On behalf of our member companies that provide more than 1 million jobs in the state and make the New Jersey Business & Industry Association the largest statewide business association in the country, we are writing to express our OPPOSITION to S-2989 (Sarlo, Singleton). The bill amends provisions regarding tax base and operative dates relative to CBT and combined reporting; provides CBT deduction in amount of certain foreign-related income, and clarifies tax treatment of certain tax credits awarded by NJEDA.
The provisions as outlined in this bill go well beyond technical corrections and represent a cost increase for New Jersey’s corporations. The legislation will increase costs for our member companies in New Jersey, and comes on the heels of the FY 2019 Budget which included a Corporation Business Tax (CBT) surcharge, as well as the adoption of combined reporting.
We are concerned with how these changes will negatively impact the competitiveness and affordability of New Jersey within the northeast region, and across the country. These changes will not only impact our competitiveness, but make us an outlier across the country.
Under this bill, New Jersey would effectively tax 50 percent of global intangible low-taxed income (GILTI), making New Jersey an outlier in its tax treatment of GILTI. This bill would make New Jersey 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, and will further discourage companies from placing their headquarters in New Jersey.
This legislation 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 current law, it will penalize small and medium sized startup companies that often don’t turn a profit in their early years. This will penalize companies in the innovation economy such as those in the technology, life sciences, manufacturing, and logistics sectors and limit venture capital investment in the state.
All told, it is the cumulative impact of these policies that contribute to the ever increasing cost of doing business in New Jersey and are counterintuitive to efforts that encourage economic growth.
Once again, NJBIA respectfully opposes S-2989, and we urge you to vote “no” when the bill comes before the full Senate for a vote on September 27, 2018. Thank you for considering our views and should you have any questions or need further information, please contact me at 609-858-9512.