A measure sponsored by Assembly members Ruben J. Ramos, Jr., Matthew Milam, Annette Quijano, Angel Fuentes, Ralph Caputo and Jason O’Donnell, aimed at combating the “credit crunch” was approved by an Assembly panel today.
The bill (A-3243) would create an incentive for lenders to provide loans to businesses within the state’s Urban Enterprise Zones (UEZ) by providing tax-free treatment on the interest earned on loans made directly to qualified UEZ businesses for five years.
“I know that businesses in Urban Enterprise Zones, especially those in my district where we have four, have been hit particularly hard by the economy,” said Ramos (D-Hudson). “This is a great incentive to get banks lending to businesses in economically depressed areas until the economy picks up on its own again.”
“Urban Enterprise Zones have helped boost distressed communities for years now, providing much needed jobs and ratables to towns that might otherwise languish,” said Milam (D-Cape May/Atlantic/Cumberland). “In times of economic downturn, we need to continue to lend support to this program so that these businesses, and the residents they employ, can continue to survive and thrive.”
Specifically, the bill permits lenders who are subject to the corporation business tax to deduct from their entire net income the amount of net interest received on loan repayments from a qualified UEZ business that is engaged in the active conduct of trade or business within a UEZ. Additionally, the lenders would be permitted to deduct from their gross income an amount equal to the amount of net interest received the loan repayment.
“Without a healthy flow of credit, businesses cannot expand or make much-needed improvements. In turn, they’re not hiring or helping to stimulate the economy,” said Quijano (D-Union).
“Access to credit might make the difference between small businesses being able to hire and keep employees, or instituting layoffs,” said Fuentes (D-Camden/Gloucester).
In order to qualify for the tax deduction: the qualified UEZ business must be located solely within a UEZ; the loan must be solely in connection with activity within the UEZ; and the taxpayer claiming the deduction must not have any equity or other ownership interest in the debtor.
“Even though experts maintain we are emerging from the recession, lenders are still hesitant to start extending healthy lines of credit. This will help offer a real incentive,” said Caputo (D-Essex).
“UEZ businesses are the backbone in many of our struggling, urban communities. Access to credit is vital to their success, and their success is vital to our community,” said O’Donnell (D-Hudson).
The measure cleared the Assembly Commerce and Economic Development Committee by a vote of 6-1.