Bill > A3403

Introduced Session

This bill allows New Jersey S corporations to elect to transfer corporation business tax credits to shareholders to apply against gross income tax liability. Most large C corporations pay State corporation business tax on profits at the rate of 9%. Subchapter S corporations pay corporation business tax at a reduced rate, currently at a 1.33% rate that is scheduled to phase down to a zero rate for Tax Year 2007 and thereafter. A wide range of credits are available under the corporation business tax to provide incentives for employee benefits, encourage investment in communities in need of redevelopment, encourage job creation, and promote investment in infrastructure located in New Jersey. These corporation business tax credits are typically limited to reducing tax liability by half, so a typical credit can reduce the tax liability of a large C corporation from 9% to 4.5%, a substantial incentive. Because the liability of a subchapter S corporation can only be reduced from 1.33% to 0.66%, these credits provide much less incentive to subchapter S corporations to do the things the credits are designed to promote. This bill allows subchapter S corporations to elect to pass the corporate level credits through to their shareholders, for the purpose of allowing the shareholders to reduce their individual New Jersey gross income tax liabilities on the income they are deemed to have received from the subchapter S corporation. The bill allows this pass-through for the Alternate Commuting Credit, the Urban Enterprise Zone New Employment Credit, the Qualified Municipality Open For Business Credit, the Neighborhood Revitalization Credit, the New Jobs Investment Tax Credit, the Manufacturing Equipment and Employment Investment Credit, the Research and Development Credit, the Water Treatment Equipment Credit, and the Urban Development Project Employment Tax Credit.

AI Summary

Committee Categories

Erik Peterson (R)*, 

Introduced, Referred to Assembly Commerce and Economic Development Committee (on 03/07/2022)

Official Document