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On September 27, 2018, the New Jersey Senate and General Assembly passed legislation amending certain provisions of the New Jersey Corporation Business Tax (“CBT”) reform bill that was enacted earlier this year (“Technical Amendments”). In July, Governor Phil Murphy and the New Jersey Legislature enacted a $37.4 billion budget package (the “Budget Bill”) that implements sweeping changes to the CBT.  Among these changes are mandatory unitary combined reporting, market-based sourcing, and a new four-year surtax on corporations with over $1 million of allocated taxable net income. The Technical Amendments, which are awaiting Governor Murphy’s signature, make several changes to the Budget Bill.  A summary of the most noteworthy provisions contained in the Budget Bill and Technical Amendments is below.

Under the Tax Cuts and Jobs Act of 2017 (“Federal Tax Reform”), Internal Revenue Code (“IRC”) section 168(k) provides 100% immediate expensing for qualified property placed into service after September 27, 2017 and before January 1, 2023. Pennsylvania, like many states, currently decouples from IRC section 168(k).   In most states, decoupling from the immediate expensing provisions in IRC section 168(k) will merely result in a timing difference as most states allow some alternate form of state-level depreciation. However, the Pennsylvania Department of Revenue (“Department”), in a departure from its prior interpretation of Pennsylvania law, recently announced its view that taxpayers are not entitled to a state-level depreciation deduction for property that is fully expensed under IRC section 168(k). A bill has recently been proposed to legislatively reverse the Department’s interpretation and allow a state-level depreciation deduction for property that is fully expensed under IRC section 168(k).