A2007

An Act enhancing the reporting and disclosure requirements concerning State tax expenditures and limiting the duration of State tax expenditure enactments, amending P.L.2009, c.189 and P.L.2007, c.200 and supplementing Title 1 of the Revised Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Section 1 of P.L.2009, c.189 (C.52:27B-20a) is amended to read as follows:

1. a. In addition to the requirements of section 11 of article 3 of P.L.1944, c.112 (C.52:27B-20), and any other provisions of law, the Governor's budget message transmitted annually to the Legislature shall include a State tax expenditure report setting forth estimates of the tax expenditures under existing State law for the last completed fiscal year, the current fiscal year and the fiscal year to which the budget message applies. The tax expenditures report shall take into account projected economic factors, and any changes in State tax expenditures as may be enacted or reasonably expected to be enacted for any fiscal year.

b. The State tax expenditures report shall:

(1) list each State tax expenditure,

(2) identify the statutory authority for each State tax expenditure, and the year in which it was enacted or the tax year or tax period in which it became effective,

(3) describe the [objective of] specific goals, purposes, and objectives that each State tax expenditure will achieve,

(4) detail in columnar enumeration for each State tax expenditure an estimate of the amount of State revenue loss for the last completed fiscal year, the current fiscal year and the fiscal year to which the budget message applies,

(5) determine through detailed performance indicators whether each State tax expenditure has been effective in achieving the [purpose] specific goals, purposes and objectives for which the tax expenditure was enacted and currently serves, including an analysis of the persons, including corporations, individuals or other entities, benefited by the expenditure,

(6) evaluate the effect of each State tax expenditure on the fairness and equity of the distribution of the tax burden,

(7) describe the data collection and reporting requirements imposed upon the persons, including corporations, individuals or other entities benefited by the expenditure to assist in making the determination required by paragraph (5) of this subsection, which shall include the specific data and baseline measurements to be collected and remitted in each year the State tax expenditure is in effect, necessary to measure any change in performance indicators, and the specific taxpayers, State departments, agencies, independent authorities, or other entities required to collect and remit data, and

(7) the public and private costs of administering the State tax expenditures.

c. As used in this section:

"State tax expenditure" means those revenue losses attributable to provisions of State tax law which establish special tax treatment, including but not limited to tax law definition, deduction, exclusion, exemption, deferral, credit or transfer certificate, preferential tax rate or other special tax provision resulting in a reduced tax liability for certain persons, individuals, types of income, transactions or property from the liability which would be presumed to exist without the State tax expenditure.

d. The Division of Taxation in the Department of the Treasury shall advise and assist the Governor in the preparation of the State tax expenditure report.

(cf: P.L.2009, c.189, s.1)

2. Section 3 of P.L.2007, c.200 (C.52:39-3) is amended to read as follows:

3. For the purposes of this act:

"Corporate parent" means either: a person, association, corporation, joint venture, partnership, or other business entity, that owns or controls 50% or more of a recipient corporation; or the recipient corporation itself, if no other person, association, corporation, joint venture, partnership, or other entity, owns or controls 50% or more of the recipient corporation.

"Date of development subsidy" means the initial date that a granting body provides the monetary value of a development subsidy to a recipient corporation provided, however, that if the development subsidy is for the installation of new equipment, the date shall be the date the recipient corporation puts the equipment into service and provided, further, that if the development subsidy is for improvements to property, the date shall be the date the improvements are finished or the date the recipient corporation occupies the property, whichever is earlier.

"Development subsidy" means the authorizing of the provision or providing to a recipient corporation of an amount of funds by or from a public body with a value of not less than $25,000 for the purpose of stimulating economic development in New Jersey, including, but not limited to, any bond, grant, loan, loan guarantee, matching fund or any tax expenditure. "Development subsidy" does not refer to any contract under which a public body purchases or otherwise procures goods, services or construction on an unsubsidized basis, including any contract solely for the construction or renovation of a facility owned by a public body. "Development subsidy" does not mean any authorizing or providing of funds by or from a public body to a recipient corporation, including by means of a tax expenditure, for the exclusive purpose of the development or production of affordable housing, for the exclusive purpose of subsidizing site remediation, recycling, commuter transportation assistance, pollution reduction, energy conservation or other programs to improve the environment, or for the exclusive purpose of providing benefits to employees of the recipient corporation. "Development subsidy" does not mean any authorizing or providing of funds by or from a public body to a non-profit organization, including by means of a tax expenditure, for the exclusive purpose of subsidizing the development of facilities used to provide recreational, educational, arts or cultural programs or childcare or healthcare services.

"Employee benefits" means the average rate of benefit costs paid by a recipient corporation to or for its employees, including, but not limited to, the cost to the recipient corporation of health care benefits, pension benefits and apprenticeship or other training and education benefits, but excluding any costs to the recipient corporation of unemployment compensation, workers' compensation or temporary disability benefits, Social Security benefits, or any other employee benefits which the recipient corporation is required by State or federal law to pay. "Employee benefits" do not include any payroll deductions or other costs paid by employees for the benefits.

