Bill Text: NJ A715 | 2024-2025 | Regular Session | Introduced
Bill Title: Provides research and development tax credit under gross income tax.
Spectrum: Moderate Partisan Bill (Republican 7-1)
Status: (Introduced) 2024-01-09 - Introduced, Referred to Assembly Science, Innovation and Technology Committee [A715 Detail]
Download: New_Jersey-2024-A715-Introduced.html
STATE OF NEW JERSEY
221st LEGISLATURE
PRE-FILED FOR INTRODUCTION IN THE 2024 SESSION
Sponsored by:
Assemblyman MICHAEL TORRISSI, JR.
District 8 (Atlantic and Burlington)
Co-Sponsored by:
Assemblymen DiMaio, Auth, DePhillips, Barranco, Assemblywoman Sumter and Assemblyman Clifton
SYNOPSIS
Provides research and development tax credit under gross income tax.
CURRENT VERSION OF TEXT
Introduced Pending Technical Review by Legislative Counsel.
An Act providing a gross income tax credit for certain research and development expenses and payments, supplementing Title 54A of the New Jersey 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 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:
(1) 10 percent of the excess of the qualified research expenses for the taxable year over the base amount; and
(2) 10 percent of the basic research payments for the taxable year determined in accordance with section 41 of the federal Internal Revenue Code (26 U.S.C. s.41), provided, however, that the terms "qualified research expenses," "base amount," "qualified organization base amount period," "basic research," and any other terms determined by the Director of the Division of Taxation to affect the calculation of the credit shall include only expenditures for research conducted in this State. Amounts paid or incurred by the taxpayer in carrying on any trade or business of the taxpayer during the taxable year, including as contributions, to an energy research consortium for energy research shall also qualify as a basic research payment for purposes of this subsection.
The portion of qualified research expenses and qualified payments of a taxpayer that is a qualified small business within the meaning of section 41(h)(3) of the federal Internal Revenue Code (26 U.S.C. s.41) that was disallowed for the section 41(h) tax credit because the taxpayer made an election pursuant to sections 41(h) and 3111(f) of the federal Internal Revenue Code (26 U.S.C. s.41 and s.3111) to take the 3111(f) credit in lieu of the 41(h) credit, shall be allowed for the purposes of calculating the New Jersey credit provided for by this section.
b. No credit shall be allowed under this section for expenses or payments included in the calculation of any credit or deduction allowed under any other section of law.
c. The director shall prescribe the order of priority of the application of the credit allowed under 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. The amount of the credit applied under this section against the tax imposed under N.J.S.54A:1-1 et seq. for the taxable year, together with any other credits allowed by law, shall not reduce the tax liability to an amount less than zero. The amount of credit otherwise allowable under this section that cannot be applied for the taxable year due to the limitations of this subsection may be carried over, if necessary, to the seven taxable years immediately following the taxable year for which the credit is allowed.
d. 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.
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.
e. No provision terminating section 41 of the federal Internal Revenue Code (26 U.S.C. s.41) shall apply.
2. This act shall take effect immediately and shall apply to taxable years beginning on or after the date of enactment.
STATEMENT
This bill allows taxpayers subject to the New Jersey gross income tax to claim a credit for research and development (R&D) expenses and payments in the same way that taxpayers subject to the corporation business tax may claim the credit. The credit is based on the federal R&D tax credit, and is intended to incentivize R&D spending, which will stimulate technological and economic growth in New Jersey.
