The Legislature backed down on two sections of the corporate business tax bill it passed Thursday — potentially changing how many companies would be subject to the tax and potentially lowering the amount of revenue the state would gain.
The bill, introduced Friday, repeals the tax on offshore assets, which was set at 9 percent, and changes the definition of the income threshold that determines which companies will be taxed.
The version of the bill that passed Thursday night defines the threshold as the net income of the company. The version introduced Friday changed it so the state only considers the allotted income from New Jersey operations.
The two main increases, percentage raises in the corporate business tax, remain unchanged.
It is unclear how or if these changes will impact Gov. Phil Murphy’s decision on whether to sign the budget. To this point, he has indicated he will not, based on a number of reasons, most specifically because this budget includes the corporate business tax increase rather than the millionaire’s tax he prefers and campaigned on.
The new bill is tentatively set for a vote Monday to supplant the existing bill, which was passed as part of the Legislature’s budget package.
That bill, sponsored by Senate President Stephen Sweeney (D-West Deptford) and Assembly Budget Chairwoman Eliana Pintor Marin (D-Newark), would give New Jersey the highest corporate business tax in the country for two years — when the increases are supposed to expire.
Companies with allotted incomes (in New Jersey) of $1 million to $25 million will be taxed at 11.5 percent on the full amount, and companies with allotted incomes of more than $25 million will be taxed at 13 percent.
The corporate business tax, in the Legislature’s original budget bill, accounts for $3.3 billion, or about 20 percent, of all major taxes in the state.
New Jersey Business & Industry Association CEO and President Michele Siekerka previously said the taxation, at 9 percent, of foreign assets that companies brought back onshore would net the state far more than the $805 million that the Office of Legislative Services estimates.
“The dollars attached with that are much larger than they think it is,” Siekerka said Wednesday. “This bill has much more revenue than you need to fill the gaps that you have.”
How much the state will get in revenue as a result is yet undetermined, and how the business community will react to these changes remain to be seen.
NJBIA and the New Jersey Chamber of Commerce have pushed back strongly against the CBT hike, or surcharge, as the Legislature has called it, as well as the millionaire’s tax.