State & Local Tax Impacts of COVID-19 for New Jersey – 2021

Thoughtware Alert Published: May 03, 2021 | Updated: Jun 11, 2021
SALT GOV COVID TW - 1

Information current as of May 30, 2021.

COVID-19 has changed life across the globe. Many taxing jurisdictions are taking mitigating actions to create social distance and aid taxpayers. The following is a running list of actions by jurisdiction, which generally result in additional time to file and/or pay. Further, many jurisdictions have closed their offices to in-person use by taxpayers and suspended their audit and administrative functions. This alert doesn’t cover similar waivers from local-level taxing authorities. These developments continue to quickly evolve; check with your BKD Trusted Advisor or visit our COVID-19 Resource Center for current information as needed.

Information Specific to New Jersey

  • New Jersey will follow the federal government’s treatment in allowing Paycheck Protection Program (PPP) loan forgiveness to be tax exempt at the state level and enabling recipients to deduct business expenses that were paid with the tax-exempt loan proceeds. New Jersey can follow the federal government’s treatment without enabling legislation under existing authority. As a result, for the 2020 tax season, related expenses paid for with PPP loans will be deductible for both gross income tax and corporation business tax purposes and forgiven loans will be excluded from being subject to either tax.
    • Governor’s Press Release, February 9, 2021, and N.J. Division of Taxation, COVID-19-Related Tax Information, February 12, 2021.
  • New Jersey approved the implementation of new accommodations for businesses that were affected by the changed economic and health circumstances due to the COVID-19 health emergency. The amendments to Grow New Jersey (Grow NJ) include the following: 1) A business may choose to waive its obligations under the incentive agreement for the 2020 and 2021 tax years and instead extend the incentive agreement by a corresponding period of time; 2) a business may terminate its Grow NJ agreement due to the COVID-19 pandemic any time before December 31, 2022, without the New Jersey Economic Development Authority (NJEDA) recapturing previously distributed tax credits; and 3) a business may amend its Grow NJ agreement to reset its employment requirements starting with 2020 provided that the incentive award is recalculated and reduced to reflect the lower employment.
    • A.R. 4, effective January 1, 2021, and the NJEDA Notice, February 10, 2021.
  • New Jersey advised that county-issued COVID-19-related grants and NJEDA grants and tax credits are exempt under the New Jersey Gross Income Tax Act and the Corporation Business Tax Act.
    • New Jersey Division of Taxation, COVID-19-Related Tax Guidance, February 26, 2021.
  • New Jersey announced the state income tax filing and payment due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021, to May 17, 2021. The change mirrors actions taken by the IRS. No additional forms are required to qualify for this extension. First-quarter 2021 individual estimated tax payments aren’t being extended and will still be due on April 15.
    • Governor’s Press Release, March 19, 2021.
  • New Jersey announced the state will follow federal guidelines and time frames for coronavirus-related distributions (CRD) for qualified individuals. If the repayment of CRD qualifies as a tax-free rollover for federal tax purposes, the Division will recognize a CRD as a tax-free rollover. Taxpayers should report these distributions in the same manner as they’re required to do for federal purposes. The repayment will qualify for favorable treatment when it qualifies for that treatment for federal purposes. Taxpayers may file amended returns to exclude CRD income originally reported and taxed and receive a refund. 
    • New Jersey Division of Taxation, Technical Bulletin GIT-1&2; April 1, 2021.
  • New Jersey legislation clarifies that forgiven PPP loans are not subject to the gross income tax. Further, the law allows for the deduction of expenses paid for by a PPP loan even if the loan is forgiven.
    • New Jersey S.B. 3234, effective retroactively to tax years beginning on or after January 1, 2020.

For more information, reach out to your BKD Trusted Advisor or use the Contact Us form below.

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