"Full-time job" means a job in which an individual is employed by a recipient corporation for at least 35 hours per week.

"Granting body" means a public body that provides or authorizes a development subsidy and, in the case of a tax expenditure related to any tax paid to the State, means the State Treasurer.

"Health benefits" means health benefits provided under a group health plan as defined in section 14 of P.L.1997, c.146 (C.17B:27-54), a health benefits plan as defined in section 1 of P.L.1992, c.162 (C.17B:27A-17), or a policy or contract of health insurance covering more than one person issued pursuant to Title 17B of the New Jersey Statutes.

"Part-time job" means a job in which an individual is employed by a recipient corporation for less than 35 hours per week.

"Project site" means the site of a project inside New Jersey for which any development subsidy is provided.

"Public body" or "State" means the State of New Jersey or any agency, instrumentality or authority of the State, but not a political subdivision of the State.

"Recipient corporation" means any non-governmental person, association, corporation, joint venture, partnership or other entity that receives a development subsidy.

"Tax expenditure" means the amount of foregone tax collections due to any abatement, reduction, exemption or credit or transfer certificate against any State tax, including, but not limited to, taxes on raw materials, inventories or other assets, taxes on gross receipts, income or sales, and any use, excise or utility tax. "Tax expenditure" does not refer to any credit against any tax liability of an employee or any personal exemption, homestead rebate, credit or deduction for the expenses of a household or individual, or other reduction of the tax liability of an individual or household.

"Temporary job" means a job for which an individual is hired for a limited period of time, which shall include all jobs for construction at the project site.

"Value of a development subsidy" means the dollar value of the development subsidy provided to the recipient corporation. In the case of a loan or loan guarantee provided by a public body to a recipient corporation or tax-exempt financing authorized by a public body, the "value of a development subsidy" means the amount loaned.

(cf: P.L.2007, c.200, s.3)

3. Section 4 of P.L.2007, c.200 (C.52:39-4) is amended to read as follows;

4. a. Each applicant for a development subsidy shall submit to the granting body an application for the development subsidy on a form prepared by the State Treasurer. The information required on the application, or in supplements accompanying the application, shall include the following:

(1) An application tracking number provided by the granting body;

(2) The names, street and mailing addresses and phone numbers of the chief officer of the granting body, the chief officer of the applicant's corporate parent and the applicant and the street address and three-digit North American Industry Classification System number of the project site;

(3) The start date and the end date, if any, of the development subsidy;

(4) A list of all development subsidies that the applicant is requesting or receiving, the name of any other granting body from which development subsidies are sought or obtained, the value of each development subsidy and the aggregate value of all development subsidies requested or received from all sources;

(5) A signed certification by the chief officer of the recipient corporation that the application is accurate and meets the requirements of this act;

(6) The total number of individuals employed by the applicant at the project site on the date of the application, the anticipated number of jobs that will be retained as a result of the development subsidy and the number of new jobs to be created by the applicant at the project site if the development subsidy is granted, broken down by full-time, part-time and temporary jobs;

(7) The average annual wage and benefit rates of current employees and the anticipated average annual wage and benefit rates of new employees;

(8) The number of current employees provided health benefits, and the number of new employees anticipated to be provided health benefits;

(9) How many of the current employees and how many of the anticipated new employees are represented by a collective bargaining unit;

(10) The average total number of individuals employed in New Jersey during the calendar year preceding the submission of the application by the applicant's corporate parent and all subsidiaries thereof, broken down by full-time, part-time and temporary jobs;

(11) A statement as to whether the development subsidy may reduce employment at any other site controlled by the applicant or its corporate parent, inside the State, resulting from automation, merger, acquisition, corporate restructuring or other business activity;

(12) A statement as to whether or not the project involves the relocation of work from another address and if so, the number of jobs to be relocated and the address from which they are to be relocated; and

(13) Any other information deemed useful or necessary by the State Treasurer for the implementation of this act, including for tax expenditures, specific data collection and reporting requirements imposed upon the recipient corporation that shall assist the State Treasurer in providing, as part of the annual budget request of the Governor, the comprehensive presentation of the State costs of tax expenditure development subsidies required pursuant to section 5 of P.L.2007, c.200 (C.52:39-5) and producing the annual Unified Economic Development Budget Report pursuant to section 6 of P.L.2007, c.200 (C.52:39-6, which information shall include the specific data and baseline measurements to be collected and remitted in each year the tax expenditure is in effect, necessary to measure any change in performance indicators, and the specific taxpayers, State departments, agencies, independent authorities, or other entities required to collect and remit data.

b. Any granting body, other than the State Treasurer approving the application, shall send a copy to the State Treasurer not more
than 15 business days after approval. If the application is not approved, the granting body shall retain the application.

