Thousands of small businesses would regain the ability to fully deduct their state and local taxes under legislation that passed both houses Monday and has been sent to Gov. Phil Murphy.
The bill, A-4807/S-3246, would establish an elective entity-level tax to be paid by pass-through businesses and provides an offsetting credit to taxpayers who receive income from a pass-through business.
“This bill will preserve the ability of thousands of New Jersey small businesses registered as S corporations and Limited Liability Corporations to fully deduct their state income taxes following changes in the federal Tax Cuts and Jobs Act,” said NJBIA Chief of Government Affairs Chrissy Buteas. “Protecting that tax deductibility for these job creators will ultimately strengthen our economy and give New Jersey a much-needed competitive boost in the region.”
The legislation, known as the “Pass-Through Business Alternative Income Tax Act,” effectively amends New Jersey’s state tax code to a similar system that was in place prior to 1993, under which S corporations, LLCs and other business partnerships directly paid the state income tax liability of their owners and partners.
“We thank the sponsors of this legislation for their efforts to reduce the tax burden for small businesses in New Jersey,” Buteas said.