SENATE, No. 517

 

STATE OF NEW JERSEY

 

INTRODUCED JANUARY 29, 1996

 

 

By Senator BASSANO

 

 

An Act concerning the application of certain losses against gross income under the gross income tax and amending N.J.S.54A:5-2.

 

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

 

    1. N.J.S.54A:5-2 is amended to read as follows:

    54A:5-2. Losses. a. Losses which occur within one category of gross income may be applied against other sources of gross income within the same category of gross income during the taxable year. However, a net loss in one category of gross income may not be applied against gross income in another category of gross income except as provided in subsection b. of this section.

    b. The excess of net losses derived from the sale, exchange or other disposition of property, which if sold for a gain would result in a gain includable in gross income pursuant to subsection c. of N.J.S.54A:5-1, over net gains on such property, as determined both as to amount and as to the taxable year of net loss in accordance with the method of accounting allowed for federal income tax purposes, may be applied against gross income in another category of gross income; provided however, that the amount and manner of that application shall be subject to the limitations and restrictions on the deductibility of those losses from federal gross income under the provisions of sections 1201 et seq. of the federal Internal Revenue Code of 1986, 26 U.S.C.§1201 et seq., relating to capital gains and losses.

(cf: N.J.S.54A:5-2)

 

    2. This act shall take effect immediately and shall apply to taxable years beginning on or after the date of enactment.

 

 

STATEMENT

 

    This bill conforms treatment of certain taxpayer losses under the gross income tax to the treatment those losses receive under the federal Internal Revenue Code.

    Under the current provisions of the State gross income tax law, a loss can be applied against an item of gross income only if the loss is within the same category as the income item. There are presently 14 categories of income under the gross income tax law, including--besides salaries and wages--net profits from business, net gains or income from disposition of property, and distributive share of partnership income. Present State law also limits application of these losses to income which the taxpayer realized in the same taxable year as that in which the loss occurred.

    Under the bill, losses from the disposition of nonbusiness property can be applied against all income, regardless of category. In addition, federal income tax law applies to govern the amount of losses which could be applied and the range of years over which a loss could be carried back or carried forward for this purpose.

 

 

 

Allows a loss from disposition of property to be applied against other categories of gross income under the gross income tax.