A6050

An Act providing corporation business tax and gross income tax credits for businesses that employ formerly incarcerated individuals, and supplementing P.L.1945, c.162 (C.54:10A-1 et seq.) and Title 54A of New Jersey Statutes.

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

1. a. (1) For privilege periods beginning on or after January 1 next following the enactment of P.L. , c. (C. ) (pending before the Legislature as this bill), a taxpayer shall be allowed a credit against the tax due pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5) in an amount equal to the value of 10 percent of qualified wages paid in the privilege period to a formerly incarcerated individual in the course of sustained employment. For each privilege period, a taxpayer’s credit allowed pursuant to this section shall not exceed $1,200 for each formerly incarcerated individual.

(2) For a taxpayer to qualify for the credit allowed pursuant to this section for a privilege period, the taxpayer shall comply with the requirements of this paragraph.

Twenty-five percent of the taxpayer’s new employees for the privilege period for which the credit is claimed shall be formerly incarcerated individuals.

If the taxpayer received the credit allowed pursuant to this section for the privilege period immediately preceding the privilege period for which the credit is claimed, then 50 percent of the formerly incarcerated individuals hired in the immediately preceding period shall remain employed by the taxpayer for the privilege period for which the credit is claimed.

The taxpayer shall regularly conduct specific recruitment efforts to hire formerly incarcerated individuals and members of the immediate families of formerly incarcerated individuals.

b. (1) The order of priority of the application of the credit allowed pursuant to this section and any other credits allowed against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5) for a privilege period shall be as prescribed by the director.

The amount of the credit applied pursuant to this section, added together with any other credit allowed against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), shall not exceed 50 percent of the tax liability otherwise due and shall not reduce the tax liability to an amount less than the statutory minimum provided in subsection (e) of section 5 of P.L.1945, c.162.

Unused credit resulting from the limitations of this paragraph may be carried forward, if necessary, for use in future privilege periods following the privilege period for which the credit is allowed.

(2) A taxpayer shall not be granted a credit pursuant to this section for the qualified wages paid to a formerly incarcerated individual in a privilege period if the qualified wages of the formerly incarcerated individual or the job providing qualified wages to the individual is included in the calculation of another credit against any State tax or a grant pursuant to P.L.1996, c.26 (C.34:1B-124 et seq.) for a period of time that coincides with the applicable privilege period.

(3) If the director determines that a taxpayer is displacing employees and replacing the employees with formerly incarcerated individuals for the primary purposes of obtaining the credit allowed pursusant to this section, the director shall deny the credit allowed under this section for the taxpayer and shall issue a tax assessment for the recapture of credit previously allowed to the taxpayer under this section plus an assessment of 50 percent of any credit subject to recapture as penalty.

c. As used in this section:

“Director” means the Director of the Division of Taxation in the Department of Treasury.

"Formerly incarcerated individual" means an individual who previously spent time in the custody of law enforcement authorities, including the Department of Corrections, following conviction of a criminal offense or following the entry of a guilty plea to a criminal charge by the person before a court of competent jurisdiction, who is no longer subject to incarceration.

“Member of the immediate family” means a formerly incarcerated individual’s spouse, parent, sibling, or child.

"Qualified wages" mean any salaries, wages, and remuneration subject to the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., paid to a formerly incarcerated individual on or after January 1 next following the enactment of P.L. , c. (C. ) (pending before the Legislature as this bill) for labor rendered in service to an enterprise of the taxpayer.

"Sustained employment" means a period of time no less than 185 business days during the privilege period in which a formerly incarcerated individual is earning qualified wages.

2. a. (1) For taxable years commencing on or after January 1 next following the enactment of P.L. , c. (C. ) (pending before the Legislature as this bill), a taxpayer shall be allowed a credit against the tax due pursuant to "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., in an amount equal to the value of 10 percent of qualified wages paid in the taxable year to a formerly incarcerated individual in the course of sustained employment. For each taxable year, a taxpayer’s credit allowed pursuant to this section shall not exceed $1,200 for each formerly incarcerated individual.

