Bill Text: NJ A2666 | 2024-2025 | Regular Session | Introduced
Bill Title: Eliminates $375 minimum Corporation Business Tax on New Jersey S corporations with New Jersey gross receipts of less than $100,000.
Spectrum: Partisan Bill (Republican 2-0)
Status: (Introduced) 2024-01-09 - Introduced, Referred to Assembly Commerce, Economic Development and Agriculture Committee [A2666 Detail]
Download: New_Jersey-2024-A2666-Introduced.html
STATE OF NEW JERSEY
221st LEGISLATURE
PRE-FILED FOR INTRODUCTION IN THE 2024 SESSION
Sponsored by:
Assemblyman JAY WEBBER
District 26 (Morris and Passaic)
SYNOPSIS
Eliminates $375 minimum Corporation Business Tax on New Jersey S corporations with New Jersey gross receipts of less than $100,000.
CURRENT VERSION OF TEXT
Introduced Pending Technical Review by Legislative Counsel.
An Act eliminating the $375 minimum Corporation Business Tax on New Jersey S corporations with New Jersey gross receipts of less than $100,000, amending P.L.1945, c.162.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 5 of P.L.1945, c.162 (C.54:10A-5) is amended to read as follows:
54:10A-5 Franchise tax.
5. The franchise tax to be annually assessed to and paid by each taxpayer shall be the greater of the amount computed pursuant to this section or the alternative minimum assessment computed pursuant to section 7 of P.L.2002, c.40 (C.54:10A-5a); provided however, that in the case of a taxpayer that is a New Jersey S corporation, an investment company, a professional corporation organized pursuant to P.L.1969, c.232 (C.14A:17-1 et seq.) or a similar corporation for profit organized for the purpose of rendering professional services under the laws of another state, or a person operating on a cooperative basis under Part I of Subchapter T of the federal Internal Revenue Code of 1986, 26 U.S.C. s.1381 et seq., there shall be no alternative minimum assessment computed pursuant to section 7 of P.L.2002, c.40 (C.54:10A-5a).
The amount computed pursuant to this section shall be the sum of the amount computed under subsection (a) hereof, or in the alternative to the amount computed under subsection (a) hereof, the amount computed under subsection (f) hereof, and the amount computed under subsection (c) hereof:
(a) That portion of its entire net worth as may be allocable to this State as provided in section 6, multiplied by the following rates: 2 mills per dollar on the first $100,000,000.00 of allocated net worth; 4/10 of a mill per dollar on the second $100,000,000.00; 3/10 of a mill per dollar on the third $100,000,000.00; and 2/10 of a mill per dollar on all amounts of allocated net worth in excess of $300,000,000.00; provided, however, that with respect to reports covering accounting or privilege periods set forth below, the rate shall be that percentage of the rate set forth in this subsection for the appropriate year:
Accounting or Privilege
Periods Beginning on or The Percentage of the Rate
after: to be Imposed Shall be:
April 1, 1983 75%
July 1, 1984 50%
July 1, 1985 25%
July 1, 1986 0
(b) (Deleted by amendment, P.L.1968, c.250, s.2.)
(c) (1) For a taxpayer that is not a New Jersey S corporation, 3 1/4% of its entire net income or such portion thereof as may be allocable to this State as provided in sections 6 through 10 of P.L.1945, c.162 (C.54:10A-6 through C.54:10A-10), plus such portion thereof as is specifically assigned to this State as provided in section 5 of P.L.1993, c.173 (C.54:10A-6.1); provided, however, that with respect to reports covering accounting or privilege periods or parts thereof ending after December 31, 1967, the rate shall be 4 1/4%; and that with respect to reports covering accounting or privilege periods or parts thereof ending after December 31, 1971, the rate shall be 5 1/2%; and that with respect to reports covering accounting or privilege periods or parts thereof ending after December 31, 1974, the rate shall be 7 1/2%; and that with respect to reports covering privilege periods or parts thereof ending after December 31, 1979, the rate shall be 9%; provided however, that for a taxpayer that has entire net income of $100,000 or less for a privilege period and is not a partnership the rate for that privilege period shall be 7 1/2% and provided further that for a taxpayer that has entire net income of $50,000 or less for a privilege period and is not a partnership the rate for that privilege period shall be 6 1/2%.
