NJBIA Legislative Successes
One of NJBIA’s long-standing goals is to improve the business climate in New Jersey so that employers can better compete with businesses in other states. The NJBIA Government Affairs team keeps a vigilant watch on the activities of the state government to push for policies that will allow businesses to succeed. During the last five years, the Government Affairs staff has successfully advocated for policies to rein in government regulations, lower the tax burden, cut down on workplace mandates and promote economic development. Here are a few of the policy successes for New Jersey businesses that NJBIA has helped achieve, starting with Tax Reform.
The best way New Jersey can encourage economic growth is to create a more favorable tax structure for business and entrepreneurs, remove unnecessary regulatory obstacles, and provide targeted job-creation incentives. NJBIA pushes for economic development policies that strengthen New Jersey’s business climate and encourage business expansion.
Expanded Job-Creation Tax Incentives
New Jersey’s job-creation incentive programs work well and target long-term job growth. In July 2011, Governor Chris Christie signed S-2972 (Lesniak, Norcross)/A-4161 (Coutinho, Greenwald), which expanded three existing tax-incentive programs. Expanded were the Economic Redevelopment and Growth Grant (ERGG), the Urban Transit Hub Tax Credit Act (UTHTC), and a residential development program originally created under the New Jersey Economic Stimulus Act. The intention was to jump start many pending large-scale development projects.
The ERGG grant program was expanded to include the Meadowlands and other growth areas. This will enable Triple Five, developer of the American Dream mall and amusement center at Meadowlands, to benefit from the program. The Urban Transit Hub credit for residential projects was increased from 20 percent to 35 percent of eligible costs over 10 years. Mixed-use projects also can now receive tax credits for both their residential component and commercial components. The goal of the Urban Transit Hub Tax Credit program is to encourage the development of communities where people can work, live and shop in one area. For more information, contact David Brogan.
BRRAG Incentive Grant Expansion
The state’s Business Relocation and Retention Assistance Grants (BRRAG) program has been expanded and its job-retention tax credit increased.
BRRAG originally provided eligible in-state businesses that relocated 250 jobs within New Jersey a one-time business tax credit of up to $1,500 per job relocated. Eligible businesses had to have a viable relocation offer from another state.
Now businesses are eligible for the tax credit if they have retained or relocated a minimum of only 50 jobs within New Jersey. The amount of the BRRAG tax credits has also been increased to a maximum of $9,000 per job. Finally, businesses are eligible not only if they relocate their facilities within New Jersey, but also if they simply keep their jobs in New Jersey at existing locations. In either event, they still must have a viable relocation offer from another state. It also extended tax credits to businesses that keep existing jobs in New Jersey. Under the old BRAGG law, businesses with viable offers to move to another state could take the tax credit only if they relocated those jobs within New Jersey.
Governor Chris Christie signed the bill, S-2370 (Madden, Kyrillos), in January 2011.
For more information, contact David Brogan
Certain manufacturers no longer have to pay the state sales tax on their natural gas and electricity bills under S-2358 (Asselta, Sweeney)/A-3484 (Greenwald, Fisher), signed into law by Governor Richard Codey in January 2006. Qualifying manufacturers must employ 250 or more employees and be located in Urban Enterprise Zones (UEZ). Manufacturing generally requires high energy usage. Removing the sales tax frees up capital that manufacturers can use to hire employees and make their operations more efficient. For more information, contact Sara Bluhm.
UEZ Sales Tax Exemption
Among other benefits, businesses in the state’s Urban Enterprise Zones (UEZ) do not have to pay the state sales tax on equipment they purchase for use in their UEZ facilities. For years, this sales-tax exemption was granted at the point of sale. In 2006, the state imposed a rebate program requiring businesses to pay the sales tax and then apply for a rebate. The rebate process was so cumbersome and time-consuming that many businesses simply stopped using it. In March 2011, Governor Christie signed S-2132 (Van Drew, Whelan)/A-1559 (Lampitt, Coutinho), which reinstated the point-of-sale exemption in the state's 32 UEZs. For more information, contact David Brogan.
Atlantic City Revitalization
A law to revitalize Atlantic City's casino and tourism industries was enacted in February 2011. The enabling legislation was S-11 (Sweeney, Whelan)/A-3581 (Burzichelli, Caputo) and S-12 (Whelan, Lesniak)/A-3517 (Burzichelli, Caputo).
Under the new law, the Casino Reinvestment Development Authority (CRDA) is responsible for creating the tourism district, establishing land-use regulations, implementing a master plan, promoting public health and safety initiatives, advancing commercial development, undertaking redevelopment projects and making infrastructure improvements. The law also merges the Atlantic City Convention and Visitors Authority with the Casino Redevelopment Authority and it authorizes the Authority to create a $30 million-per-year marketing program funded by a majority of New Jersey casino licensees.
