Bill > A1487

Introduced Session

This bill provides credits against the New Jersey gross income tax to support the development of certain New Jersey-based small business start-ups. Under the bill, taxpayers that meet the definition of a qualified small business are allowed gross income tax credits that can be taken to reduce the taxpayer's liability for tax during the first, second, and third taxable years in which the business is conducted or operated for a profit by the taxpayer. The bill provides that the amount of credit permitted to be taken is determined based upon a fixed percentage of the taxpayer's New Jersey gross income tax liability incurred and required to be paid in connection with the conduct or operation of the qualified small business. The bill provides that the fixed percentage of the credit is weighted in favor of tax liabilities incurred during the first few years of profitability. The bill specifies that in the first taxable year the business is conducted or operated for a profit, the taxpayer is allowed a credit equal to 75 percent of the New Jersey gross income tax liability that is incurred and required to be paid in connection with the conduct or operation of the qualified small business. In the second year of profitability, the credit is equal to 50 percent of the tax liability incurred and required to be paid in connection with the conduct or operation of the business. In the third year, the credit is 25 percent of the tax liability incurred and required to be paid in connection with the business. The bill limits the application of the allowable credits to the tax otherwise due and required to be paid for the taxable year to which the credit applies. This means, for example, that a credit allowed for tax liabilities incurred in connection with the conduct or operation of a qualified small business during the second taxable year in which the business is conducted or operated for a profit can only be taken to reduce the tax liabilities required to be paid by the taxpayer during the second taxable year the business is profitable; the credit cannot be carried back or carried forward to reduce a past or future tax liability. The bill establishes a mandatory pre-approval process in connection with the credits. The bill provides that taxpayers seeking a credit to offset a tax liability incurred and required to be paid in connection with the conduct or operation of a qualified small business must make and file an application with the Director of the Division of Taxation to obtain the director's written authorization prior to taking the allowable credit. The bill authorizes the director to establish an application process and prescribe the form and manner through which a taxpayer may make and file an application to obtain the director's authorization for the credit, but stipulates that the taxpayer must demonstrate that the qualified small business (for which the taxpayer is seeking a credit) is unrelated to the conduct or operation of any other business that was, or is currently, conducted or operated by the taxpayer or, if the qualified small business and any other business that was, or is currently, conducted or operated by the taxpayer are related, that the qualified small business was not established or acquired for the purpose of enjoying the benefit of the credit. The bill provides that taxpayer applications are deemed approved and written authorizations are deemed issued if the director fails to make a determination regarding the approval of an application within 90 calendar days of the date a complete application is received or if the director fails to issue a written authorization within five calendar days of the date the determination is made. The bill authorizes the director to adopt rules and regulations necessary to effectuate the purposes of the bill, and allows for the immediate filing of those rules and regulations with the Office of Administrative Law, effective for a period not exceeding 360 calendar days following the bill's effective date. The bill takes effect immediately and applies to tax liabilities incurred and required to be paid in connection with qualified small businesses first conducted or operated for a profit in taxable years beginning on or after January 1 next following the date of enactment. For purposes of the bill, a "qualified small business" is a business that: -- is registered to do business in this State, -- maintains a business location or otherwise derives a majority of its income from business activities or operations conducted within this State, -- has no more than 50 employees in any calendar month during the first taxable year in which the business is conducted or operated for a profit by the taxpayer, and -- has net income of not more than $100,000 from all business activities or operations conducted within and without this State during the first taxable year in which the business is conducted or operated for a profit by the taxpayer. The purpose of this bill is to support the development of start-up small businesses that are based in New Jersey. The credit provided by the bill will significantly reduce the tax liabilities associated with the conduct or operation of small businesses during the first few years of profitability, and provide small business owners with the opportunity to reinvest additional resources back into their businesses during the most critical period in the life of any small business.

AI Summary

Committee Categories

Clinton Calabrese (D)*,  Mitchelle Drulis (D)*,  Roy Freiman (D)*,  Vicky Flynn (R),  Shama Haider (D),  Verlina Reynolds-Jackson (D),  Gerry Scharfenberger (R), 

Introduced, Referred to Assembly Science, Innovation and Technology Committee (on 01/13/2026)

Official Document