For privilege periods ending on or after July 31, 2019, for a combined group filing a mandatory or elective combined return, for the portion of a taxable member's activities that are independent from the unitary business of the combined group filing a mandatory unitary combined return where the taxable member independently has nexus with this State, and for a taxpayer that files a separate return, the tax rate shall be applied against taxable net income plus such portion thereof as is specifically assigned to this State as provided in section 5 of P.L.1993, c.173 (C.54:10A-6.1).
(2) For a taxpayer that is a New Jersey S corporation:
(i) for privilege periods ending on or before June 30, 1998 the rate determined by subtracting the maximum tax bracket rate provided under N.J.S.54A:2-1 for the privilege period from the tax rate that would otherwise be applicable to the taxpayer's entire net income for the privilege period if the taxpayer were not an S corporation provided under paragraph (1) of this subsection for the privilege period; and
(ii) For a taxpayer that has entire net income in excess of $100,000 for the privilege period,
for privilege periods ending on or after July 1, 1998, but on or before June 30, 2001, the rate shall be 2%,
for privilege periods ending on or after July 1, 2001, but on or before June 30, 2006, the rate shall be 1.33%,
for privilege periods ending on or after July 1, 2006, but on or before June 30, 2007, the rate shall be 0.67%, and
for privilege periods ending on or after July 1, 2007 there shall be no rate of tax imposed under this paragraph; and
(iii) For a taxpayer that has entire net income of $100,000 or less for privilege periods ending on or after July 1, 1998, but on or before June 30, 2001, the rate for that privilege period shall be 0.5%, and for privilege periods ending on or after July 1, 2001, there shall be no rate of tax imposed under this paragraph.
(iv) The taxpayer's rate determined under subparagraph (i), (ii) or (iii) of this paragraph shall be multiplied by its entire net income that is not subject to federal income taxation or such portion thereof as may be allocable to this State pursuant to sections 6 through 10 of P.L.1945, c.162 (C.54:10A-6 through C.54:10A-10) plus such portion thereof as is specifically assigned to this State as provided in section 5 of P.L.1993, c.173 (C.54:10A-6.1). For privilege periods ending on or after July 31, 2019, the tax rate shall be applied against taxable net income.
(3) For a taxpayer that is a New Jersey S corporation, in addition to the amount, if any, determined under paragraph (2) of this subsection, the tax rate that would otherwise be applicable to the taxpayer's entire net income for the privilege period if the taxpayer were not an S corporation provided under paragraph (1) of this subsection for the privilege period multiplied by its entire net income that is subject to federal income taxation or such portion thereof as may be allocable to this State pursuant to sections 6 through 10 of P.L.1945, c.162 (C.54:10A-6 through C.54:10A-10). For privilege periods ending on or after July 31, 2019, the tax rate shall be applied against taxable net income.
(d) Provided, however, that the franchise tax to be annually assessed to and paid by any investment company or real estate investment trust, which has elected to report as such and has filed its return in the form and within the time provided in this act and the rules and regulations promulgated in connection therewith, shall, in the case of an investment company, be measured by 40% of its entire net income and 40% of its entire net worth, and in the case of a real estate investment trust, by 4% of its entire net income and 15% of its entire net worth, at the rates hereinbefore set forth for the computation of tax on net income and net worth, respectively, but in no case less than $250, and further provided, however, that the franchise tax to be annually assessed to and paid by a regulated investment company which for a period covered by its report satisfies the requirements of Chapter 1, Subchapter M, Part I, Section 852(a) of the federal Internal Revenue Code shall be $250. For privilege periods ending on or after July 31, 2019, the tax rate shall be applied against 40% of its taxable net income in the case of an investment company, and against 4% of its taxable net income in the case of a real estate investment trust.