Moratorium on 2.5% Development Fee
The state’s 2.5 percent commercial development fee, intended to raise money for affordable housing projects, was suspended in July 2009 when Governor Jon Corzine signed S-2299 (Lesniak)/A-4048 (Roberts, Coutinho). The law also provides tax and fee reductions and financial incentives to stimulate large-scale, private-sector economic development projects. It also created a new tax increment financing program to provide rebates for some of the taxes paid by a development project, expanded the amount of net operating losses available for businesses under the Technology Business Tax Certificate Transfer program, reformed the Urban Transit Hub Tax Credit (UTHTC) program to make it easier for businesses to qualify and provided for public-private investment partnerships to build facilities at the state's colleges and universities.
Loans for Working Capital
Small and medium-sized businesses received help coping with a statewide “credit crunch” under a new $50 million loan program enacted in 2008. Governor Jon Corzine signed S-4 (Sarlo, Turner)/A-3377 (Schaer, Fisher), creating the Main Street Business Assistance Program, which is administered by the NJ Economic Development Authority (EDA) through participating banks. The EDA was also authorized to provide a line-of-credit guarantee capable of stimulating an additional $200 to $300 million in business loans.
NJBIA believes that New Jersey can have both an effective environmental policy and a strong business climate. The Association fights for common sense laws and regulations that provide meaningful protection for the environment while minimizing the burden on businesses. At the same time, NJBIA fights against regulations and laws that are costly and cumbersome but provide little benefit to the environment.
Elimination of Greenhouse Gas Cap-and-Trade Program
Effective January 2012, Governor Chris Christie, removed New Jersey from the 10-state Regional Greenhouse Gas Initiative (RGGI), a cap-and-trade program to limit carbon emissions from participating states’ power plants. In 2011, he vetoed S-2946 (Sweeney, Smith) /A-4108 (McKeon, Chivukula), which would have forced the state to rejoin RGGI.
Under RGGI, electricity producers in participating states purchase emission certificates allowing them to emit greenhouse gases in their generation process. These certificates are then bought and sold between power plants as needed. Generators that keep emissions below their targets, or "caps," can sell their excess certificates, while those that exceed their targets must purchase more certificates. The added cost of the certificates is passed on to ratepayers in the form of higher electric rates. NJBIA opposes RGGI because it is an ineffective program that imposes additional costs on New Jersey businesses while providing no net environmental benefit. RGGI includes northeastern states, of which only three states in this region's PJM Interconnection power grid participate. Pennsylvania, for instance, has not joined the program and therefore can charge lower electricity rates to its customers while its power plants pollute New Jersey’s air. For more information, contact Sara Bluhm.
Defeat of Rain Tax Bill
Governor Chris Christie on August 2011 vetoed S-1815 (Smith)/A-2577 (McKeon), which would have permitted Ocean County and its municipalities to impose storm water runoff fees on property owners through the creation of storm water utility authorities. This “rain tax” on business would have been used to fund storm water-runoff-prevention projects. The bills would have amounted to triple taxation of business. Businesses already pay property taxes and many have paid thousands of dollars more for existing storm water permit fees. For more information, contact Sara Bluhm.
It is now easier to bring contaminated sites back to productive use and to remove underground storage tanks under two NJBIA-backed environmental bills signed in January 2006 by Governor Richard Codey. A-1633 (Chivukula, Egan)/S-2116 (B. Smith) created an inventory of New Jersey’s “brownfields” industrial sites to help builders, urban planners, municipal officials, and others who may want to use them for new development. A-2739 (Weinberg)/S-240 (Coniglio) exempts underground storage tank owners from repaying a state grant for safety upgrades if the property is taken by a municipality through condemnation or eminent domain. For more information, contact Sara Bluhm.
Licensed Site Remediation Professionals
Legislation S-1897 (Smith)/A-2962 (McKeon, Cryan), creating a Licensed Site Remediation Professional (LSRP) program to expedite the cleanup of thousands of contaminated sites was signed by Governor Jon Corzine on May 2009. Under the program, private-sector environmental engineers and consultants can be licensed and given the authority to oversee the clean-up of contaminated sites without oversight of a case manager from the NJ Department of Environmental Protection (DEP) every step of the way. The law is intended to cut red tape and speed cleanups, making them more feasible financially and therefore able to better attract private-sector investment. For more information, contact Sara Bluhm.
