A bill that will reform New Jersey’s corporate tax policies to be more competitive with other states by changing the way global intangible low-taxed income (GILTI) and net operating losses (NOLs) are treated under state law advanced to Gov. Phil Murphy’s desk on Friday.
Bill A-5323 (Pintor Marin, D-29) and its Senate-counterpart, S-3737 (Sarlo, D-36) was passed unanimously by both Houses on Friday.
NJBIA Chief Government Affairs Officer Christopher Emigholz, who worked with the Murphy administration on the bill as far back as last summer, said he was grateful.
“We’re very happy to see this legislation go to Governor Murphy’s desk,” he said. “This was complicated, but also compromise, legislation that we have been working hard on for a long time.
“We thank Treasury, the Department of Taxation, and the Murphy administration for working with us on this bill and to bring more fairness and competitiveness within our corporate tax structure.”
Emigholz explained that most states do not tax income earned abroad by U.S.-controlled corporations as aggressively as New Jersey.
Neighboring Pennsylvania does not tax GILTI, while New York and Connecticut only tax 5% of GILTI.
New Jersey, however, is a national outlier that only allows corporations to deduct 50% of GILTI from their tax base.
“Aside from the questions on the appropriateness of states taxing foreign income at all, New Jersey should not be more aggressive on this possibly inappropriate tax than any other state in the nation,” Emigholz said. “Especially when we are fortunate to have as many multi-national corporations located and creating great jobs here.”
The bill would also make the tax code more taxpayer friendly in the way it treats net operating losses (NOLs) by allowing the sharing of NOLs by combined businesses.
“Current law does not allow the pooling of NOLs between combined businesses resulting in the inability to fully utilize them, and the current ordering of them also limits their full use,” Emigholz said.
“This bill allows the sharing of NOLs between combined businesses so that they are not locked away or captured, and changing the order would end them being partially absorbed by the dividends received deduction.
