S1837

An Act providing tax credits for certain expenses incurred by employers that contribute to the child care of employees’ children and supplementing P.L.1945, c.162 (C.54:10A-1 et seq.) and chapter 4 of Title 54A of the New Jersey Revised Statutes.

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

1. a. A taxpayer 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 50 percent of any of the following expenses incurred by the taxpayer during the privilege period, except that the total amount of the tax credit allowed to any taxpayer shall not exceed $100,000 during any privilege period:

(1) expenses related to the acquisition, construction, reconstruction, renovation, or other improvement of real property in this State that is to be used by the taxpayer, or another person under contract or agreement with the taxpayer, to conduct, maintain, and operate a qualified child care center primarily for the children of individuals employed by the taxpayer;

(2) expenses related to the maintenance and operation of an on-site qualified child care center that is used primarily by the children of individuals employed by the taxpayer;

(3) expenses paid to another person or entity, under contract or agreement with the taxpayer, to provide child care services to children of individuals employed by the taxpayer at a qualified child care center; or

(4) payments made to an individual employed by the taxpayer to subsidize expenses incurred by the employee for child care services provided at a qualified child care center to children of the employee.

b. The combined value of all tax credits allowed pursuant to this section and section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall not exceed $10 million in any tax year.

c. To be eligible to claim a tax credit allowed pursuant to this section, a taxpayer shall submit an application to the commissioner, in a form and manner prescribed by the commissioner, which includes evidence satisfactory to the commissioner of the taxpayer’s expenses for which the taxpayer seeks a credit pursuant to this section. The commissioner shall review and approve applications on a rolling basis and issue a certificate of credit to any taxpayer whose application meets the requirements of this section, which certificate shall certify the amount of the allowable tax credit for the privilege period, subject to the limitations set forth in subsection b. of this section. To claim the tax credit allowed pursuant to this section, the taxpayer shall attach to any return which the taxpayer is required to file under P.L.1945, c.162 (C.54:10A-1 et seq.) the certificate issued for that privilege period.

d. Upon approval of any application authorizing a credit pursuant to this section, a taxpayer shall enter into an agreement with the director on or before the last day of the privilege period for which the credit is first applied. In addition to any other terms that the director may deem appropriate, the agreement shall require:

(1) the taxpayer to submit to the director all receipts, bills, invoices, and other similar documents that the director determines to be necessary to verify the expenses incurred by the taxpayer; and

(2) the following requirements if all or part of the tax credit is authorized pursuant to paragraph (1) of subsection a. of the section:

(a) the taxpayer shall demonstrate to the director that the real property acquired, constructed, reconstructed, renovated, or otherwise improved in this State is not part of the principal residence of an individual employed by the taxpayer;

(b) the taxpayer shall demonstrate to the director that the real property acquired, constructed, reconstructed, renovated, or otherwise improved in this State is used by the taxpayer, or another person under contract or agreement with the taxpayer, to conduct, maintain, and operate a qualified child care center primarily for the children of individuals employed by the taxpayer on the date the agreement is entered into;

(c) the taxpayer shall use the real property acquired, constructed, reconstructed, renovated, or otherwise improved in this State to conduct, maintain, and operate, either directly or indirectly by another person under contract or agreement with the taxpayer, a qualified child care center primarily for the children of individuals employed by the taxpayer;

(d) the taxpayer shall notify the director in writing if the real property is not used by the taxpayer, or another person under contract or agreement with the taxpayer, to conduct, maintain and operate a qualified child care center primarily for the children of individuals employed by the taxpayer, and the taxpayer shall repay the amount of credit allowed in accordance with paragraph (1) of subsection a. of this section that has been applied to reduce the taxpayer’s liability for tax or that has been used as the basis of a tax credit transfer certificate that has been sold to another person in accordance with subsection e. of this section. The taxpayer shall also be prohibited from applying any unused amount of credit allowed in accordance with paragraph (1) of subsection a. of this section or from making and filing an application with the director in accordance with subsection g. of this section for a tax credit transfer certificate in lieu of the taxpayer being allowed to apply any amount of the credit against the tax liability of the taxpayer. The taxpayer shall not be required to repay the amount of any credit, or be prohibited from applying any unused credit, allowed in accordance with paragraph (1) of subsection a. of this section, if the taxpayer’s failure to conduct, maintain, and operate the qualified child care center results from a casualty loss, involving the qualified child care center, or if another person, under contract or agreement with the taxpayer and the director, assumes the taxpayer’s responsibility to use the real property to conduct, maintain, and operate a qualified child care center primarily for the children of individuals employed by that person;