NJBIA was able to win significant amendments to a new law imposing penalties for violating state environmental laws. More than a dozen common-sense amendments were made before Governor Jon Corzine signed S-2650 (Vitale, Buono)/A-4287 (Wisniewski, Vas). Among other things, the amendments removed criminal penalties for minor violations and stated that violations subject to civil penalties would have to be committed knowingly or recklessly. This ensures that inadvertent violations will not result in major penalties. The bill was also amended to give more time (35 days) for alleged violators to respond and request a hearing.
The amended version also removed an onerous provision that all violations be permanently recorded on a property’s deed. Only violations of the Safe Dam Act and the Flood Hazard Control Act are recorded on deeds, but these violations would have to be removed once resolved. Finally, the bill, as originally written, would have directed that all financial penalties collected by the NJ Department of Environmental Protection (DEP) be deposited in funds controlled by the agency instead of being placed in the state’s general fund. This would have given the DEP a clear incentive to collect more fines. Now, only penalty revenues collected under the Threatened and Endangered Species Act, the Safe Dam Act, and the Freshwater Wetlands Protection Act are kept by the DEP so it can meet federal matching fund requirements. For more information, contact Sara Bluhm.
NJBIA has tried to move environmental policy in New Jersey away from regulations and enforcement and towards compliance assistance and the provision of incentives to promote environmentally sound operations. In 2008, DEP adopted its Stewardship Program to identify environmentally responsible companies and provide them with state contract preferences. In January 2010, legislation codifying this program, A-795 (Gusciora, Fisher), was signed by Governor Jon Corzine.
National ‘Green Building’ Code
NJBIA was able to convince the state to base any “green building” requirements added to New Jersey’s Uniform Construction Code on existing national models. As a result, S-702 (Smith)/A-1629 (McKeon, Chivukula), signed by Governor Jon Corzine in August 2009, did not contain a lot of New Jersey-only requirements that would have made construction more complicated and expensive in the state. The law required the Commissioner of Community Affairs to develop an energy-building subcode based on the International Energy Conservation Code and other national models. It also limited the commissioner’s ability to change the code after it’s adopted. As a result, the law provides for a uniform standard for incorporating green-building standards into the state's energy subcode, making it easier to follow and more cost-effective. For more information, contact Sara Bluhm.
It’s no secret that New Jersey has a high cost of doing business, and that is certainly true when it comes to business taxes. NJBIA has been chipping away at tax policies that are unfair, put New Jersey businesses at a competitive disadvantage and cost us jobs. The results have lowered the tax burden on New Jersey businesses across the state. In 2011 alone, businesses saved $185 million in taxes thanks to NJBIA-backed tax legislation that was enacted in 2011. Furthermore, these same tax policies have legislative phase-ins, incrementally increasing over the next four years. When fully implemented they will result in an annual savings of $660 million per year in perpetuity.
Business Income Tax Reform
NJBIA has long advocated for tax reforms that modernize the tax code to make New Jersey more competitive with other states, reduce the cost of doing business and encourage job creation. In April 2011, Governor Christie signed S-2754 (Buono, Greenstein)/A-3870 (Greenwald, Barnes) that accomplishes this goal in two ways.
First, it will allow small businesses that pay personal income taxes (LLCs, partnerships, S corporations and sole proprietorships) instead of corporate taxes to treat their operating losses the way larger C corporations can do now. Businesses with losses incurred from, say, a major expense, such as an expansion or new equipment, will be able to deduct a portion of those losses from their future profits to lower their income tax liability.
It also allows businesses to offset gains in one income category with losses in another. For instance, a company could offset gains in an LLC from losses in a partnership. Previously, losses could only be used to offset income generated from within the same business unit and within the same category of income. Prior to enactment of this law, New Jersey was one of only two states that divided business income this way. For more information, contact David Brogan.
Single Sales Factor
C corporations with competitors in other states will no longer face a tax penalty for creating jobs and have facilities in New Jersey, thanks to enactment of single-sales-factor tax reform. Previously, New Jersey's corporate tax structure was based on three factors—sales, the number of employees, and facilities in the state. As a result, companies that had sales in New Jersey but no facilities or employment paid a lower tax rate than New Jersey companies because their employment and facilities factors are 0. Under this law, corporate taxes will be based solely on in-state sales, leveling the playing field for companies that create jobs, pay taxes and generate economic opportunity in New Jersey. Governor Chris Christie signed S-2753 (Whelan, Madden)/A-3869 (Greenwald, Milam) in April. For more information, contact David Brogan.
