The Legislature will take up corporate tax relief this fall as a part of an ongoing effort to address the weakening economy, the State’s top two Legislative leaders told 200 NJBIA members on September 26.
Speaking at NJBIA’s Meet the Legislative Leaders event, Senate President Richard Codey and Assembly Speaker Joseph Roberts said they wanted to look at two issues strongly pushed by NJBIA—extending the carry-forward period for net-operating-loss deductions to 20 years from seven years and basing the Corporation Business Tax (CBT) solely on in-State sales.
“What would it mean to keep business here and attract more business here?” Codey asked rhetorically, underscoring the Legislature’s concern over the economic downturn.
New Jersey’s CBT is based on a company’s in-State sales, property and payroll. For out-of-state companies that simply sell their goods in New Jersey, the payroll and property factors are zero, so they pay less in taxes than companies that create jobs and have facilities here.
NJBIA believes that is backwards and has urged the Legislature to adopt a single-sales-factor reform, that would base the CBT solely on a company’s in-state sales and not on its New Jersey payroll or facilities as well.
“These are long overdue for an adjustment in my opinion,” Roberts said. “When you tax a building and a payroll, you send a pretty clear message that you should locate your business elsewhere.”
Similarly, New Jersey is one of only eight states that do not allow corporations to deduct net operating losses (NOLs) over a 20-year period. Codey has introduced legislation that would extend NOL carry-forward periods beyond the current seven years to 20 years. Assemblyman Lou Greenwald has introduced a similar bill in the Assembly.
On October 6, the Senate Budget and Appropriations Committee released the NOL expansion, S-2130 (Codey); the Assembly Budget Committee released the Assembly version of the NOL expansion, A-3124 (Greenwald, McKeon); and the Assembly Economic Growth Committee released the single-sales-factor reform bill, A-2626 (Vas). While the Wall Street financial crisis has brought economic issues to the forefront, Codey and Roberts pointed out that the Legislature had already passed economic-growth legislation to bolster New Jersey’s struggling economy.
The audience applauded when Codey cited the recent enactment of the NJBIA-backed Permit Extension Act, which extends existing permit approvals for construction projects through 2010.
“If you have a right to develop a property and you’re stymied by the economic crisis, you deserve to get a breather,” Roberts said.
Codey also cited the $260 million the Legislature put into the Unemployment Insurance (UI) fund to prevent a $350 million automatic payroll tax increase. Federal law requires UI taxes to increase automatically if the fund balance drops below a certain level.
Both leaders said that despite the Legislature’s effort they believe the current economic crisis will have an impact on New Jersey, especially in lost State tax revenues. Codey said the Legislature is considering additional budget cuts. He said he hoped action would be taken early to prepare for a revenue shortfall.
“What’s going on in Wall Street and down in DC affects us a great deal in New Jersey,” he said. “We’re going to take a wallop because tax revenues are going to be down drastically.”
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