New Jersey Governor Signs New Tax Bills Affecting Businesses

  by Stewart Weintraub and Jennifer Weidler

New Jersey’s Governor, Chris Christie, recently signed legislation enacting important changes for New Jersey’s tax scheme relating to businesses.  The first bill, S2753, provides for a three year phase-in of a single-sales-factor apportionment formula. New Jerseycurrently has a three-factor apportionment formula, consisting of sales, property and payroll factors.  Beginning on January 1, 2012, the sales factor will be weighted as 70% of apportionment, while property and payroll factors will be weighted as 15% each.  During 2013, the sales factor weighting will increase to 90% of apportionment, and finally in 2014 it will account for 100% of apportionment.

The estimated cost of this change to the state is approximately $24 million during 2012, and $308.5 million for the following five years.  The bill represents a welcomed change for some state businesses who criticized the disparate treatment amongst corporations in New Jersey, claiming that the state taxed companies that hired and expanded in the state higher than it did businesses with most of their employees and property outside of the state.  The bill also putsNew Jerseyamongst a number of other states that have single-sales factor apportionment.

The second bill, S2754, allows taxpayers to net their gains and losses from certain business-related categories of gross income and carry those losses forward for up to twenty years.  This bill allows small businesses with flow-through taxation to obtain the same benefits as taxpayers who pay the Corporate Business Tax.  The estimated cost of this change for the state is approximately $23 million during the first year, and $574 million over the five-year phase-in period.

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