(e) the director shall assess the amount of any credit allowed in accordance with paragraph (1) of subsection a. of this section that is required to be repaid by the taxpayer, give notice of the assessment to the taxpayer, and make demand upon the taxpayer for payment of the assessment to be made within 30 days of the date notice and demand is mailed to the taxpayer by the director;

(f) the taxpayer shall pay to the director interest on an assessment, or any portion of an assessment, that is not paid in full within 30 days of the date notice and demand is mailed at a rate of three percentage points above the prime rate assessed for each month or fraction thereof, compounded annually at the end of each year, from the date the credit allowed in accordance with paragraph (1) of subsection a. of this section was first applied to reduce the taxpayer’s liability for tax, or the date the taxpayer made and filed an application with the director for a tax credit transfer certificate, until the date payment is made; and

(g) the taxpayer shall pay any assessment, and any applicable interest on an assessment, if there is a deficiency with respect to the payment of a State tax. The director shall be provided all rights, powers, and duties authorized under the State Uniform Tax Procedure Law, R.S.54:48-1 et seq., to ensure the payment, collection, or recovery of the deficiency, and the taxpayer shall be afforded all protections, rights, and remedies allowed under R.S.54:48-1 et seq. to challenge, protest, or appeal the deficiency or any determination or decision rendered in connection with the deficiency.

e. If two or more taxpayers pay or incur costs during the privilege period for any purpose set forth in subsection a. of this section, each taxpayer shall be allowed a credit in accordance with this section for that portion of the expenses incurred by that taxpayer; provided, however, that each taxpayer shall separately make an application to the director and upon approval of the application, shall enter into an agreement with the director in accordance with subsection d. of this section.

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

(2) The amount of credit allowed in accordance with this section that is applied against the tax liability of the taxpayer for a privilege period, together with any other credits 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 otherwise due 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).

(3) The amount of any credit allowed in accordance with this section that cannot be applied against the tax liability of the taxpayer for a privilege period due to the limitations and conditions of this subsection may be carried forward, if necessary, to be used by the taxpayer against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5) in each of the seven privilege periods following the privilege period for which the credit is allowed.

g. (1) A taxpayer allowed a credit in accordance with this section may make and file an application with the director for a tax credit transfer certificate in lieu of the taxpayer being allowed to claim any amount of the transferred credit against the tax liability of the taxpayer. Upon the review and approval of an application made and filed in accordance with this subsection, the director shall issue to the taxpayer a tax credit transfer certificate. The tax credit transfer certificate issued to a taxpayer by the director may be sold, in full or in part, to another person that may have a liability for tax under section 5 of P.L.1945, c.162 (C.54:10A-5), N.J.S.54A:1-1 et seq., sections 2 and 3 of P.L.1945, c.132 (C.54:18A-2 and 54:18A-3), section 1 of P.L.1950, c.231 (C.17:32-15), or N.J.S.17B:23-5, in exchange for private financial consideration to be provided to the taxpayer by the person making the purchase. The tax credit transfer certificate issued to a taxpayer by the director shall include a statement waiving the taxpayer's right to apply that amount of the credit against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5) that the taxpayer has elected to sell to another person in exchange for private financial consideration.

(2) The sale of any amount of a tax credit transfer certificate issued to a taxpayer by the director shall not be made for private financial consideration of less than 75 percent of the transferred credit amount. The amount of any tax credit transfer certificate that may be used by a purchaser against a tax liability of the purchaser under section 5 of P.L.1945, c.162 (C.54:10A-5), N.J.S.54A:1-1 et seq., sections 2 and 3 of P.L.1945, c.132 (C.54:18A-2 and 54:18A-3), section 1 of P.L.1950, c.231 (C.17:32-15), or N.J.S.17B:23-5 shall be subject to any limitations and conditions on the application of tax credit transfer certificates that may be prescribed by the director.

h. As used in this section:

“Child care services” means services provided for the care, supervision, and education of children under the age of 13 years that meet State licensing and quality standards.

