GREENWALD, MILAM, SPENCER & POU DEMOCRATIC CORPORATE TAX REFORM APPROVED BY ASSEMBLY

Bill Similar to One Vetoed By Governor; Then Included in Budget Proposal 4 Days Later

Assembly Democratic corporate tax reform legislation sponsored by Lou Greenwald, Matthew W. Milam and L. Grace Spencer to create jobs and economic growth was approved Thursday by the Assembly.

The bill (A-3869/S-2753), approved by a vote of 77-0 modifies the business tax formula used to determine the corporate income subject to tax by the state from a three-factor formula to a single sales factor formula.

It’s a slightly revised version of a measure (A-1676) approved in January by the Legislature, only to be vetoed by the governor, then included in his budget plan four days later.

“It’s unfortunate that the governor turned this bill into a sandbox tussle that delayed its implementation and hurt businesses, but we’re not got going to waver from our commitment to helping businesses create jobs,” said Greenwald (D-Camden). “This change will, quite simply, give New Jersey businesses significant tax relief as they continue to work through the recession. Ensuring our businesses have the flexibility they need to create and retain jobs and reinvigorate our economy is a priority.”

“Anything we can do to give businesses the ability to hire, expand and invest in New Jersey is a smart approach,” said Milam (D-Atlantic/Cape May/Cumberland). “We need to make certain New Jersey businesses have the confidence needed to spark economic development. This change will help provide that confidence at a time when businesses need it most.”

“Businesses need to know that operating in New Jersey will give them the competitive edge they need to grow and prosper,” said Spencer (D-Essex). “New Jersey’s workers also need that confidence. With this bill, we will be giving the businesses that employ hard-working New Jerseyans a greater chance to succeed.”

“We continue to fight for job creation, and this bill is a key part of that effort,” said Pou (D-Passaic/Bergen). “Businesses need the flexibility provided by this bill to create jobs and stay competitive with other states. It’s disappointing the governor delayed its benefits, but economic growth is our priority.”

Each state that imposes a corporate income tax determines the portion of the total income of a corporation subject to state tax by using formulas that measure specific activities of the corporation assigned to that state. The portion of the income of the corporation subject to tax by a state is determined by the proportion of some activity in the state to the total of such activity of the corporation.

This bill replaces the three-factor formula with a single sales factor formula.

The change is phased in over three years, beginning with privilege periods beginning on or after Jan. 1, 2012 but before Jan. 1, 2013.