Bill Text: NJ S1951 | 2010-2011 | Regular Session | Introduced
Bill Title: Provides gross income tax exemption for the income of certain qualified new resident business owners.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2010-05-20 - Introduced in the Senate, Referred to Senate Economic Growth Committee [S1951 Detail]
Download: New_Jersey-2010-S1951-Introduced.html
Sponsored by:
Senator RAYMOND J. LESNIAK
District 20 (Union)
SYNOPSIS
Provides gross income tax exemption for the income of certain qualified new resident business owners.
CURRENT VERSION OF TEXT
As introduced.
An Act providing a gross income tax exemption for the income of certain qualified new resident business owners, supplementing Title 54A of the new Jersey Statures.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. The Legislature hereby finds that:
a. There exists in certain municipalities a history of high rates of crime, poverty and unemployment which, despite favorable transportation infrastructure, has tended to deter private investment even prior to the current fiscal emergency;
b. Many of these municipalities have also experienced stagnation or decline in their land values and ratable base, contributing to structural deficits which limit the ability of such municipalities to provide redevelopment incentives otherwise available to New Jersey municipalities;
c. In certain of these municipalities, the relatively high proportion of properties exempt from real estate taxes by reason of governmental or nonprofit use further limits the ability to provide redevelopment incentives through existing means;
d. The attraction of new businesses to the State of New Jersey is an integral part of the State's plan to recover from the current fiscal emergency and to address the growing rates of unemployment in the State;
e. The current fiscal emergency has also restricted the ability of the State to provide certain investment incentives to attract new businesses, as well as to provide financial support to certain charitable organizations and educational institutions which have historically provided important services to the people of the State;
f. The residence of business owners in municipalities in which their businesses are located tends to encourage additional private investment within those municipalities;
g. A pilot program designed to attract new businesses to the State through the provision of gross income tax exemptions for individuals who bring the new businesses and relocate their personal residences to certain municipalities in the State, and who make certain contributions to charitable organizations and educational institutions serving the people of the State, would achieve the goals of attracting new businesses to the State, reducing unemployment, maintaining the services provided by those charitable organizations, and stimulating the economic development of municipalities most likely to benefit from these incentives by virtue of their existing transportation infrastructure, all while avoiding the need for direct relocation or redevelopment subsidies; and
h. This pilot program will obtain optimal results if implemented in a single municipality within each of the northern, central and southern portions of the State.
2. a. Gross income shall not include the income otherwise includable in gross income for the taxable year under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., of a qualified new resident business owner for the applicable taxable years of that individual; provided, the qualified new resident business owner submits, with the owner's New Jersey gross income tax return and as a condition to the exclusion provided by this section, (1) a copy of the written acceptance of the qualified charitable contribution described in subsection c. of this section and (2) a certified report of the qualified business for the applicable taxable year.
b. As used in this section:
"Applicable taxable year" means, (1) the "initial applicable taxable year" which is the taxable year beginning in the first calendar year, which shall not be later than 2011, in which the location requirement, the residency requirement and the charitable contribution requirement each are, or have previously been, satisfied, and (2) the five immediately succeeding taxable years.
"Certified report" means a report of the qualified business, certified by the individual or individuals having the function of its chief executive officer and chief financial officer, showing the qualified business' income, together with an annual payroll report and other information as is required to demonstrate the qualified business' satisfaction of the location requirement.
"Charitable contribution requirement" means, for each individual certified as an "owner" of a qualified business, the making by that individual of a "charitable contribution," as defined by subsection (c) of section 170) of the federal Internal Revenue Code of 1986 (26 U.S.C. s.170), in cash of at least $500,000 to a qualified charitable organization or a qualified educational institution; provided, the recipient of the contribution shall agree as a condition to receiving the contribution that the recipient shall comply with the requirements of subsection c. of this section.
"Controlled or influenced" means, for a qualified charitable organization, any of the following: (1) the presence on the organization's board of trustees (or any committee thereof or similar entity) of the qualified new resident business owner or any member of the owner's immediate family, or any other owner, director or employee of the qualified business; (2) the receipt of at least ten percent in aggregate financial support from the qualified new resident business owner, or any member of the owner's immediate family, or any other owner, director or employee of the qualified business; or (3) the provision of any special benefit (not otherwise granted to other similar donors) to the qualified new resident business owner, or any member of the owner's immediate family, or any other owner, director or employee of the qualified business.
"Eligible municipality" means each of (i) the city of the first class with the highest population according to the most recent federal decennial census for which official population counts have been released prior to the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill), (ii) the city subject to the provisions of P.L.1973, c.299 (C.52:9Q-1 et seq.) and (iii) the city subject to the provisions of P.L.2002, c.43 (C.52:27BBB-1 et seq.).
"Eligible partnership" means a partnership that is a qualified business pursuant to this section.
"Eligible position" means a new full-time position in this State created by a qualified business or transferred from another state by the qualified business under the terms and conditions set forth in this section. "Eligible position" includes all current and future partners of a partnership created by a qualified business in New Jersey or transferred from another state by the qualified business pursuant to the conditions set forth in this section.
"Full-time employee" means a person who is employed for consideration for at least 35 hours a week, or who renders any other standard of service accepted by custom or practice as full-time employment, whose wages are subject to withholding as provided in the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., and who is determined by the Division of Taxation to be employed in a permanent position according to criteria it develops, or who renders any other standard of service generally accepted by custom or practice as full-time employment, or who is a partner of an eligible partnership, who works for the partnership for at least 35 hours a week, and whose distributive share of partnership income, or whose guaranteed payments, or any combination thereof, is subject to the payment of estimated taxes, as provided in the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq. "Full-time employee" shall not include (1) any person certified by a qualified business as an owner of that qualified business, or (2) any person who works as an independent contractor or on a consulting basis for the qualified business.