(cf: P.L.2007, c.200, s.4)

4. Section 6 of P.L.2007, c.200 (C.52:39-6) is amended to read as follows:

6. a. The State Treasurer shall, not more than four months after the end of each State fiscal year, compile and publish, in printed and electronic form, including on the Internet, an annual Unified Economic Development Budget Report with regard to the fiscal year just concluded. The report shall provide the following comprehensive information regarding the costs and benefits of all development subsidies of the State:

(1) Information regarding tax expenditures resulting from any development subsidy, including the name of each recipient corporation receiving one or more tax expenditures with a combined total value equal to or greater than $100,000, the value of all tax expenditures received by each recipient corporation and summaries of the number of full-time and part-time jobs created or retained, employee benefits provided and the degree to which job creation and retention, wage and benefit goals and requirements of recipient corporations and parent corporations have been met,. Any tax expenditure received by a corporation receiving tax expenditures with a total value of less than $100,000 shall not be itemized. The report shall include aggregate dollar amounts for each category of tax expenditure, each geographical area, the number of companies for each category of tax expenditure, the number of full-time and part-time jobs created or retained, the employee benefits provided, and the degree to which job creation and retention, wage and benefit rate goals and requirements have been met for each category of tax expenditure, and a determination made through detailed performance indicators whether each tax expenditure has been effective in achieving the specific goals, purposes and objectives for which the tax expenditure was enacted and currently serves; and

(2) The costs of all expenditures of development subsidies appropriated by any granting body, including, but not limited to, the Department of Labor and Workforce Development, the Department of Education, the New Jersey Economic Development Authority, the New Jersey Commerce, Economic Growth and Tourism Commission, the New Jersey Commission on Higher Education, the New Jersey Commission on Science and Technology, and research and business assistance programs of public institutions of higher education, together with the cost to the granting bodies and the value of the development subsidies received by each recipient corporation, and summaries of the number of full-time and part-time jobs created or retained, employee benefits provided, and the degree to which job creation and retention, wage and benefit rate goals and requirements of recipient corporations and parent corporations have been met.

b. The State Treasurer shall provide to the Legislature, as part of the annual budget request of the Governor, a comprehensive presentation of the costs of all development subsidies to the State during the prior fiscal year, an estimate of the anticipated costs of development subsidies for the then current fiscal year and an estimate of the costs of all development subsidies for the fiscal year of the requested budget, including, but not limited to:

(1) The total cost to the State of tax expenditures resulting from the development subsidies, the costs for each category of tax expenditure, and the amounts of tax expenditures by geographical area; and

(2) The cost to the State of all appropriated expenditures for development subsidies, including line-item budgets for every State-funded entity concerned with economic development, including, but not limited to, the Department of Labor and Workforce Development, the Department of Education, the New Jersey Economic Development Authority, the New Jersey Commerce, Economic Growth and Tourism Commission, the New Jersey Commission on Higher Education, the New Jersey Commission on Science and Technology, and research and business assistance programs of public institutions of higher education.

(cf: P.L.2007, c.200, s.6)

5. (New section) Notwithstanding any other law to the contrary, any bill introduced on or after January 10, 2012 and enacted thereafter, that authorizes a State tax expenditure as defined in section 1 of P.L.2009, c.189 (C.52:27B-20a) or a tax expenditure as defined in section 3 of P.L.2007, c.200 (C.52:39-3), shall expire on the first day of January next following the seventh anniversary of its effective date.

6. This act shall take effect immediately.

STATEMENT

This bill enhances the current statutory requirements of the review and evaluation of State tax expenditures or State tax preferences that are meant to accomplish public goals by forgoing State tax dollars to the direct benefit of certain taxpayers. These tax expenditures often are intended to encourage investment that will create jobs and economic development. Other tax expenditures are intended to relieve tax on publically favored or important products, services or financial decisions. Certain recently enacted requirements for the regular Executive branch review of whether these various tax breaks have met expectations are in need of improvement. State public finance experts recommend that tax preferences be evaluated on par with direct spending programs.

This bill will enhance the annual review required by the State Treasurer of the specific goals, purposes, and objectives that each State tax expenditure is intended to achieve. The bill also requires an enhanced annual evaluation of specific data collection and improved reporting requirements imposed upon the recipient of tax expenditures, the comprehensive presentation of the State costs of tax expenditures including development subsidies, and review of the specific data and baseline measurements to be collected and remitted in each year that a tax expenditure is in effect, that are necessary to measure any change in performance indicators for evaluation of the overall benefit of tax expenditures.

The bill also requires that any bill authorizing a tax preference that is introduced after January 10, 2012, shall be evaluated based on specific goals and objectives, provide for detailed performance indicators, and expire after seven years.