NJBIA and the NJ State Chamber of Commerce recently met with Treasury, Taxation and the Governor’s office to review our Joint Reform Package to Increase Competitiveness. We also recently met with the Senate and Assembly Majority offices to discuss the platform as well.
While many of the policy matters in the Reform Package were discussed, I am going to specifically highlight two below – GILTI and NOLs.
With respect to GILTI, we once again thanked the Administration for their willingness to issue Technical Bulletin 95 to address the apportionment rate, which was certainly helpful to some companies. Yet, New Jersey is still one of only five states that tax 50% or more of GILTI, and the only state out of 18 which have 10 or more Fortune 500 company headquarters to include more than 5% of GILTI in their tax base. As such and recognizing this would require a change in the statute, we are seeking their support and feedback to move New Jersey in line with other states by either decoupling from GILTI or excluding 95% of GILTI from the state tax base.
With respect to Net Operating Loss (NOL), New Jersey is one of only three states that require a company to reduce its net operating loss carryforward by the deduction it is allowed for dividends received from subsidiaries. As part of the final FY19 budget, A4202 eliminated this requirement. However, A4495, which was passed in October of 2018, reversed course. New Jersey continues to remain out of step with other states on its treatment of NOL carryovers.
New Jersey is also out of step with most other states on its treatment of the survival of NOLs in certain corporate combinations/reorganizations. Of primary concern is when two corporations are merged, NOLs can survive only to the extent they were generated by the corporation that survives the merger. A4495 had fully addressed this issue, however, it was amended in the final budget to limit the fix to members of a combined group. This raises concerns if there is not instant unitary relation between the entities.
We believe these policy decisions are in direct contrast to promoting an innovation economy. As such, we support changes to these current policies. During the meeting, we discussed the potential revenue impact of such policy changes. As a follow-up, we are gathering as much information as possible with respect to potential revenue impact and need your help.
We are asking our member companies to assist us with gathering internal company information to gauge the impact on state revenues. We’ll be asking for information from the last three tax years as to how much your company and its affiliates “lost” on each of the two NOL issues. As such, please email me at email@example.com if you are able to work with us on this project. An NDA will be provided and all information will be completely confidential and the results will only be released in the aggregate. This information gathering project will assist our advocacy efforts. Please help us help you.
We will continue to keep you updated on any policy within our Joint Reform Package.