A3683 A2152 ACS

An Act concerning unemployment taxes, and supplementing parts of the statutory law.

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

1. a. (1) For privilege periods beginning in Calendar Year 2023, a taxpayer that is a small business shall be allowed a credit against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), in an amount equal to the difference in the small business’s unemployment insurance contributions for Fiscal Year 2023 as required pursuant to R.S.43:21-7(c)(5)(P) and the amount the small business would have otherwise contributed if contributions for Fiscal Year 2023 were computed based on rates set by column “C” of the table in R.S.43:21-7(c)(5)(E); provided, however, if the actual fund reserve ratio results in the contribution rate for employers being set by a column that has a lower tax rate than the rates provided in column “C,” the tax credit provided pursuant to this section shall not be made available.

(2) For privilege periods beginning in Calendar Year 2024, a taxpayer that is a small business shall be allowed a credit against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), in an amount equal to the difference in the small business’s unemployment insurance contributions for Fiscal Year 2024 as required pursuant to R.S.43:21-7(c)(5)(Q) and the amount the small business would have otherwise contributed if contributions for Fiscal Year 2024 were computed based on rates set by column “C” of the table in R.S.43:21-7(c)(5)(E); provided, however, if the actual fund reserve ratio results in the contribution rate for employers being set by a column that has a lower tax rate than the rates provided in column “C,” the tax credit provided pursuant to this section shall not be made available.

b. No tax credits shall be allowed pursuant to this section for any amount of the increase in a small business’s unemployment insurance contributions that is offset by grants or other subsidies made available for similar purposes.

c. A taxpayer shall apply in a form and manner to be determined by the director for the tax credits provided pursuant to this section. The order of priority of the application of the credits allowed pursuant to this section and any other credits allowed by law shall be as prescribed by the director.

d. The amount of the credits applied under this section against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5) for a privilege period, together with any other credits allowed by law 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 (C.54:10A-5). The amount of the tax credits otherwise allowable under this section that cannot be applied for the privilege period due to the limitations of this subsection or under other provisions of P.L.1945, c.162 (C.54:10A-1 et seq.) may be carried forward, if necessary, to the seven privilege periods following the privilege period for which the tax credit was allowed.

e. As used in this section:

"Small business" means a small business as defined by the United States Small Business Administration that for purposes of size standards or other factors meets the applicable criteria set forth in Part 121 of Title 13 of the Code of Federal Regulations as amended, which has its principal place of business in New Jersey, and is independently owned and operated.

2. a. (1) For taxable years beginning in Calendar Year 2023, a taxpayer that is a small business shall be allowed a credit against the tax otherwise due under the “New Jersey Gross Income Tax Act,” N.J.S.54A:1-1 et seq., in an amount equal to the difference in the small business’s unemployment insurance contributions for Fiscal Year 2023 as required pursuant to R.S.43:21-7(c)(5)(P) and the amount the small business would have otherwise contributed if contributions for Fiscal Year 2023 were computed based on rates set by column “C” of the table in R.S.43:21-7(c)(5)(E); provided, however, if the actual fund reserve ratio results in the contribution rate for employers being set by a column that has a lower tax rate than the rates provided in column “C,” the tax credit provided pursuant to this section shall not be made available.

(2) For taxable years beginning in Calendar Year 2024, a taxpayer that is a small business shall be allowed a credit against the tax otherwise due under the “New Jersey Gross Income Tax Act,” N.J.S.54A:1-1 et seq., in an amount equal to the difference in the small business’s unemployment insurance contributions for Fiscal Year 2024 as required pursuant to R.S.43:21-7(c)(5)(Q) and the amount the small business would have otherwise contributed if contributions for Fiscal Year 2024 were computed based on rates set by column “C” of the table in R.S.43:21-7(c)(5)(E); provided, however, if the actual fund reserve ratio results in the contribution rate for employers being set by a column that has a lower tax rate than the rates provided in column “C,” the tax credit provided pursuant to this section shall not be made available.

