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Instructions for Form 305
Manufacturing Equipment and Employment Investment Tax Credit
Purpose a location outside the state to a location within the state of New Jersey,
The purpose of the Manufacturing Equipment and Employment Invest- such equipment would be eligible for the credit.
ment Tax Credit is to encourage investment in certain manufacturing
equipment in New Jersey and to provide the taxpayer with incentive to For purposes of the credit, property shall be considered placed in ser-
increase employment at New Jersey locations by employing New Jer- vice or use in New Jersey in the earlier of the following tax years:
sey residents. 1. The tax year in which, under the taxpayer’s depreciation practice,
the period for depreciation with respect to such property begins.
A taxpayer must invest in qualified manufacturing equipment in its tax For transferred equipment, depreciation would continue that started
year beginning on or after January 1, 1994, to qualify for this tax credit. when the property was originally placed in service outside the State.
Such investment has the benefit of allowing a tax credit computation for The equipment is not disqualified from the credit because deprecia-
the tax year in which the investment was made as well as each of the tion did not start in New Jersey, or
following two tax years. The tax credit computation for the first year is
based on the cost of the qualified manufacturing equipment placed in 2. The tax year in which the property is placed in a condition or state of
service in New Jersey during that tax year. This portion of the credit is readiness and availability for a specifically assigned function.
calculated in Part I. The computations for the two following tax years are
based on the average increase in New Jersey residents employed in Machinery, apparatus, or equipment is directly used in production only
New Jersey subject to a limitation based on the cost of the investment when used to initiate, sustain, or terminate the transformation of raw ma-
made in the first year. The portion of the tax credit for the two tax years terials into finished products. Property leased or licensed by the lessee
following the year of investment are calculated in Parts II and III of this to another taxpayer is not qualified equipment.
schedule. The credit allowable for any given year cannot exceed 50%
of the tax liability otherwise due and cannot reduce the total tax liability
below the statutory minimum.
Nonqualifying Equipment
Examples of qualified equipment may not include:
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 1. Motor vehicles or other off-premise transportation equipment;
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 in- 2. Airplanes;
vestment. Refer to the example on page 2. 3. Property located or primarily used outside New Jersey;
Parts V and VI are used to calculate the allowable credit and carryover. 4. Equipment or parts with a useful life of less than four years;
Taxpayers filing Forms CBT-100, CBT-100S, or BFC-1 complete Part V 5. Tangible personal property that the taxpayer contracts or agrees to
and CBT-100U filers complete Part VI. lease or rent to another person or licenses another person to use;
Taxpayers must include the appropriate credit form in 6. Property or equipment purchased from related persons or affili-
the year the credit was earned even if they are not ated entities (unless expressly waived by the Director, Division of
claiming the credit on their tax return. Taxation);
7. Property acquired incident to the purchase of stock or assets of an-
other entity that has already been used by that entity for manufactur-
Manufacturing Equipment Tax Credit ing or processing in New Jersey;
The Manufacturing Equipment portion is limited to 2% of the invest- 8. Equipment for which either a New Jobs Investment Tax Credit or a
ment credit base of qualified equipment placed in service in the tax Research and Development Tax Credit has been claimed;
year, up to a maximum credit for the tax year of $1,000,000, provided
however, with respect to qualified equipment placed in service during 9. Any tangible personal property placed in service prior to the start of
privilege periods beginning on and after July 1, 2004, if a taxpayer has the tax year commencing in Calendar Year 1994;
50 or fewer employees (an average number of full-time employees and
full-time employee equivalents of 50 or less) and entire net income to 10. Property not directly attributable to manufacturing, processing, or
be used a measure of the tax determined pursuant to section 6 of P.L. refining.
1945, c.162 (C.54:10A-6) of less than $5,000,000 for the tax year, the 11. Property not directly attributable to the generation of electricity or
taxpayer shall be allowed a credit in an amount equal to 4% of the in- thermal energy.
vestment credit base of qualified equipment placed in service in the tax
year, up to a maximum allowed credit for the tax year of $1,000,000.
Investment Credit Base
Qualified Equipment (Net Cost of Qualified Equipment)
Qualified equipment means machinery, apparatus, or equipment ac- Net Cost is the net monetary consideration provided for acquisition
quired by purchase or lease for use or consumption by the taxpayer of title and/or ownership to the subject property. The cost of qualified
directly and primarily in the production of tangible personal property equipment shall not include the value of equipment given in trade
by manufacturing, processing, assembling, or refining, as defined in or exchange for the equipment purchased for business relocation or
N.J.S.A. 54:32B-8.13(a), having a useful life of four or more years, and expansion.
placed in service in New Jersey and machinery, apparatus, or equip-
ment acquired by purchase for use or consumption directly and primarily If equipment is damaged or destroyed by fire, flood, storm, or other ca-
in the generation of electricity as defined pursuant to subsection b. of sualty, or is stolen, the cost of replacement equipment shall not include
section 25 of P.L. 1980, c.105 (C.54:32B-8.13) to the point of connection any insurance proceeds received in compensation for the loss. In the
to the grid, or in the generation of thermal energy, having a useful life of case of self-constructed equipment, the cost shall be the amount prop-
four or more years, placed in service in this State. erly charged to the capital account for depreciation in accordance with
federal income tax law.
Qualified equipment also includes property that a company may transfer
from an out-of-State facility to a location within New Jersey. If a corpo- The cost of leased equipment to the lessee is the minimum amount
ration moves equipment that otherwise would qualify for the credit from required by the lease agreement to be paid over the term of the lease,
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