SENATE COMMUNITY AND URBAN AFFAIRS COMMITTEE

STATEMENT TO

SENATE, No. 1422

with committee amendments

STATE OF NEW JERSEY

DATED:  JANUARY 25, 2024

      The Senate Community and Urban Affairs Committee reports favorably and with committee amendments Senate Bill No. 1422.

      This bill, as amended, allows taxpayers to claim a deduction for depreciation, under the Gross Income Tax and the Corporation Business Tax, based on a percentage of eligible property expenditures, meaning capital expenditures incurred by the taxpayer in connection with the construction of a new affordable housing development owned by the taxpayer.  Under the bill, a taxpayer may claim this deduction over a 10-year period.

      To calculate the percentage of eligible property expenditures that may be depreciated, the taxpayer would be required to apply the following formula: 2 x (the number of affordable housing units in the development / the total number of housing units in the development).

      As defined in the bill, “affordable housing development” means a development: (1) for which construction commences on or after the effective date of the bill; (2) which does not utilize funds obtained from any federal, State, or local subsidy toward, or is allowed a tax credit or payment in lieu of tax for, the construction of low- and moderate-income housing; and (3) that includes one or more units of housing, at least 20 percent of which qualify as affordable housing, as defined in the bill. 

      This bill was pre-filed for introduction in the 2024-2025 session pending technical review.  As reported, the bill includes the changes required by technical review, which has been performed.

COMMITTEE AMENDMENTS:

      The committee amended the bill to: (1) adjust the formula which calculates the percentage of eligible property expenditures depreciated; (2) provide that affordable housing developments, for which a taxpayer would be allowed to depreciate a percentage of eligible property expenditures, are required to be constructed after the effective date of the bill and are not to utilize federal, State, or local subsidies, tax credits, or payments in lieu of taxes; (3) provide that the bill’s provisions would apply to eligible property expenditures for affordable housing developments placed in service in the 2025 tax year and thereafter; and (4) make technical changes.