| 1 | 1 | | ASSEMBLY, No. 5284 STATE OF NEW JERSEY 220th LEGISLATURE INTRODUCED MARCH 9, 2023 |
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| 3 | 3 | | ASSEMBLY, No. 5284 |
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| 7 | 7 | | STATE OF NEW JERSEY |
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| 9 | 9 | | 220th LEGISLATURE |
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| 13 | 13 | | INTRODUCED MARCH 9, 2023 |
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| 17 | 17 | | Sponsored by: Assemblyman ROY FREIMAN District 16 (Hunterdon, Mercer, Middlesex and Somerset) Assemblyman LOUIS D. GREENWALD District 6 (Burlington and Camden) Assemblyman JOHN F. MCKEON District 27 (Essex and Morris) SYNOPSIS Provides tax credits to small businesses to offset increases in unemployment insurance contributions. CURRENT VERSION OF TEXT As introduced. |
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| 21 | 21 | | Sponsored by: |
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| 23 | 23 | | Assemblyman ROY FREIMAN |
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| 25 | 25 | | District 16 (Hunterdon, Mercer, Middlesex and Somerset) |
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| 27 | 27 | | Assemblyman LOUIS D. GREENWALD |
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| 29 | 29 | | District 6 (Burlington and Camden) |
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| 31 | 31 | | Assemblyman JOHN F. MCKEON |
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| 33 | 33 | | District 27 (Essex and Morris) |
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| 43 | 43 | | SYNOPSIS |
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| 45 | 45 | | Provides tax credits to small businesses to offset increases in unemployment insurance contributions. |
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| 48 | 48 | | |
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| 49 | 49 | | CURRENT VERSION OF TEXT |
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| 51 | 51 | | As introduced. |
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| 55 | 55 | | An Act providing tax credits to small businesses to offset certain increases in their unemployment insurance contributions, and supplementing P.L.1945, c.162 (C.54:10A-1 et seq.) and Title 54A of the New Jersey Statutes. Be It Enacted by the Senate and General Assembly of the State of New Jersey: 1. a. (1) For privilege periods beginning in Calendar Year 2023, a taxpayer that is a small business shall be allowed a credit against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), in an amount equal to the difference in the small business's unemployment insurance contributions for Fiscal Year 2023 as required pursuant to R.S.43:21-7(c)(5)(P) and the amount the small business would have otherwise contributed if contributions for Fiscal Year 2023 were computed based on rates set by column "C" of the table in R.S.43:21-7(c)(5)(E); provided, however, if the actual fund reserve ratio results in the contribution rate for employers being set by a column that has a lower tax rate than the rates provided in column "C," the tax credit provided pursuant to the paragraph shall not be made available. (2) For privilege periods beginning in Calendar Year 2024, a taxpayer that is a small business shall be allowed a credit against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), in an amount equal to the difference in the small business's unemployment insurance contributions for Fiscal Year 2024 as required pursuant to R.S.43:21-7(c)(5)(Q) and the amount the small business would have otherwise contributed if contributions for Fiscal Year 2024 were computed based on rates set by column "C" of the table in R.S.43:21-7(c)(5)(E); provided, however, if the actual fund reserve ratio results in the contribution rate for employers being set by a column that has a lower tax rate than the rates provided in column "C," the tax credit provided pursuant to the paragraph shall not be made available. (3) For privilege periods beginning in any calendar year after Calendar Year 2024 in which the rate of unemployment insurance contributions is greater than the rates set by column "C" of the table in R.S.43:21-7(c)(5)(E) and ending with the first calendar year in which the rate of unemployment insurance contributions is equal to or less than the rates set by column "C" of that table, a taxpayer that is a small business shall be allowed a credit against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), in an amount equal to the difference in the small business's unemployment insurance contributions for Fiscal Year 2024 as required pursuant to R.S.43:21-7(c)(5)(Q) and the amount the small business would have otherwise contributed if contributions for Fiscal Year 2024 were computed based on rates set by column "C" of the table in R.S.43:21-7(c)(5)(E); provided, however, if the actual fund reserve ratio results in the contribution rate for employers being set by a column that has a lower tax rate than the rates provided in column "C," the tax credit provided pursuant to the paragraph shall not be made available. b. No tax credits shall be allowed pursuant to this section for any amount of the increase in a small business's unemployment insurance contributions that is offset by grants or other subsidies made available for similar purposes. c. A taxpayer shall apply in a form and manner to be determined by the director for the tax credits provided pursuant to this section. The order of priority of the application of the credits allowed pursuant to this section and any other credits