(e) The tax assessed to any taxpayer pursuant to this section shall not be less than $25 in the case of a domestic corporation, $50 in the case of a foreign corporation, or $250 in the case of an investment company or regulated investment company. Provided however, that for privilege periods beginning in calendar year 1994 and thereafter the minimum taxes for taxpayers other than an investment company or a regulated investment company shall be as provided in the following schedule:
Period Beginning Domestic Foreign
In Calendar Year Corporation Corporation
Minimum Tax Minimum Tax
1994 $ 50 $100
1995 $100 $200
1996 $150 $200
1997 $200 $200
1998 $200 $200
1999 $200 $200
2000 $200 $200
2001 $210 $210
and for calendar years 2002 through 2005 the minimum tax for all taxpayers shall be $500, and for calendar year 2006 through calendar year 2011 the minimum tax for all corporations, and for privilege periods beginning in calendar year 2012 and thereafter the minimum tax for corporations that are not New Jersey S corporations shall be based on the New Jersey gross receipts of the taxpayer pursuant to the following schedule:
New Jersey Gross Receipts: Minimum Tax:
Less than $100,000 . . . . . . . .$500
$100,000 or more but
less than $250,000 . . . . . . . $750
$250,000 or more but
less than $500,000 . . . . . . $1,000
$500,000 or more but
less than $1,000,000 . . . . . . $1,500
$1,000,000 or more . . . . . . $2,000
and for privilege periods beginning in calendar year 2012 and thereafter the minimum tax for corporations that are New Jersey S corporations shall be based on the New Jersey gross receipts of the taxpayer pursuant to the following schedule:
For Privilege Periods Beginning in Calendar Year 2012 but Before the Date of Enactment of P.L. ,c. (pending before the Legislature as this bill)
New Jersey Gross Receipts: Minimum Tax:
Less than $100,000 . . . . . . .$375
$100,000 or more but
less than $250,000 . . . . . . . $562.50
$250,000 or more but
less than $500,000 . . . . . . $750
$500,000 or more but
less than $1,000,000 . . . . . . $1,125
$1,000,000 or more . . . . . . $1,500
For Privilege Periods Beginning in Calendar Year 2012 but Before the Date of Enactment of P.L. ,c. (pending before the Legislature as this bill)
New Jersey Gross Receipts: Minimum Tax:
Less than $100,000 . . . . . . .$0
$100,000 or more but
less than $250,000 . . . . . . . $562.50
$250,000 or more but
less than $500,000 . . . . . . $750
$500,000 or more but
less than $1,000,000 . . . . . . $1,125
$1,000,000 or more . . . . . . $1,500
provided however, that for a taxpayer that is a member of an affiliated group or a controlled group pursuant to section 1504 or 1563 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.1504 or 1563, and whose group has total payroll of $5,000,000 or more for the privilege period, the minimum tax shall be $2,000 for the privilege per; provided, however, for privilege periods ending on and after July 31, 2019, the minimum tax of each taxable member of a combined group filing a mandatory or elective New Jersey combined return shall be $2,000 for the group privilege period, except that for a New Jersey S corporation with New Jersey gross receipts of less than $100,000 for the privilege period the minimum tax for the privilege period shall be $0.
(f) In lieu of the portion of the tax based on net worth and to be computed under subsection (a) of this section, any taxpayer, the value of whose total assets everywhere, less reasonable reserves for depreciation, as of the close of the period covered by its report, amounts to less than $150,000, may elect to pay the tax shown in a table which shall be promulgated by the director.
(g) Provided however, that for privilege periods beginning on or after January 1, 2001 but before January 1, 2002 the franchise tax annually assessed to and paid by a taxpayer:
(1) that is a limited liability company or foreign limited liability company classified as a partnership for federal income tax purposes shall be the amount determined pursuant to the provisions of section 3 of P.L.2001, c.136 (C.54:10A-15.6); or
(2) that is a limited partnership or foreign limited partnership classified as a partnership for federal income tax purposes shall be the amount determined pursuant to the provisions of section 4 of P.L.2001, c.136 (C.54:10A-15.7).
(h) Provided however, that for privilege periods beginning on or after January 1, 2002 the franchise tax annually assessed to and paid by a taxpayer that is a partnership shall be the amount determined pursuant to the provisions of section 12 of P.L.2002, c.40 (C.54:10A-15.11).
(i) (Deleted by amendment, P.L.2008, c.120)
(cf: P.L.2020, c.118, s.9)
2. This act shall take effect immediately and apply to privilege periods beginning on or after the date of enactment.
STATEMENT
This bill eliminates the $375 minimum Corporation Business Tax (CBT) payment due for New Jersey S corporations with New Jersey gross receipts of less than $100,000.
At present, if a New Jersey S corporation earns New Jersey gross receipts of less than $100,000, a $375 minimum CBT payment is due. The $375 minimum CBT payment is due even if the New Jersey S corporation earns New Jersey gross receipts significantly less than $100,000. And this minimum CBT payment does not account for the further possibility of the gross income tax's application to the New Jersey S corporation's income through the shareholders.
This bill alleviates the rigid application of the CBT minimum tax on New Jersey S corporations with less than $100,000 in New Jersey gross receipts. As New Jersey continues to recover from the most recent economic downturn, this bill will help some of New Jersey's smallest grossing S corporations free up potentially duplicative tax payments for more productive investment in the economy.
The bill applies to privilege periods beginning on and after the date of enactment.
