New Jersey Issues Opportunity Zone Guidance

New Jersey follows IRC Sec. 1400Z-2 for both corporation and gross income taxpayers.

What is the Federal Law?

The Opportunity Zone Program was enacted as part of the 2017 federal Tax Cuts and Jobs Act. The program is designed to encourage long-term capital investments into low-income rural and urban communities. The program offers incentives with regard to the taxation of capital gains for investment in Opportunity Zones. The US Department of the Treasury approved 169 census tracts in 75 New Jersey municipalities as Opportunity Zones.

What is New Jersey Following?

For corporation business taxpayers, New Jersey follows the same method of accounting as for federal purposes. New Jersey’s starting point is the entity’s federal taxable income, before federal net operating losses and other special deductions, subject to certain modifications.

For gross income taxpayers, New Jersey follows the method of accounting and the basis of property must be the same as for federal income tax. New Jersey also follows the special rule for investments held for at least 10 years if the taxpayer makes that election federally. The gains are subject to tax when the gain is recognized for federal purposes. This treatment applies to both individuals and pass-through entities.

Notice: Federal Tax Cuts and Jobs Act (TCJA) – Opportunity Zones, New Jersey Division of Taxation, February 5, 2019

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CCHTaxGroup

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