“Commissioner” means the Commissioner of Labor and Workforce Development.

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

“Qualified child care center” means a facility that is licensed as a child care center by the Department of Children and Families in accordance with the “Child Care Center Licensing Act,” P.L.1983, c.492 (C.30:5B-1 et seq.); provided, however, that a “qualified child care center” shall not include a facility licensed by the department if:

(1) the principal use of the facility is for some purpose other than the care, development, and supervision of children, unless the facility is the principal residence of the person who owns and operates the qualified child care center;

(2) the facility is not used on a regular basis to provide for the care, development, and supervision of children;

(3) enrollment in the facility is not open to children of individuals employed by the taxpayer; or

(4) use of the facility is limited or restricted under procedures, criteria, or other systems of selection that unfairly discriminate in favor of individuals employed by the taxpayer on the basis of race, creed, religion, sex, national origin, disability, or marital status.

2. a. A taxpayer 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 50 percent of any of the following expenses incurred by the taxpayer during the taxable year, except that the total amount of the tax credit allowed to the taxpayer shall not exceed $100,000 during any taxable year:

(2) expenses related to the maintenance and operation of an on-site qualified child care center of the taxpayer that is used primarily by the children of individuals employed by the taxpayer;

b. The combined value of all tax credits allowed pursuant to section 1 of P.L. , c. (C. ) (pending before the Legislature as this bill) and this section shall not exceed $10 million in any tax year.

c. To be eligible to claim a tax credit allowed pursuant to this section, a taxpayer shall submit an application to the commissioner, in a form and manner prescribed by the commissioner, which includes evidence satisfactory to the commissioner of the taxpayer’s expenses for which the taxpayer seeks a credit pursuant to this section. The commissioner shall review and approve applications on a rolling basis and issue a certificate of credit to any taxpayer whose application meets the requirements of this section, which certificate shall certify the amount of the allowable tax credit for the taxable year, subject to the limitations set forth in subsection b. of this section. To claim the tax credit allowed pursuant to this section, the taxpayer shall attach to any return which the taxpayer is required to file under N.J.S.54A:1-1 et seq. the certificate issued for that taxable year.

d. Upon approval of any application authorizing a credit pursuant to this section, a taxpayer shall enter into an agreement with the director on or before the last day of the taxable year for which the credit is first applied. In addition to any other terms that the director may deem appropriate, the agreement shall require:

(1) the taxpayer to submit to the director all receipts, bills, invoices, and other similar documents that the director determines to be necessary to verify the expenses incurred by the taxpayer; and

(2) the following requirements if all or part of the tax credit is authorized pursuant to paragraph (1) of subsection a. of this section:

(d) the taxpayer shall notify the director in writing if the real property is not used by the taxpayer, or another person under contract or agreement with the taxpayer, to conduct, maintain, and operate a qualified child care center primarily for the children of individuals employed by the taxpayer, and the taxpayer shall repay the amount of credit allowed in accordance with paragraph (1) of subsection a. of this section that has been applied to reduce the taxpayer’s liability for tax or that has been used as the basis of a tax credit transfer certificate that has been sold to another person in accordance with subsection e. of this section. The taxpayer shall also be prohibited from applying any unused amount of credit allowed in accordance with paragraph (1) of subsection a. of this section or from making and filing an application with the director in accordance with subsection h. of this section for a tax credit transfer certificate in lieu of the taxpayer being allowed to apply any amount of the credit against the tax liability of the taxpayer. The taxpayer shall not be required to repay the amount of any credit, or be prohibited from applying any unused credit, allowed in accordance with paragraph (1) of subsection a. of this section, if the taxpayer’s failure to conduct, maintain, and operate the qualified child care center results from a casualty loss, involving the qualified child care center, or if another person, under contract or agreement with the taxpayer and the director, assumes the taxpayer’s responsibility to use the real property to conduct, maintain, and operate a qualified child care center primarily for the children of individuals employed by that person;

