Allows gross income taxpayers to claim deduction for certain losses for which federal theft loss deduction is allowed.

S4339

SENATE, No. 4339

STATE OF NEW JERSEY

222nd LEGISLATURE

�

INTRODUCED MAY 28, 2026

Sponsored by:

Senator� VINCENT J. POLISTINA

District 2 (Atlantic)

SYNOPSIS

���� Allows gross income taxpayers to claim deduction for
certain losses for which federal theft loss deduction is allowed.

CURRENT VERSION OF TEXT

���� As introduced.

��

An Act
allowing a gross income tax deduction for certain theft
losses, and supplementing chapter 3 of Title 54A of the New Jersey Statutes.

����
Be It
Enacted
by the Senate and General Assembly of
the State of New Jersey:

���� 1.��� a.� A resident taxpayer
who sustains a loss arising from theft, for which
a federal theft loss deduction is allowed pursuant to
paragraphs (2) or (3) of subsection (c) of section 165 of the federal Internal
Revenue Code, 26 U.S.C. s.165, shall be allowed a
deduction from the
taxpayer�s gross income for the taxable year in which the loss occurred, in the
form and manner as shall be provided by the director.� The amount of the
deduction shall be equal to the amount of the federal theft loss deduction allowed
pursuant to section 165 of the federal Internal Revenue Code, 26 U.S.C. s.165,
for the taxable year in which the loss occurred.

���� b.��� No deduction shall be
allowed pursuant to this section for any cost, expense, or loss included in the
calculation of any category of income pursuant to N.J.S.54A:5-1 that is net of
expenses, or in the calculation of any other deduction, credit, or exemption
allowed by law, for the taxable year in which the deduction is claimed.

���� c.���� For purposes of this
section, �theft� has the same meaning as defined for
federal income tax purposes, including, but not
limited to, any criminal appropriation of another�s property to the use of the
taker, including theft by swindling, false pretenses, and any other form of
guile, and including larceny and embezzlement.

���� 2.��� This act shall take
effect on January 1 next following the date of enactment.

STATEMENT

���� This bill allows a resident
taxpayer who sustains a loss arising from theft, for which a federal theft loss
deduction is allowed, to claim a deduction of the same amount for gross income
tax purposes.�

���� Under the bill, a taxpayer who
is allowed to claim a theft loss deduction for federal tax purposes would also
be permitted to claim a deduction, in the same amount, for State gross income
tax purposes.� However, the bill provides that no amount of the deduction would
be allowed for any cost, expense, or loss that is also included in the
calculation of any category of income that is net of expenses, or in the
calculation of any other deduction, credit, or exemption that is allowed for
the taxable year in which the deduction is claimed.

���� Under federal law, a theft
loss deduction is generally allowed for individuals who sustain losses as part
of a transaction entered into for profit, but not associated with a trade or
business.� Accordingly, individuals who fall victim to certain fraudulent
schemes are permitted to claim the federal deduction, provided the fraudulent
scheme involved a profit motive.� The Internal Revenue Service has issued
guidance concerning the types of fraudulent schemes and investment arrangements
in which the theft loss deduction is generally permitted, which schemes may
include those in which an individual has been defrauded into making withdrawals
or transfers from existing investment arrangements, including Individual
Retirement Accounts (IRAs), for the alleged purpose of safeguarding or
reinvesting these funds.

���� Under the bill,
�theft� has the same
meaning as defined for federal income tax purposes, including, but not limited
to, any appropriation of another�s property to the use of the taker, including
theft by swindling, false pretenses, and any other form of guile, and includes
larceny and embezzlement.