Good news should be noted. That’s why although you already know about the signing of the FY24 state budget and a new law making New Jersey corporate taxes more competitive, I must underscore the hard work and business advocacy that produced this outcome.
On July 3, Gov. Phil Murphy signed an NJBIA-led law that reforms the way New Jersey taxes income that US-controlled corporations earn abroad. This complex compromise is important to the many multinational corporations located and creating jobs in New Jersey, and this tax reform happened because of the yeoman’s work done by NJBIA Chief Government Affairs Officer Christopher Emigholz.
For more than a year, he has been meeting with experts from NJBIA member companies, the Murphy administration, the Department of Treasury, the Division of Taxation, and the Legislature to move this bill forward and make New Jersey’s corporate tax structure fairer and more competitive. He successfully navigated opposition and misinformation from media and progressive groups to get this bill across the legislative finish line without a single lawmaker casting a dissenting vote.
The result is that New Jersey’s treatment of global intangible low-taxed income (GILTI) and net operating losses (NOLs) will be more favorable for business taxpayers and in line with surrounding states. New Jersey had been a national outlier, taxing GILTI at 50%. Under the new law, New Jersey will tax GILTI at 5% as New York and Connecticut do. As with any compromise, businesses did not get all that they wanted in this revenue-neutral law, but overall, this is a win for taxpayers.
The FY24 state budget that took effect July 1 also lets the temporary 2.5% Corporation Business Tax surcharge expire as statutorily scheduled, returning New Jersey’s highest-in-the-nation 11.5% CBT rate back to 9%. During budget season, NJBIA and other business groups successfully fought a disinformation campaign waged by progressive groups intent on derailing the sunset.
Now the governor and Legislature are keeping their promise to the business community with this budget and letting the CBT surcharge sunset on Jan. 1, 2024, a decision that will allow businesses to make investments in growing their companies to benefit workers and the state’s economy.
The FY24 budget also includes other fiscally responsible moves including the third consecutive full payment to the state’s underfunded pension system, increased school aid, and the allocation of more energy gross receipts taxes to municipalities to help hold down property taxes for all taxpayers, including businesses. There are also pro-growth investments in workforce development, innovation and infrastructure that will help businesses and the economy.
Despite these successes, disappointments remain. Businesses were collectively hit with another $700 million increase in unemployment insurance taxes on July 1. Federal pandemic relief aid should have been applied to avoid this. Also concerning is the rapid increase in state spending – this $54.3 billion budget is 56% higher than in 2018. Spending that is unsustainable will impact future taxes.
The CBT reform, surtax sunset and other FY24 budget positives are noteworthy, but the strong business advocacy they reflect is still needed to move the needle on our other fiscal challenges and to provide more small business relief. NJBIA is committed to getting the job done, because when it comes to state budgets, success is not final.
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