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New Jersey Tax Credit for COVID-19 Building Improvements

By CHRISTOPHER S. MAYNARD, CPA

March 31, 2021

The fallout from the COVID-19 pandemic created by forced business closures and other government orders continues to challenge New Jersey businesses. Despite the drop in new cases, partially due to vaccination efforts, many have just started the journey back to profitability. Given the reality this road will not be smooth, the New Jersey state legislature has been debating several new COVID-19 relief bills designed to help businesses. One of the bills, known as NJ Senate Bill 3305-R1, introduces a new state tax credit for non-residential building improvements designed to stop Coronavirus from spreading. A key provision permits businesses to claim a state tax credit for qualifying modifications made in 2020 through 2022, offering a new savings opportunity previously unavailable. Also, New Jersey has automatically extended the filing date for certain corporations that file Corporate Business Tax (CBT) returns.  Below we provide a brief summary of these two provisions.

Key Credit Details

The credit will be available for qualifying businesses in 2020, 2021, 2022 and will be applied against state income taxes due. The amount of the credit depends on the size of the location. For work locations, less than 30,000 square feet, 75% of qualifying expenditures can be claimed (maximum of $100,000), and for those with more than 30,000 square feet, 50% of qualifying costs can be claimed (maximum of $250,000). The credit is not refundable, features a seven-year carry forward period, and applies to qualifying expenses after March 9, 2020, and before January 1, 2023.

Qualifying Expenditures

Only certain COVID-19 expenses can be claimed, including:

  • The installation of transparent sneeze guards or shields.
  • Bi-polar ionization and ultraviolet lighting to disinfect indoor air and surfaces, including work areas, cash registers, displays, escalators, elevators, and more.
  • Infrared thermometers are used to screen employees and visitors.
  • Touchless entryway and security improvements to limit physical contact.
  • Upgrades and improvements to HVAC systems to increase airflow.
  • Other materials, supplies, and equipment to reduce virus transmission and create a safe environment and workspace.

Corporate Business Tax (CBT) Automatic Extension

The good news for businesses eligible to claim the credit for 2020 is that New Jersey has issued an automatic extension to the CBT filing deadline. For those required to file CBT-100, CBT-100U, and CBT-100S with an original due date between November 15, 2020, and April 15, 2021, now have until May 15, 2021, to file. It is important to note the extension applies only to the filing and not the payment deadline. This means taxpayers that owe will still be required to pay by the original filing deadline. In cases where the due date falls on a weekend or legal holiday, then the return and payment are due on the following business day. Finally, affected taxpayers applying for an extension will receive six months from the original, not the extended, due date.

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The tax credit for COVID-19 modifications to non-residential property presents a vital tax savings opportunity for many businesses. It will create an additional dimension of savings for Hamilton, Princeton, and other New Jersey-area companies if passed. The extended filing deadline will make it easier to claim expenses for 2020. If you have questions about the information outlined above or need assistance with another tax or accounting issue, Klatzkin can help. For additional information, click here to contact us. We look forward to speaking with you soon.

©2021 Klatzkin & Company LLP. The above represents our best understanding and interpretation of the material covered as of this post’s date and does not constitute accounting, tax, or financial advice. Please consult your advisor concerning your specific situation.

About the Author

Chris is a Partner and divides his time between Klatzkin’s Newtown and Hamilton offices. He focuses on serving the audit, tax, and compliance needs of independent schools and nonprofit organizations. Chris works with schools and organizations in New Jersey and Pennsylvania to navigate compliance issues, audit concerns, and tax planning matters. He has experience with...

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