Form 305 - Manufacturing Equipment And Employment Investment Tax Credit - 2013 Page 3
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5Form 305-A
Instructions for Form 305
(09-13, R-01)
Manufacturing Equipment and Employment
Investment Tax Credit
The purpose of the Manufacturing Equipment and Employment Investment Tax Credit is to encourage investment in certain
manufacturing equipment in New Jersey and to provide the taxpayer with incentive to increase employment at New Jersey locations by
employing New Jersey residents.
A taxpayer must invest in qualified manufacturing equipment in its tax year beginning on or after January 1, 1994 in order to qualify
for this tax credit. Such investment has the benefit of allowing a tax credit computation for the tax year in which the investment was made
as well as each of the following two tax years. The tax credit computation for the first year is based on the cost of the qualified manufacturing
equipment placed in service in New Jersey during that tax year. This portion of the credit is calculated in Part I. The computations for the
two following tax years are based on the average increase in New Jersey residents employed in New Jersey subject to a limitation based
on the cost of the investment made in the first year. The portion of the tax credit for the two tax years following the year of investment are
calculated in Parts II and III of this schedule. The credit allowable for any given year is limited to 50% of the taxpayer’s total liability, not to
exceed an amount which would reduce the total tax liability below the statutory minimum.
Parts I, II and III of this schedule relate to qualified investments made during three different tax years. Although it is possible after the
initial investment year that more than one part can be completed, at no time should more than one part be completed with respect to the
same investment. Refer to the example on Page 2.
MANUFACTURING EQUIPMENT TAX CREDIT
Machinery, apparatus or equipment is directly used in production
The Manufacturing Equipment portion is limited to 2% of the
only when used to initiate, sustain, or terminate the transformation
investment credit base of qualified equipment placed in service in
of raw materials into finished products. Property leased or licensed
the tax year, up to a maximum credit for the tax year of $1,000,000,
by the lessee to another taxpayer is not qualified equipment.
provided however, with respect to qualified equipment placed in
service during privilege periods beginning on and after July 1, 2004,
NON-QUALIFYING EQUIPMENT
if a taxpayer has 50 or fewer employees (an average number of full-
Examples of qualified equipment may not include:
time employees and full-time employee equivalents of 50 or less)
1. Motor vehicles or other off premise transportation equipment;
and entire net income to be used a a measure of the tax determined
2. Airplanes;
pursuant to section 6 of P.L. 1945, c.162 (C.54:10A-6) of less than
$5,000,000 for the tax year, the taxpayer shall be allowed a credit in
3. Property located or primarily used outside of New Jersey;
an amount equal to 4% of the investment credit base of qualified
4. Equipment or parts with a useful life of less than four (4) years;
equipment placed in service in the tax year, up to a maximum
allowed credit for the tax year of $1,000,000.
5. Tangible personal property which the taxpayer contracts or
agrees to lease or rent to another person or licenses another
QUALIFIED EQUIPMENT
person to use;
Qualified equipment means machinery, apparatus or equipment
6. Property or equipment purchased from related persons or
acquired by purchase or lease for use or consumption by the
affiliated entities (unless expressly waived by the Director,
taxpayer directly and primarily in the production of tangible personal
Division of Taxation);
property by manufacturing, processing, assembling or refining, as
7. Property acquired incident to the purchase of stock or assets
defined in N.J.S.A. 54:32B-8.13(a), having a useful life of four or
of another entity which has already been used by that entity for
more years, and placed in service in New Jersey and machinery,
manufacturing or processing in New Jersey;
apparatus or equipment acquired by purchase for use or
consumption directly and primarily in the generation of electricity as
8. Equipment for which either a New Jobs Investment Tax Credit
defined pursuant to subsection b. of section 25 of P.L. 1980,c.105
or a Research and Development Tax Credit has been claimed;
(C.54:32B-8.13) to the point of connection to the grid, or in the
9. Any tangible personal property placed in service prior to the
generation of thermal energy, having a useful life of four or more
start of the tax year commencing in calendar year 1994;
years, placed in service in this State.
10. Property not directly attributable to manufacturing, processing
Qualified equipment also includes property that a company may
or refining.
transfer from an out of state facility to a location within New Jersey.
If a corporation moves equipment that otherwise would qualify for
11. Property not directly attributable to the generation of electricity
the credit from a location outside the state to a location within the
or thermal energy.
state of New Jersey, such equipment would be eligible for the credit.
INVESTMENT CREDIT BASE
For purposes of the credit, property shall be considered placed in
(Net Cost of Qualified Equipment)
service or use in New Jersey in the earlier of the following tax years:
Net Cost is the net monetary consideration provided for acquisition
1. The tax year in which, under the taxpayer’s depreciation
of title and/or ownership to the subject property.
The cost of
practice, the period for depreciation with respect to such
qualified equipment shall not include the value of equipment given
property begins.
For transferred equipment depreciation
in trade or exchange for the equipment purchased for business
would continue which started when the property was originally
relocation or expansion.
placed in service outside the state. The equipment is not
disqualified from the credit because depreciation did not start
If equipment is damaged or destroyed by fire, flood, storm or other
in New Jersey, or
casualty, or is stolen, the cost of replacement equipment shall not
include any insurance proceeds received in compensation for the
2. The taxable year in which the property is placed in a condition
loss. In the case of self-constructed equipment, the cost thereof
or state of readiness and availability for a specifically assigned
shall be the amount properly charged to the capital account for
function.
depreciation in accordance with Federal income tax law.
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