c. A taxpayer shall apply in a form and manner to be determined by the director for the tax credits provided pursuant to this section. The order of priority of the application of the credit allowed pursuant to this section and any other credits allowed by law shall be as prescribed by the director.

d. The amount of the tax credits applied under this section against the tax otherwise due under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., for a taxable year, when taken together with any other payments, credits, deductions, and adjustments allowed by law shall not reduce the tax liability of the taxpayer to an amount less than zero. The amount of the tax credits otherwise allowable under this section that cannot be applied for the taxable year due to the limitations of this subsection or under other provisions of N.J.S.54A:1-1 et seq., may be carried forward, if necessary, to the seven taxable years following the taxable year for which the tax credits were allowed.

e. (1) A business entity that is classified as a partnership for federal income tax purposes shall not be allowed a tax credit pursuant to this section directly, but the amount of tax credits of a taxpayer in respect to distributive share of entity income, shall be determined by allocating to the taxpayer that proportion of the tax credits acquired by the entity that is equal to the taxpayer’s share, whether or not distributed, of the total distributive income or gain of the entity for its taxable year ending within or with the taxpayer’s taxable year.

(2) A New Jersey S Corporation shall not be allowed a tax credit pursuant to this section directly, but the amount of the tax credit of a taxpayer in respect of a pro rata share of S Corporation income, shall be determined by allocating to the taxpayer that proportion of the tax credit acquired by the New Jersey S Corporation that is equal to the taxpayer’s share, whether or not distributed, of the total pro rata share of S Corporation income of the New Jersey S Corporation for its privilege period ending within or with the taxpayer’s taxable year.

f. As used in this section:

3. a. There is established, in the Department of Labor and Workforce Development, the Supplemental Unemployment Compensation Revolving Fund. Commencing on July 1, 2022, moneys from the fund shall be used to pay into the unemployment compensation fund amounts needed to pay back any balance in federal unemployment insurance loan advances provided pursuant to Title XII of the Social Security Act (42 U.S.C. s. 1321 et seq.).

b. The Supplemental Unemployment Compensation Revolving Fund is authorized, to the extent permitted by federal law, to accept as repayments from unemployment compensation fund of the amounts paid into the unemployment compensation fund pursuant to subsection a. of this section, but only after the unemployment compensation fund is capable of making all unemployment compensation payments without drawing on federal loan advances.

c. Moneys in the Supplemental Unemployment Compensation Revolving Fund, including all interest and income derived from investments of those moneys, shall not be used for any purpose other than the payment of, and the administration of the payment of, unemployment compensation or for the reimbursement of federal loans made to the unemployment compensation fund for the payment of unemployment compensation, and therefore all moneys in the Supplemental Unemployment Compensation Revolving Fund are regarded as being subject to the requirements of federal law, and of paragraph 8 of section 2 of Article 8 of the State Constitution, that State unemployment funds be used exclusively for the payment of, and the administration of the payment of, unemployment compensation. All moneys appropriated to the Supplemental Unemployment Compensation Revolving Fund and any repayments of moneys paid from the unemployment compensation fund into the Supplemental Unemployment Compensation Revolving Fund pursuant to subsection b. of this section, including all interest and income derived from investments of those moneys, shall be used exclusively for the payment of, and the administration of the payment of, unemployment compensation, or for the reimbursement of federal loans made to the unemployment compensation for the payment of unemployment compensation. Payments shall not be made from the unemployment compensation fund to the Supplemental Unemployment Compensation Revolving Fund if it is determined that those payments would be in violation of federal law.

4. The Department of Labor and Workforce Development shall notify each employer of any change in the amount and rate of contributions by the employer into the unemployment compensation fund not less than 30 days before the change occurs.

5. There is appropriated $375 million from the General Fund to the Unemployment Compensation Revolving Fund.

6. This act shall take effect immediately.