allowed by law shall be as prescribed by the director. d. The amount of the credits applied under this section against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5) for a privilege period, together with any other credits allowed by law shall not reduce the tax liability to an amount less than the statutory minimum provided in subsection (e) of section 5 of P.L.1945, c.162 (C.54:10A-5). The amount of the tax credits otherwise allowable under this section that cannot be applied for the privilege period due to the limitations of this subsection or under other provisions of P.L.1945, c.162 (C.54:10A-1 et seq.) may be carried forward, if necessary, to the seven privilege periods following the privilege period for which the tax credit was allowed. e. As used in this section: "Small business" means a small business as defined by the United States Small Business Administration that for purposes of size standards or other factors meets the applicable criteria set forth in Part 121 of Title 13 of the Code of Federal Regulations as amended, which has its principal place of business in New Jersey, and is independently owned and operated. 2. a. (1) For taxable years beginning in Calendar Year 2023, a taxpayer that is a small business shall be allowed a credit against the tax otherwise due under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., in an amount equal to the difference in the small business's unemployment insurance contributions for Fiscal Year 2023 as required pursuant to R.S.43:21-7(c)(5)(P) and the amount the small business would have otherwise contributed if contributions for Fiscal Year 2023 were computed based on rates set by column "C" of the table in R.S.43:21-7(c)(5)(E); provided, however, if the actual fund reserve ratio results in the contribution rate for employers being set by a column that has a lower tax rate than the rates provided in column "C," the tax credit provided pursuant to the paragraph shall not be made available. (2) For taxable years beginning in Calendar Year 2024, a taxpayer that is a small business shall be allowed a credit against the tax otherwise due under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., in an amount equal to the difference in the small business's unemployment insurance contributions for Fiscal Year 2024 as required pursuant to R.S.43:21-7(c)(5)(Q) and the amount the small business would have otherwise contributed if contributions for Fiscal Year 2024 were computed based on rates set by column "C" of the table in R.S.43:21-7(c)(5)(E); provided, however, if the actual fund reserve ratio results in the contribution rate for employers being set by a column that has a lower tax rate than the rates provided in column "C," the tax credit provided pursuant to the paragraph shall not be made available. (3) For privilege periods beginning in any calendar year after Calendar Year 2024 in which the rate of unemployment insurance contributions is greater than the rates set by column "C" of the table in R.S.43:21-7(c)(5)(E) and ending with the first calendar year in which the rate of unemployment insurance contributions is equal to or less than the rates set by column "C" of that table, a taxpayer that is a small business shall be allowed a credit against the tax otherwise due under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., in an amount equal to the difference in the small business's unemployment insurance contributions for Fiscal Year 2024 as required pursuant to R.S.43:21-7(c)(5)(Q) and the amount the small business would have otherwise contributed if contributions for Fiscal Year 2024 were computed based on rates set by column "C" of the table in R.S.43:21-7(c)(5)(E); provided, however, if the actual fund reserve ratio results in the contribution rate for employers being set by a column that has a lower tax rate than the rates provided in column "C," the tax credit provided pursuant to the paragraph shall not be made available. b. No tax credits shall be allowed pursuant to this section for any amount of the increase in a small business's unemployment insurance contributions that is offset by grants or other subsidies made available for similar purposes. c. A taxpayer shall apply in a form and manner to be determined by the director for the tax credits provided pursuant to this section. The order of priority of the application of the credit allowed pursuant to this section and any other credits allowed by law shall be as prescribed by the director. d. The amount of the tax credits applied under this section against the tax otherwise due under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., for a taxable year, when taken together with any other payments, credits, deductions, and adjustments allowed by law shall not reduce the tax liability of the taxpayer to an amount less than zero. The amount of the tax credits otherwise allowable under this section that cannot be applied for the taxable year due to the limitations of this subsection or under other provisions of N.J.S.54A:1-1 et seq., may be carried forward, if necessary, to the seven taxable years following the taxable year for which the tax credits were allowed. e. (1) A business entity that is classified as a partnership for federal income tax purposes shall not be allowed a tax credit pursuant to this section directly, but the amount of tax credits of a taxpayer in respect to distributive share of entity income, shall be determined by allocating to the taxpayer that proportion of the tax credits acquired by the entity that is equal to the taxpayer's share, whether or not distributed, of the total distributive income or