Bill Similar to One Vetoed By Governor; Then Included in Budget Proposal 4 Days Later
Assembly Democratic legislation sponsored by Lou Greenwald, Peter J. Barnes III, Gordon Johnson, Nellie Pou and Paul Moriarty to provide a vital tax break to small businesses that employ many New Jerseyans has been signed into law.
The new law (S-2754/A-3870) is a slightly revised version of a measure (A-3535) approved in January by the Legislature, only to be vetoed by the governor, then included in his budget plan four days later.
“Businesses could have already been taking advantage of this important tax cut if it wasn’t for the governor’s nonsensical veto, but as they say, imitation is the sincerest form of flattery, so I’m pleased to see this bill signed into law,” said Greenwald (D-Camden). “If we’re going to create jobs and build a stronger economy, we need to protect the small businesses that are the lifeblood of this state. It’s time to get rid of archaic tax rules that inhibit job creation and economic growth.”
“Small businesses must be a priority as we position New Jersey’s economy to thrive,” said Barnes (D-Middlesex). “Our small businesses must be free to use creativity and innovation they’re famous for to create jobs and spark economic growth throughout our state.”
“This change will make it easier for entrepreneurs to invest in and establish new businesses by allowing them to balance losses from one venture with the gains from their established, profitable entities,” said Johnson (D-Bergen). “It’s a great gain for our business community.”
“The law provides sole proprietors and other small business owners with a tax cut by requiring the tax code to treat them the same way as it does larger corporations,” said Pou (D-Passaic/Bergen). “This is a fair change that ultimately will benefit our workers through a strong business environment.”
“This is a vital piece of ensuring New Jersey’s small businesses can thrive and create jobs, positioning our state for success,” said Moriarty (D-Gloucester/Camden). “It’s unfortunate others have played games with this bill and delayed its benefits, but we’re committed to fighting for job creation and helping small businesses succeed.”
Under current law, New Jersey’s personal income tax is calculated through 16 separately defined categories of income.
Unlike the federal tax code and the tax laws of 48 other states, state tax law does not permit filers who generate income from different types of businesses to offset gains derived from one business entity with losses sustained from another.
The new law establishes an alternative business calculation under the gross income tax as a mechanism that permits taxpayers who generate income from different types of business entities to offset gains from one type of business with losses from another, and permits taxpayers to carry forward business-related losses for a period of up to 20 taxable years.
The law phases in the tax savings over five years beginning with tax year 2012. Once fully implemented, the maximum savings will be equal to 50 percent of the savings that would accrue from unlimited netting between these income categories and the net loss carry forward.
The law will also give small business owners the same ability to recoup losses over 20 years that large corporations currently enjoy under a Greenwald bill signed into law two years ago.