In order to establish uniform Corporation Business Tax treatment for the New Jersey casino industry, the Division has established the following guidelines with respect to Casino Reinvestment Development Authority (CRDA) obligations:
- If the Investment Tax election is made the tax expense is allowable for Federal Tax purposes but it must be added back on line 31 for Corporation Business Tax purposes.
- If the Investment Tax election is not made the following possibilities must be considered:
- Obligations that are based on the 1.25% of gross revenues are not deductible when they are paid. In addition credits earned have no effect on income since no expenditure is made. These credits merely represent a reduction of an amount to be paid at a later date.
- Type B and C bonds sold to casinos from funds on deposit (that may be resold by the casino) are not deductible and the Internal Revenue Regulations govern the recognition for profit or loss for the items in this category.
- Investments that directly benefit the casinos that are of a capital nature will follow the IRS rules for capitalization and depreciation. This could cause certain items such as buildings and land purchased not to be available for the depreciation expense. Accordingly, the Division will apply the IRS rules to all items classified as direct investments.
- Finally donations distributed to third party organizations that give no direct benefit to the casino will be allowed as a deduction subject to IRS rules governing the limitations for those organizations.