gain of the entity for its taxable year ending within or with the taxpayer's taxable year. (2) A New Jersey S Corporation shall not be allowed a tax credit pursuant to this section directly, but the amount of the tax credit of a taxpayer in respect of a pro rata share of S Corporation income, shall be determined by allocating to the taxpayer that proportion of the tax credit acquired by the New Jersey S Corporation that is equal to the taxpayer's share, whether or not distributed, of the total pro rata share of S Corporation income of the New Jersey S Corporation for its privilege period ending within or with the taxpayer's taxable year. f. As used in this section: "Small business" means a small business as defined by the United States Small Business Administration that for purposes of size standards or other factors meets the applicable criteria set forth in Part 121 of Title 13 of the Code of Federal Regulations as amended, which has its principal place of business in New Jersey, and is independently owned and operated. 3. This act shall take effect immediately. STATEMENT This bill provides corporation business tax and gross income tax credits to small businesses to help offset increases in their unemployment insurance contributions, including increases scheduled pursuant to P.L.2020, c.150. The tax credit provided by the bill to a small business is an amount equal to the difference in the business's actual unemployment insurance contribution as required pursuant to R.S.43:21-7(c)(5) and the amount the small business would have paid if contributions had been computed based on rates set by column "C" of the table in R.S.43:21-7(c)(5)(E). The credit will be provided for any year in which the unemployment insurance contribution rates are greater than those imposed under column "C", and will end upon the first year in which the tax rates are equal or less than the rates of column "C". The bill adopts the U.S. Small Business Administration's definitions of a small business based on size standards and other applicable criteria. The tax credits are non-refundable, but may be carried forward for seven years. If a small business utilizes alternative relief options, such as grants or subsidies, to offset their increase in employer contributions, the small business would not be eligible for the bill's tax credits. |
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| 56 | 56 | | |
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| 57 | 57 | | An Act providing tax credits to small businesses to offset certain increases in their unemployment insurance contributions, and supplementing P.L.1945, c.162 (C.54:10A-1 et seq.) and Title 54A of the New Jersey Statutes. |
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| 61 | 61 | | Be It Enacted by the Senate and General Assembly of the State of New Jersey: |
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| 65 | 65 | | 1. a. (1) For privilege periods beginning in Calendar Year 2023, a taxpayer that is a small business shall be allowed a credit against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), in an amount equal to the difference in the small business's unemployment insurance contributions for Fiscal Year 2023 as required pursuant to R.S.43:21-7(c)(5)(P) and the amount the small business would have otherwise contributed if contributions for Fiscal Year 2023 were computed based on rates set by column "C" of the table in R.S.43:21-7(c)(5)(E); provided, however, if the actual fund reserve ratio results in the contribution rate for employers being set by a column that has a lower tax rate than the rates provided in column "C," the tax credit provided pursuant to the paragraph shall not be made available. |
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| 67 | 67 | | (2) For privilege periods beginning in Calendar Year 2024, a taxpayer that is a small business shall be allowed a credit against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), in an amount equal to the difference in the small business's unemployment insurance contributions for Fiscal Year 2024 as required pursuant to R.S.43:21-7(c)(5)(Q) and the amount the small business would have otherwise contributed if contributions for Fiscal Year 2024 were computed based on rates set by column "C" of the table in R.S.43:21-7(c)(5)(E); provided, however, if the actual fund reserve ratio results in the contribution rate for employers being set by a column that has a lower tax rate than the rates provided in column "C," the tax credit provided pursuant to the paragraph shall not be made available. |
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| 68 | 68 | | |
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| 69 | 69 | | (3) For privilege periods beginning in any calendar year after Calendar Year 2024 in which the rate of unemployment insurance contributions is greater than the rates set by column "C" of the table in R.S.43:21-7(c)(5)(E) and ending with the first calendar year in which the rate of unemployment insurance contributions is equal to or less than the rates set by column "C" of that table, a taxpayer that is a small business shall be allowed a credit against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), in an amount equal to the difference in the small business's unemployment insurance contributions for Fiscal Year 2024 as required pursuant to R.S.43:21-7(c)(5)(Q) and the amount the small business would have otherwise contributed if contributions for Fiscal Year 2024 were computed based on rates set by column "C" of the table in R.S.43:21-7(c)(5)(E); provided, however, if the actual fund reserve ratio results in the contribution rate for employers being set by a column that has a lower tax rate than the rates provided in column "C," the tax credit provided pursuant to the paragraph shall not be made available. |