"Location requirement" means the establishment or relocation by a qualified business of both its headquarters and its principal place of business in an eligible municipality at which the qualified business remains located during the applicable taxable year, and at which location the qualified business has located the requisite number of eligible positions filled by new employees remain filled by new employees continuously throughout the applicable taxable year.
"New employee" means a full-time employee first employed in an eligible position, except that (1) an individual certified by a qualified business as an owner of the qualified business shall not be a "new employee," (2) a New Jersey resident whose position is relocated to this State shall not be classified as a "new employee" unless that resident's wages, or that resident's distributive share of partnership income, or that resident's guaranteed payments or any combination thereof, prior to the relocation, were subject to taxes imposed on, or measured by, income by the state or municipality in which the position was previously located. "New employee" shall not include an employee who was previously employed in New Jersey by the qualified business or by a "related person" as defined by section 2 of P.L.1993, c.170 (C.54:10A-5.5), if the employee is transferred to the qualified business unless the employee's position at the employee's previous employer is filled by a new employee. "New employee" shall not include a child, grandchild, parent or spouse of an individual associated with the qualified business which individual has direct or indirect ownership of at least 15% of the profits, capital or value of the qualified business. "New employee" shall include an employee whose position is relocated to this State but whose income is not subject to the New Jersey gross income tax pursuant to N.J.S.54A:1-1 et seq.
"New resident" means an individual who establishes residence in any eligible municipality after the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill) and who has not, during any of the three years preceding such establishment of residence, been a resident or domiciliary of the State of New Jersey, or filed or was required to file a resident personal income tax return pursuant to the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq.
"Owner" means the individual or individuals who, at the close of the initial applicable taxable year, own, directly or indirectly, at least 51 percent of the equity interests in a qualified business. No individual shall be an "owner" who does not personally own, directly or indirectly, at least 5 percent of the equity interests in the qualified business. The identity of all owners of a qualified business to be allowed the tax exemption provided in this section shall be certified by the qualified business as of the close of the initial applicable taxable year, and notwithstanding any subsequent changes in equity ownership of that qualified business, no individual not so certified shall be an "owner" for purposes of this section.
"Partner" means a person who is entitled to either a distributive share of partnership income, or guaranteed payments, or any combination thereof, by virtue of holding an interest in the partnership.
"Qualified business" means a "business" as defined by section 2 of P.L.1996, c.26 (C.34:1B-125), for (1) is newly located in an eligible municipality after the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill) and satisfies the location requirement for the applicable taxable year.
"Qualified charitable organization" means an organization that (1) has been determined by the Internal Revenue Service to be an organization described in paragraph (3) of subsection (c) of section 501 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.501), that it is eligible to receive "charitable contributions" under subsection (c) of section 170 of the federal Internal Revenue Code of 1986 (26 U.S.C. 170), (2) is organized under the laws of, and has both its headquarters and its principal place of business located in, this State, (3) has, within any of the three preceding State fiscal years received grant funding from this State, and (4) is not controlled or influenced by the qualified new resident business owner.
"Qualified educational institution" means a public or nonprofit entity that is organized under the laws of and is located in this State, and that provides pre-school, elementary, secondary or college level instruction to students within this State of New Jersey, or that is organized for the sole purpose of providing financial support for an entity of that kind.
"Qualified new resident business owner" means an individual who (1) is an owner of a qualified business, (2) has satisfied the residency requirement for the applicable taxable year, and (3) has satisfied the charitable contribution requirement.
"Residence" means an owner's new place of abode which has not been adopted for any mere special or temporary purpose, but which is established by the owner as the owner's ordinary and permanent domicile.
"Requisite number" means the number of new employees required for a qualified business, which is the product of five and the number of individuals certified as owners of the qualified business as of the close of the initial applicable taxable year.
"Residency requirement" means, for each person certified as an owner of a qualified business, the owner's actual presence at the owner's residence within the same eligible municipality that satisfies the location requirement for the owner's qualified business for at least a majority of the nights in the applicable taxable year (or, in the case of the initial applicable taxable year, a majority of the nights in the portion of the taxable year in which residency was established).
c. A qualified charitable organization or qualified educational institution that accepts a qualified charitable contribution shall ensure that not less than 95 percent of the contribution will be used for its charitable or educational purposes within this State, and shall provide an annual accounting of the use of such funds to the director in each year following the receipt of the qualified charitable contribution, until all such funds have been expended. Upon acceptance of a qualified charitable contribution, a qualified educational organization or qualified educational institution shall confirm in writing to the owner making the qualified charitable contribution that it has accepted the contribution and that it agrees to comply with the provisions of this section.
3. This act shall take effect immediately.
STATEMENT
This bill establishes a pilot program designed to attract new businesses to the State through the provision of gross income tax exemptions for individuals who bring new businesses and relocate their personal residences to certain municipalities in the State, and who make certain contributions to charitable organizations and educational institutions serving the people of the State.
This bill provides up to a six year gross income tax exemption for all of the income of each of the qualified owners of a business who (1) relocates the business headquarters and business location and relocates the owner's personal residence to one of the target municipalities of Newark, Trenton, or Camden; (2) creates 5 new positions in the target municipality for each of the business' owners who jointly own 51 percent of the equity in the qualified business, individually each own 5 percent of the equity in the qualified business, and each of whom has been certified by the qualified business as of the close of the initial applicable tax year and fills those positions with new employees; and (3) makes a charitable contribution of $500,000 or more to a qualified charitable institution or qualified educational institution.
