A5592

An Act providing tax credits to certain business for certain purchases from small business and supplementing P.L.1945, c.162 (C.54:10A-1 et seq.) and Title 54A of the New Jersey Statutes.

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

1. a. As used in this section:

“Eligible business” means a business with no more than 100 full-time employees and taxable income of no more than $20 million that is independently owned and operated, has its principal place of business in this State, and is not delinquent or deficient with respect to the payment of any State tax.

“Qualified purchase” means a purchase of goods or services from a small business, including, but not limited to: agricultural or horticultural projects produced in this State; tools or manufacturing equipment; furniture or fixtures; supplies; products manufactured or substantially transformed in this State; professional services; technology services; construction, maintenance, repair, and other services related to the property used for the eligible business; communications or advertising services; and transportation or logistics services. “Qualified purchase” does not include payments to a small business for utilities, rent, or a mortgage.

“Small business” means a business with no more than 50 full-time employees, at least one of whom is a resident of this State, that is registered to do business in this State, maintains at least one physical business location in this State, is independently owned and operated, has its principal place of business in this State, and is not delinquent or deficient with respect to the payment of any State tax. “Small business” does not include any subsidiary or affiliate of the eligible business applying for a tax credit pursuant to this section.

b. A taxpayer that is an eligible 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 five percent of the qualified purchases incurred during the privilege period by the taxpayer, provided that the total value of credits allowed to a taxpayer during any privilege period shall not exceed $100,000.

c. When filing a return that includes a claim for a tax credit allowed pursuant to this section, a taxpayer shall include such business records as may be required by the director documenting the qualified purchases incurred by the taxpayer during the privilege period.

d. No tax credit shall be allowed pursuant to this section for any costs or expenses included in the calculation of any other tax credit or exemption granted pursuant to a claim made on a tax return filed with the director, or included in the calculation of an award of business assistance or incentive, for a period of time that coincides with the privilege period for which a tax credit authorized pursuant to this section is allowed.

e. The order of priority in which the tax credit allowed pursuant to this section and any other tax credits allowed by law may be taken shall be as prescribed by the director. The amount of the tax credit 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, 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 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 credit otherwise allowable under this section which 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, after which the credit shall expire.

2. a. As used in this section:

b. A taxpayer that is an eligible business shall be allowed a credit against the tax otherwise due for the taxable year under the “New Jersey Gross Income Tax Act,” N.J.S.54A:1-1 et seq. in an amount equal to five percent of the qualified purchases incurred during the taxable year by the taxpayer, provided that the total value of credits allowed to a taxpayer during any taxable year shall not exceed $100,000.

d. No tax credit shall be allowed pursuant to this section for any costs or expenses included in the calculation of any other tax credit or exemption granted pursuant to a claim made on a tax return filed with the director, or included in the calculation of an award of business assistance or incentive, for a period of time that coincides with the taxable year for which a tax credit authorized pursuant to this section is allowed.

e. The order of priority in which the tax credit allowed pursuant to this section and any other tax credits allowed by law may be taken shall be as prescribed by the director. The amount of the tax credit applied under this section against the tax imposed pursuant to “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 credit otherwise allowable under this section which cannot be applied for the taxable year due to the limitations of this section or 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 credit was allowed, after which the credit shall expire.

f. (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 credit of a taxpayer in respect of a distributive share of entity income, shall be determined by allocating to the taxpayer that proportion of the tax credit 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 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.

3. The Director of the Division of Taxation in the Department of the Treasury shall adopt, pursuant to the “Administrative Procedure Act,” P.L.1968, c.410 (C.52:14B-1 et seq.), rules and regulations necessary to implement P.L. , c. (C. ) (pending before the Legislature as this bill).

4. This act shall take effect immediately and apply to any tax period beginning on or after the effective date of this act.

STATEMENT

This bill creates a corporation business tax and gross income tax credit for eligible businesses that make qualified purchases from small businesses.

Under the bill, the value of the credit is to equal five percent of the qualified purchases incurred by the eligible business in the tax period, up to a total value of $100,000 for an eligible business during any tax period. When filing a tax return that includes a claim for the tax credit allowed under the bill, a taxpayer is required to include such business records as may be required by the Director of the Division of Taxation in the Department of the Treasury documenting the qualified purchases incurred by the taxpayer.

Under the bill, an “eligible business” is a business with no more than 100 full-time employees and taxable income of no more than $20 million that is independently owned and operated, has its principal place of business in this State, and is not delinquent or deficient with respect to the payment of any State tax.