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| 71 | 71 | | b. No tax credits shall be allowed pursuant to this section for any amount of the increase in a small business's unemployment insurance contributions that is offset by grants or other subsidies made available for similar purposes. |
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| 72 | 72 | | |
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| 73 | 73 | | c. A taxpayer shall apply in a form and manner to be determined by the director for the tax credits provided pursuant to this section. The order of priority of the application of the credits allowed pursuant to this section and any other credits allowed by law shall be as prescribed by the director. |
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| 74 | 74 | | |
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| 75 | 75 | | d. The amount of the credits applied under this section against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5) for a privilege period, together with any other credits allowed by law shall not reduce the tax liability to an amount less than the statutory minimum provided in subsection (e) of section 5 of P.L.1945, c.162 (C.54:10A-5). The amount of the tax credits otherwise allowable under this section that cannot be applied for the privilege period due to the limitations of this subsection or under other provisions of P.L.1945, c.162 (C.54:10A-1 et seq.) may be carried forward, if necessary, to the seven privilege periods following the privilege period for which the tax credit was allowed. |
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| 77 | 77 | | e. As used in this section: |
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| 78 | 78 | | |
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| 79 | 79 | | "Small business" means a small business as defined by the United States Small Business Administration that for purposes of size standards or other factors meets the applicable criteria set forth in Part 121 of Title 13 of the Code of Federal Regulations as amended, which has its principal place of business in New Jersey, and is independently owned and operated. |
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| 83 | 83 | | 2. a. (1) For taxable years beginning in Calendar Year 2023, a taxpayer that is a small business shall be allowed a credit against the tax otherwise due under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., in an amount equal to the difference in the small business's unemployment insurance contributions for Fiscal Year 2023 as required pursuant to R.S.43:21-7(c)(5)(P) and the amount the small business would have otherwise contributed if contributions for Fiscal Year 2023 were computed based on rates set by column "C" of the table in R.S.43:21-7(c)(5)(E); provided, however, if the actual fund reserve ratio results in the contribution rate for employers being set by a column that has a lower tax rate than the rates provided in column "C," the tax credit provided pursuant to the paragraph shall not be made available. |
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| 85 | 85 | | (2) For taxable years beginning in Calendar Year 2024, a taxpayer that is a small business shall be allowed a credit against the tax otherwise due under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., in an amount equal to the difference in the small business's unemployment insurance contributions for Fiscal Year 2024 as required pursuant to R.S.43:21-7(c)(5)(Q) and the amount the small business would have otherwise contributed if contributions for Fiscal Year 2024 were computed based on rates set by column "C" of the table in R.S.43:21-7(c)(5)(E); provided, however, if the actual fund reserve ratio results in the contribution rate for employers being set by a column that has a lower tax rate than the rates provided in column "C," the tax credit provided pursuant to the paragraph shall not be made available. |
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| 86 | 86 | | |
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| 87 | 87 | | (3) For privilege periods beginning in any calendar year after Calendar Year 2024 in which the rate of unemployment insurance contributions is greater than the rates set by column "C" of the table in R.S.43:21-7(c)(5)(E) and ending with the first calendar year in which the rate of unemployment insurance contributions is equal to or less than the rates set by column "C" of that table, a taxpayer that is a small business shall be allowed a credit against the tax otherwise due under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., in an amount equal to the difference in the small business's unemployment insurance contributions for Fiscal Year 2024 as required pursuant to R.S.43:21-7(c)(5)(Q) and the amount the small business would have otherwise contributed if contributions for Fiscal Year 2024 were computed based on rates set by column "C" of the table in R.S.43:21-7(c)(5)(E); provided, however, if the actual fund reserve ratio results in the contribution rate for employers being set by a column that has a lower tax rate than the rates provided in column "C," the tax credit provided pursuant to the paragraph shall not be made available. |
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| 88 | 88 | | |
