LEGISLATIVE FISCAL ESTIMATE

ASSEMBLY, No. 3486

STATE OF NEW JERSEY

216th LEGISLATURE

 

DATED: JULY 3, 2014

 

 

SUMMARY

 

Synopsis:

Adjusts and clarifies certain State tax compliance standards and restricts certain State tax benefits.

Type of Impact:

A recurring revenue gain to the State General Fund and Property Tax Relief Fund.

Agencies Affected:

Department of the Treasury.

 

 

Office of Legislative Services Estimate

Fiscal Impact

FY 2015

FY 2016

FY 2017

 

State Revenue Gain

Indeterminate — See comments below

 

 

 

 

·         The Office of Legislative Services (OLS) cannot determine the bill's impact on State revenue collections.  The legislation should, however, produce a recurring State revenue gain.

·         The Department of the Treasury provided the OLS with an informal projection that the bill would increase FY 2015 State revenues by $110 million.  The OLS cannot independently verify the accuracy of Treasury’s estimate whose individual components are listed on the following page.

 

 

BILL DESCRIPTION

 

      Assembly Bill No. 3486 of 2014 adjusts and clarifies certain State tax compliance standards and restricts certain State tax benefits, notably:

      (i)   Corporation Business Tax Operational Income Adjustment:  adjusting the statutory definition of operational income under the corporation business tax to clarify that the acquisition, management or disposition of an asset may be independent factors in determining qualification rather than three necessary factors to qualification;

      (ii)  Conditioning Certain Nonresident Partner Tax Credits and Refunds on the Filing of New Jersey Gross Income Tax Returns:  requiring certain nonresident partners to file a gross income tax return as a prerequisite to receiving tax credits and refunds related to partnership activities taxable to New Jersey;

      (iii)  Corporation Business Tax Net Operating Losses Reduction for Certain Debt Cancellations:  reducing corporation business tax net operating losses for amounts of debt discharged and excluded from income on account of  bankruptcy, insolvency or qualified farm indebtedness; and

      (iv)    Establishing Sales Tax Nexus through Certain Independent Contractors – i.e. “Click-Through Nexus”:  denoting statutorily that sellers using commissioned physically present independent contractors to market in-State sales, online or otherwise, invoke the duty to collect sales tax if cumulative sales through those contractors exceed $10,000 for the prior four calendar quarters.

 

 

FISCAL ANALYSIS

 

EXECUTIVE BRANCH

 

      The Department of the Treasury has not provided an official fiscal estimate on this bill’s tax law changes, which were originally proposed in the Executive’s FY 2015 Budget recommendation.  But the department submitted to the OLS an informal estimate that the bill would increase FY 2015 State revenues by $110 million.  The individual elements of the Executive's estimated revenue gain are as follows:

 

Tax Law Change

Executive FY 2015 Revenue Gain Estimate

Conditioning Certain Nonresident Partner Tax Credits and Refunds on the Filing of New Jersey Gross Income Tax Returns

$40,000,000

Establishing Sales Tax Nexus through Certain Independent Contractors

$25,000,000

Corporation Business Tax Operational Income Adjustment

$25,000,000

Corporation Business Tax Net Operating Losses Reduction for Certain Debt Cancellations

$20,000,000

 

 

OFFICE OF LEGISLATIVE SERVICES

 

      The OLS cannot independently determine the bill's impact on State revenue collections and verify the accuracy of the Department of the Treasury estimate.  The legislation should, however, produce a recurring revenue gain to the State General Fund and Property Tax Relief Fund.

 

Section:

Revenue, Finance and Appropriations

Analyst:

Thomas Koenig

Lead Fiscal Analyst

Approved:

David J. Rosen

Legislative Budget and Finance Officer

 

This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).