(2) For a taxpayer to qualify for the credit allowed pursuant to this section for a taxable year, the taxpayer shall comply with the requirements of this paragraph.

Twenty-five percent of the taxpayer’s new employees for the taxable year for which the credit is claimed shall be formerly incarcerated individuals.

If the taxpayer received the credit allowed pursuant to this section for the taxable year immediately preceding the taxable year for which the credit is claimed, then 50 percent of the formerly incarcerated individuals hired in the immediately preceding taxable year shall remain employed by the taxpayer for the taxable year for which the credit is claimed.

The taxpayer shall regularly conduct specific recruitment efforts to hire formerly incarcerated individuals and members of the immediate families of formerly incarcerated individuals.

b. (1) A credit allowed pursuant to this section shall not reduce the tax liability otherwise due pursuant to the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., for a taxable year to an amount less than zero.

Unused credit resulting from limitations of this paragraph may be carried forward if necessary to future taxable years following the taxable year for which the credit was allowed. The form and method of carry forward shall be as prescribed by the director.

(2) A taxpayer shall not be granted a credit pursuant to this section for the qualified wages paid to a formerly incarcerated individual in a taxable year if the qualified wages of the formerly incarcerated individual is included in the calculation of another credit against any State tax or a grant pursuant to P.L.1996, c.26 (C.34:1B-124 et seq.) for a period of time that coincides with the applicable taxable year.

(3) If the director determines that a taxpayer is displacing employees and replacing the employees with formerly incarcerated individuals for the primary purposes of obtaining the credit allowed pursuant to this section, the director shall deny the credit allowed under this section for the taxpayer and shall issue a tax assessment for the recapture of credit previously allowed to the taxpayer under this section plus an assessment of 50 percent of any credit subject to recapture as penalty.

c. As used in this section:

“Director” means the Director of the Division of Taxation in the Department of Treasury.

“Member of the immediate family” means a formerly incarcerated individual’s spouse, parent, sibling, or child.

"Sustained employment" means a period of time no less than 185 business days during the taxable year in which a formerly incarcerated individual is earning qualified wages.

3. This act shall take effect immediately.

STATEMENT

This bill provides a corporation business tax credit and gross income tax credit for qualified wages for employing formerly incarcerated individuals.

The two credits established by this bill provide an employer with a credit in the amount of 10 percent of the wages paid to a formerly incarcerated individual. The credits may not exceed $1,200 for each formerly incarcerated individual. The bill defines a formerly incarcerated individual as an individual who previously spent time in the custody of law enforcement authorities, including the Department of Corrections, following conviction of a criminal offense or following the entry of a guilty plea to a criminal charge by the person before a court of competent jurisdiction, who is no longer subject to incarceration. To be creditable, wages must also arise from employment of a formerly incarcerated individual for at least 185 business days of the applicable tax year or privilege period.

To qualify for a credit, the bill imposes a series of conditions on a taxpayer as an employer. For a tax year or privilege period that the credit is claimed, the bill requires that 25 percent of the taxpayer’s new employees be formerly incarcerated individuals. For tax years or privilege periods immediately subsequent to a prior credit year, the bill further requires that 50 percent of the qualified veterans hired during that time must remain employed by the taxpayer. Additionally, the bill requires the taxpayer to make efforts to recruit formerly incarcerated individuals and members of the immediately family of formerly incarcerated individuals.

In addition to providing the terms of credit qualification, the bill contains provisions aimed at preventing potential misuse of the credit. The bill prohibits taxpayers from simultaneously using the wages or employment of the formerly incarcerated individual to qualify for the credit and any other generally available employment incentive that comes in the form of a State tax credit. The bill also empowers the Director of the Division of Taxation in the Department of the Treasury to recapture the credit, plus an additional 50 percent penalty, if the director determines that the employer displaced employees to replace them with formerly incarcerated individuals for the primary purpose of taking advantage of the credit.