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| 89 | 89 | | b. No tax credits shall be allowed pursuant to this section for any amount of the increase in a small business's unemployment insurance contributions that is offset by grants or other subsidies made available for similar purposes. |
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| 90 | 90 | | |
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| 91 | 91 | | c. A taxpayer shall apply in a form and manner to be determined by the director for the tax credits provided pursuant to this section. The order of priority of the application of the credit allowed pursuant to this section and any other credits allowed by law shall be as prescribed by the director. |
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| 92 | 92 | | |
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| 93 | 93 | | d. The amount of the tax credits applied under this section against the tax otherwise due under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., for a taxable year, when taken together with any other payments, credits, deductions, and adjustments allowed by law shall not reduce the tax liability of the taxpayer to an amount less than zero. The amount of the tax credits otherwise allowable under this section that cannot be applied for the taxable year due to the limitations of this subsection or under other provisions of N.J.S.54A:1-1 et seq., may be carried forward, if necessary, to the seven taxable years following the taxable year for which the tax credits were allowed. |
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| 94 | 94 | | |
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| 95 | 95 | | e. (1) A business entity that is classified as a partnership for federal income tax purposes shall not be allowed a tax credit pursuant to this section directly, but the amount of tax credits of a taxpayer in respect to distributive share of entity income, shall be determined by allocating to the taxpayer that proportion of the tax credits acquired by the entity that is equal to the taxpayer's share, whether or not distributed, of the total distributive income or gain of the entity for its taxable year ending within or with the taxpayer's taxable year. |
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| 96 | 96 | | |
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| 97 | 97 | | (2) A New Jersey S Corporation shall not be allowed a tax credit pursuant to this section directly, but the amount of the tax credit of a taxpayer in respect of a pro rata share of S Corporation income, shall be determined by allocating to the taxpayer that proportion of the tax credit acquired by the New Jersey S Corporation that is equal to the taxpayer's share, whether or not distributed, of the total pro rata share of S Corporation income of the New Jersey S Corporation for its privilege period ending within or with the taxpayer's taxable year. |
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| 98 | 98 | | |
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| 99 | 99 | | f. As used in this section: |
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| 100 | 100 | | |
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| 101 | 101 | | "Small business" means a small business as defined by the United States Small Business Administration that for purposes of size standards or other factors meets the applicable criteria set forth in Part 121 of Title 13 of the Code of Federal Regulations as amended, which has its principal place of business in New Jersey, and is independently owned and operated. |
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| 102 | 102 | | |
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| 103 | 103 | | |
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| 104 | 104 | | |
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| 105 | 105 | | 3. This act shall take effect immediately. |
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| 111 | 111 | | STATEMENT |
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| 114 | 114 | | |
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| 115 | 115 | | This bill provides corporation business tax and gross income tax credits to small businesses to help offset increases in their unemployment insurance contributions, including increases scheduled pursuant to P.L.2020, c.150. The tax credit provided by the bill to a small business is an amount equal to the difference in the business's actual unemployment insurance contribution as required pursuant to R.S.43:21-7(c)(5) and the amount the small business would have paid if contributions had been computed based on rates set by column "C" of the table in R.S.43:21-7(c)(5)(E). The credit will be provided for any year in which the unemployment insurance contribution rates are greater than those imposed under column "C", and will end upon the first year in which the tax rates are equal or less than the rates of column "C". |
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| 116 | 116 | | |
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| 117 | 117 | | The bill adopts the U.S. Small Business Administration's definitions of a small business based on size standards and other applicable criteria. The tax credits are non-refundable, but may be carried forward for seven years. |
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| 118 | 118 | | |
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| 119 | 119 | | If a small business utilizes alternative relief options, such as grants or subsidies, to offset their increase in employer contributions, the small business would not be eligible for the bill's tax credits. |
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