Budget hearing with the Treasurer and the Office of Legislative Services this week revealed that New Jersey’s largest job creators are taking advantage of an NJBIA-written law that reformed New Jersey’s corporate tax policies to be more competitive with other states.
The 2023 law signed by Gov. Phil Murphy changed the way net operating losses (NOLs) and global intangible low-taxed income (GILTI) were treated under state law.
During a revenue update based on the state’s April 15 tax returns, Senate Budget Chair Paul Sarlo (D-36) asked about Corporation Business Tax (CBT) projections for the state that had been considerably marked down from February to May considerably.
“Does that have something to do with the net operating loss law that some corporations have taken advantage of?” Sarlo asked OLS Revenue and Economic Policy Analyst Oscar Mendez.
“That is right on the dot, chairman,” Mendez replied.
More specifically, Treasurer Elizabeth Muoio in a revenue update this week provided to budget committees which lowered the Treasury’s anticipated CBT collections by $508.5 million.
“When adding a 2.5% Corporate Transit Fee (CTF), an expansion of the CBT tax last year, total revenue from corporate business taxes is projected to be $745.9 million less in the current fiscal year,” said NJBIA Chief Government Affairs Officer Christopher Emigholz, who worked directly with the Murphy administration on the reforms.
The 2023 law, which was sponsored by Sarlo and Assemblywoman Eliana Pintor Marin (D-29), made the tax code more taxpayer friendly in the way it treats NOLs by allowing the sharing of NOLs by combined businesses.
“Previous law did not allow the pooling of NOLs between combined businesses resulting in the inability to fully utilize them,” Emigholz said.
Also prior to the law, New Jersey had more aggressively taxed income earned abroad by U.S.-controlled corporations.
Neighboring Pennsylvania does not tax GILTI, while New York and Connecticut only tax 5% of GILTI.
But New Jersey was a national outlier in only allowing corporations to deduct 50% of GILTI from their tax base. The 2023 law brought New Jersey in line with New York and Connecticut.
“We are very happy that our corporations, who provide many jobs in the state and around the country and galvanize our economy, are taking advantage of these reforms,” Emigholz said.
“While we know having the highest corporate tax rate in the nation is not something to be celebrated, bringing New Jersey in line with other states on the intricacies of how they are taxed is a big plus.
“We also continue to thank the Murphy administration for working with the business community on these complex rules,” Emigholz said.