Elimination of Cap on R&D Tax Credit
A key component of New Jersey’s ability to compete in the global economy is its’ ability to promote high-tech innovation through research and development. To promote R and D, New Jersey has allowed companies to deduct a portion of their research-and-development expenses from their corporate business taxes. In June 2001, Governor Chris Christie signed S-2980 (Whelan, Sarlo)/A-4205 (Lampitt, Prieto), allowing businesses to take a tax credit equal to all of their research-and-development expenses. For more information, contact David Brogan.
25% Reduction in S Corporation Minimum Filing Fee
One of the benefits of filing as an S corporation, as opposed to a C corporation, is that the S corporation is taxed at the individual level, not the entity level. However, New Jersey undermines this benefit by charging a minimum fee between $500 to $2,000, based on gross receipts. Governor Chris Christie signed S-2981 (Greenstein, Sarlo)/A-4206 (Coutinho, Coughlin), cutting the S corporation minimum tax by 25 percent, or to between $375 and $1,500. For more information, contact David Brogan.
“Temporary” Energy Tax
When New Jersey followed many other states in deregulating its energy market in the late 1990s, it created a temporary tax on energy bills to generate funding to help utilities transition into a market-based system. That tax, known as TEFA (Transitional Energy Facilities Assessment), was scheduled to expire in 2002. Past governors and Legislatures continually extended the expiration date until it became a de-facto permanent tax. The fiscal year 2012 state budget finally phases out this outdated tax. This will save 3 to 4 percent of the cost of an energy bill. For more information, contact Sara Bluhm.
Moratorium on Development Fee
Before the recession, lawmakers enacted a fee on non-residential construction equal to 2.5 percent of the cost of the project. The idea was to create a funding source for affordable housing.. Once the recession hit, NJBIA successfully argued that such a fee in this economic climate would devastate the construction industry, and legislators enacted a moratorium in implementing it. The moratorium was extended to December 31, 2013, when Acting Governor Kim Guadagno signed S-2974 (Lesniak, Sweeney)/A-4221 (Coutinho, Bucco) into law in 2011. Developers who paid the fee between July 1, 2010 and the present are eligible for reimbursement if the money paid was not already spent on an affordable housing project by the municipality. For more information, contact David Brogan.
Phase-in of Automatic UI Tax Increase
When it comes to Unemployment Insurance payroll taxes, New Jersey law requires taxes to be raised on employers automatically whenever the balance of the fund falls below the level needed to pay benefits. During the great recession, the balance of the fund plummeted to the point where in 2011 it is more than $1 billion in debt to the federal government. If nothing were done, employers would have been hit with a payroll tax that at one point would have been as large as $1 billion, or an average of nearly $400 per employee. This kind of tax increase during the worst economic downturn would have been devastating to New Jersey businesses.
NJBIA organized various trade groups and leading New Jersey companies and reached out to legislative allies to prevent this from happening. After extensive research and intense lobbying campaign, NJBIA successfully convinced the state to change the law and phase in the tax increase over several years to lessen the impact on employers. Governor Chris Christie signed
S-2730 (Madden, Doherty)/A-3819 (Egan, Evans), in June 2011 to avert a $1 billion automatic tax increase. For more information, contact Stefanie Riehl.
No Millionaire’s Tax
At 8.97 percent, New Jersey’s top income tax rate is already has one of the highest in the region, yet some lawmakers pushed to make the state even more unfriendly under the guise of the millionaire’s tax. NJBIA campaigned strongly against such initiatives. One would have raised the top rate to 10.75 percent, making New Jersey’s the third highest tax rate in the nation. NJBIA backed Governor Chris Christie as he vetoed the income tax increase not once, but twice.
NJBIA has repeatedly called on state government to live within its means and not raise taxes. The state has made great strides in improving the tax climate in New Jersey. An income tax increase would have undercut those efforts. For more information, contact David Brogan.
Rain Tax on Ocean County Businesses
NJBIA opposed legislation that could have forced Ocean County businesses to pay additional fees for stormwater runoff projects. Because the tax would have been based on the amount of stormwater runoff a business has, it would have amounted to a tax on rain. NJBIA opposed the tax because Ocean County businesses already pay property taxes and stormwater permit fees for their facilities. Governor Chris Christie vetoed the bill, S-1856 (Smith)/A-2606 (McKeon), in 2011. For more information, contact Sara Bluhm.
Expansion of Net-Operating-Loss Tax Deductions
In 2008, New Jersey joined the ranks of more than half the states and the federal government when then Governor Jon Corzine signed legislation, S-2130 (Codey)/A-3124 (Greenwald, McKeon), to increase New Jersey's net-operating-loss carry forward period to 20 years from the previous seven. New Jersey businesses that pay the Corporation Business Tax and have a loss in one fiscal year will now be able to deduct it from income received for up to 20 future years. For more information, contact David Brogan.