(f) the taxpayer shall pay to the director interest on an assessment, or portion of an assessment, that is not paid in full within 30 days of the date notice and demand is mailed at a rate of three percentage points above the prime rate assessed for each month or fraction thereof, compounded annually at the end of each year, from the date the credit allowed in accordance with paragraph (1) of subsection a. of this section was first applied to reduce the taxpayer’s liability for tax, or the date the taxpayer made and filed an application with the director for a tax credit transfer certificate, until the date payment is made; and

e. If two or more taxpayers pay or incur costs during the taxable year for any purpose set forth in subsection a. of this section, each taxpayer shall be allowed a credit in accordance with this section for that portion of the expenses incurred by that taxpayer; provided, however, that each taxpayer shall separately make an application to the director, and upon approval of the application, shall enter into an agreement with the director in accordance with subsection d. of this section.

f. (1) A business entity that is classified as a partnership for federal income tax purposes shall not be allowed the credit directly under N.J.S.54A:1-1 et seq., but the amount of credit of the taxpayer in respect of a distributive share of partnership income shall be determined by allocating to the taxpayer that proportion of the credit acquired by the partnership that is equal to the taxpayer's share, whether or not distributed, of the total distributive income or gain of the partnership for its taxable year ending within or with the taxpayer's taxable year.

(2) A taxpayer that is a New Jersey S corporation shall not be allowed the credit directly under N.J.S.54A:1-1 et seq., but the amount of 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 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.

g. (1) The order of priority of the application of the credit allowed in accordance with this section and any other credits allowed by law against the tax otherwise due for the taxable year under N.J.S.54A:1-1 et seq. shall be as prescribed by the director.

(2) The amount of credit allowed in accordance with this section that is applied against the tax liability of the taxpayer for a taxable year, together with any other credits allowed against the tax imposed pursuant to N.J.S.54A:1-1 et seq., shall not reduce the tax liability otherwise due to an amount less than zero.

(3) The amount of any tax credit allowed in accordance with this section that cannot be applied against the tax liability of the taxpayer for a taxable year due to the limitations and conditions of this subsection may be carried forward, if necessary, to be used by the taxpayer against the tax imposed pursuant to N.J.S.54A:1-1 et seq. in each of the seven taxable years following the taxable years for which the credit is allowed.

h. (1) A taxpayer allowed a credit in accordance with this section may make and file an application with the director for a tax credit transfer certificate in lieu of the taxpayer being allowed to claim any amount of the transferred credit against the tax liability of the taxpayer. Upon the review and approval of an application made and filed in accordance with this subsection, the director shall issue to the taxpayer a tax credit transfer certificate. The tax credit transfer certificate issued to the taxpayer by the director may be sold, in full or in part, to another person that may have a liability for tax under section 5 of P.L.1945, c.162 (C.54:10A-5), N.J.S.54A:1-1 et seq., sections 2 and 3 of P.L.1945, c.132 (C.54:18A-2 and 54:18A-3), section 1 of P.L.1950, c.231 (C.17:32-15), or N.J.S.17B:23-5, in exchange for private financial consideration to be provided to the taxpayer by the person making the purchase. The tax credit transfer certificate issued to a taxpayer by the director shall include a statement waiving the taxpayer's right to apply that amount of the credit against the tax otherwise due for the taxable year under N.J.S.54A:1-1 et seq. that the taxpayer has elected to sell to another person in exchange for private financial consideration.

i. As used in this section:

“Child care services” means services provided for the care, supervision, and education of children under the age of 13 years that meet State licensing and quality standards.

“Commissioner” means the Commissioner of Labor and Workforce Development.

