Assemblyman Ruben J. Ramos, Jr. is introducing a bill aimed at combating the “credit crunch” by creating an incentive for lenders to provide loans to businesses within the state’s Urban Enterprise Zones (UEZ). The bill would permit lenders making loans directly to qualified UEZ businesses to receive tax-free treatment on the interest earned on those loans 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.”
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.
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.
Ramos intends to introduce the legislation the next time the Assembly is in session.