NJBIA President & CEO Michele N. Siekerka, Esq. issued the following statement Thursday regarding Gov. Phil Murphy’s action on A-4495, which revises the Corporation Business Tax.
“We are extremely disappointed the governor has signed A-4495 into law, which extends well beyond the intended cleanup of the Corporation Business Tax (CBT) legislation passed in July and will place a significant additional financial burden on our state’s largest job creators and discourage startup companies from operating here.
“With the bill now law, New Jersey will tax 50 percent of Global Intangible Low Taxed Income (GILTI), making our state a national outlier in its tax treatment of GILTI. New Jersey is now the only state, other than Maine, to have specifically considered, and affirmatively decided to tax 50 percent of GILTI.
“This provision will negatively impact any U.S. based company that files tax returns in New Jersey, and even more so those companies that are headquartered here in the state. It will further discourage companies from placing their headquarters here.
“This bill also reverses current law, which preserves the value of net operating losses (NOLs) when there is a dividend received deduction. Existing treatment of NOLs puts New Jersey in line with virtually all other states in the country. By undoing this law, small and medium sized startup companies that often don’t turn a profit in their early years will now be penalized.
“This will harm companies in the technology, life sciences, manufacturing, and logistics sectors and limit venture capital investment in the state. This is the same investment the governor was seeking to inspire in his economic plan announced earlier this week.
“These provisions strike at the heart of our regional and global competitiveness, and are yet another hit to the state’s job creators. New Jersey needs long-term, sustainable solutions to address our fiscal challenges, not increased costs.”
One response to “NJBIA Statement on Governor’s Action on Corporation Business Tax Bill”
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“GILTI” is foreign source income, or put another way, non-US source income of a “US Person” owning 10% or more of the vote or value of a CFC’s stock. GILTI taxation can be triggered to such a US Person by extraordinary transactions such as the sale of a CFC’s valuable commercial real estate, as well as the low-taxed, offshore, intangible asset derived income of a CFC that the Federal provision ( IRC 951A) is nominally aimed at.
I agree with MS’s comments. But also, I trust the legislation is limited to C corporations paying the CBT and does not also apply to NJ S corporations and hence their individual shareholders. If the legislation does apply, then the S corporation would want to (1) no longer be incorporated in NJ and/or (2) would want to relocate out of NJ, like to PA or DEL. So, for example, an NJ corp that no longer does business in NJ would want to merge into, for example, a Newco Delaware corp, so that NJ no longer has tax jurisdiction to impose this new tax. Also, NJ has become less of a desirable place to incorporate to the detriment of the State Treasuer’s filing office revenues.