SENATE, No. 177

STATE OF NEW JERSEY

Introduced Pending Technical Review by Legislative Counsel

PRE-FILED FOR INTRODUCTION IN THE 1996 SESSION

By Senator RICE

An Act providing a gross income tax credit for certain home improvements, supplementing Title 54A of the New Jersey Statutes.

    Be It Enacted by the Senate and General Assembly of the State of New Jersey:

    1. a. As used in this section:

    "Condominium" means the form of real property ownership provided for under the "Condominium Act," P.L.1969, c.257 (C.46:8B-1 et seq.).

    "Cooperative" means a housing corporation or association which entitles the holder of a share or membership interest thereof to possess and occupy for dwelling purposes a house, apartment, manufactured or mobile home or other unit of housing owned or leased by the corporation or association, or to lease or purchase a unit of housing constructed or to be constructed by the corporation or association.

    "Cost of home improvement" means the actual amount of money and the monetary value of any other thing of value constituting the entire consideration exchanged or to be exchanged for the materials and services which constitute the home improvement.

    "Director" means the Director of the Division of Taxation in the Department of the Treasury.

    "Home improvement" means the improvement of a qualified residence which does not change the permitted use of the residence and shall include the modernization, rehabilitation, renovation, alteration or repair of the residence, provided that the cost of the home improvement equals or exceeds $1,000.

    "Horizontal property regime" means the form of real property ownership provided for under the "Horizontal Property Act," P.L.1963, c.168 (C.46:8A-1 et seq.).

    "Mutual housing corporation" means a corporation not-for-profit, incorporated under the laws of this State on a mutual or cooperative basis within the scope of section 607 of the Lanham Act (National Defense Housing), Pub.L. 849, 76th Congress (42 U.S.C. § 1521 et seq.), as amended, which acquired a National Defense Housing Project pursuant to that act.

    "Qualified residence" means any residential property which is owned by the claimant, assessed as real property, consists of a single residential unit, and constitutes the principal place of residence of the claimant. A qualified residence may be a unit in a condominium or horizontal property regime, but shall not be a unit in a cooperative or mutual housing corporation. A person shall be deemed to have ownership of a residence under this paragragh if that person is a tenant for life or a tenant under a lease for 99 years or more and is entitled to and actually takes possession of the residence under an executory contract for the sale thereof or under an agreement with a lending institution which holds title as security for a loan;

    b. A resident taxpayer shall be allowed a credit against the tax otherwise due pursuant to N.J.S.54A:1-1 et seq. as follows:

    (1) If the taxpayer's gross income is not greater than $35,000, the credit shall be an amount equal to 15% of the cost of the home improvement;

    (2) If the taxpayer's gross income is greater than $35,000 but not greater than $70,000, the credit shall be an amount equal to 10% of the cost of the home improvement; and

    (3) If the taxpayer's gross income is greater than $70,000 but not greater than $150,000, the credit shall be an amount equal to 5% of the cost of the home improvement.

    The maximum credit allowed in any tax year pursuant to this section shall be $5,000.

    c. The amount of the credit shall be applied during the taxable year in which the final payment for the home improvement is made against any tax liability otherwise due after any other credits permitted pursuant to law have been applied. If the credit reduces the taxpayer's tax liability to zero, the remaining amount of the credit shall be considered an overpayment of the tax.

    2. The director shall promulgate rules and regulations in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14-1 et seq.) as are deemed necessary to administer the provisions of this act.

    3. This act shall take effect immediately and shall apply to taxable years beginning on or after January 1, 1994.

STATEMENT

    This bill provides for a credit under the New Jersey gross income tax equal to between 5% and 15% of the cost of certain home improvements. Under the bill home improvements include the modernization, rehabilitation, renovation, alteration or repair of a residence owned and occupied by the claimant. To qualify for the credit the cost of the home improvement must equal or exceed $1,000.

    The percentage of the cost of the improvement that is allowed as a credit depends upon the claimant's gross income. Taxpayers with an income of $35,000 or less receive a credit equal to 15% of the cost of the improvement. Taxpayers with incomes above $35,000 but not more than $70,000 receive a credit equal to 10% of the cost of the improvement. Taxpayers with incomes above $70,000 but not greater than $150,000 receive a credit equal to 5% of the cost of the improvement. Taxpayers with incomes above $150,000 are not eligible for the credit. The maximum credit permitted under the bill is $5,000. If a taxpayer's credit exceeds the taxpayer's liability, the taxpayer may receive the difference as a refund.

    This bill provides a stimulus to the State's economy and encourages homeowners to improve their properties by giving them tax incentives. Currently, tax incentives for home improvements are only available to owners of rental property.

Provides credit for home improvement costs under gross income tax.