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

(2) the facility is not used on a regular basis to provide for the care, development, and supervision of children;

(3) enrollment in the facility is not open to children of individuals employed by the taxpayer; or

3. Beginning one year after the implementation of P.L. , c. (C. ) (pending before the Legislature as this bill), the Commissioner of the Department of Labor and Workforce Development shall, in consultation with the Commissioner of the Department of Human Services and the Director of the Division of Taxation in the Department of the Treasury, conduct an annual evaluation of the tax credits authorized under P.L. , c. (C. ) (pending before the Legislature as this bill) to assess the impact of the tax credits on the availability of, and employee satisfaction with, employer-provided child care, and submit an annual report to the Governor and Legislature pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), detailing the number of businesses participating, total tax credits claimed, and recommendations for improvements to the tax incentive.

4. This act shall take effect immediately and shall apply to privilege periods and taxable years beginning on or after the January 1 next following the date of enactment.

STATEMENT

This bill provides corporation business tax and gross income tax credits to employers for certain expenses incurred for the provision of child care services for the children of employees. Under the bill, the combined value of all tax credits allowed to employers subject to the corporation business tax or gross income tax may not exceed $10 million in any tax year.

Specifically, the bill permits an employer to claim a tax credit of up to $100,000 per taxable period for 50 percent of any of the following expenses incurred by the taxpayer during the taxable period:

(1) expenses related to the acquisition, construction, reconstruction, renovation, or other improvements to real property in this State that is to be used by the taxpayer, or another person under contract or agreement with the taxpayer, to conduct, maintain, and operate a qualified child care center primarily for the children of individuals employed by the taxpayer;

(2) expenses related to the maintenance and operation of an on-site qualified child care center of the taxpayer that is used primarily by the children of individuals employed by the taxpayer;

(4) payments made to an individual employed by the taxpayer to subsidize expenses incurred by the employee for child care services provided at a qualified child care center for children of the employee.

Under the bill, the Commissioner of Labor and Workforce Development (commissioner) is required to review and approve applications for the tax credit on a rolling basis to ensure that the combined value of all tax credits awarded to employers pursuant to the bill does not exceed the tax credit cap in any tax year.

The bill provides that to be eligible to claim the credit, a taxpayer is required to submit an application to the commissioner, in a form and manner prescribed by the commissioner, which includes evidence satisfactory to the commissioner of the taxpayer’s expenses for which the taxpayer seeks a tax credit. To claim the credit allowed, the taxpayer is required to attach the credit certificate issued for that tax period to the taxpayer’s tax return. Moreover, upon approval of any application for the construction of a child care center, a qualified taxpayer is required to enter into an agreement with the director. The bill requires the agreement, at a minimum, to include certain provisions as described in the bill, including to require the employer to demonstrate the intended use and status of the real property acquired, constructed, reconstructed, renovated, or otherwise improved in this State, and requires the employer to use that property to conduct, maintain, and operate a qualified child care center primarily for the children of individuals employed by the employer.

Under the bill, an employer receiving a tax credit may file an application with the director for a tax credit transfer certificate in lieu of the taxpayer being allowed to claim any amount of the transferred credit against the tax liability of the taxpayer. The bill specifies that, if issued, the certificate may be sold to another person that may have a tax liability under certain other State taxes in exchange for private financial consideration, but stipulates that the sale cannot be made for consideration of less than 75 percent of the transferred credit amount.

The bill defines “child care services” as services provided for the care, supervision, and education of children under the age of 13 years that meet State licensing and quality standards. A “qualified child care center” is also defined as a facility that is licensed as a child care center by the Department of Children and Families, but specifically excludes from that definition facilities licensed by the department if: the principal use of the facility is for some purpose other than the care, development, and supervision of children; the facility is not used on a regular basis to provide for the care, development, and supervision of children; enrollment in the facility is not open to children of individuals employed by the business claiming the credit; or use of the facility is limited or restricted under procedures, criteria, or other systems of selection that unfairly discriminate.

Under the bill, the commissioner is required, in consultation with the Commissioner of Human Services and the Director of the Division of Taxation in the Department of the Treasury, to conduct an annual evaluation of the tax credits issued under the bill to assess the impact of the tax credits on the availability of, and employee satisfaction with, employer-provided child care, and submit an annual report to the Governor and Legislature detailing the number of businesses participating, total tax credits claimed, and recommendations for improvements to the tax incentive.