Vernoia, Enterline + Brewer, CPA LLC

On June 30, 2011, New Jersey Gov. Chris Christie approved a budget that does not raise taxes, eliminates the cap on the corporation business tax research credit, decreases the minimum corporation business tax on S corporations by 25%, doubles the homestead property tax benefit, and phases out the transitional energy facility assessment (TEFA) imposed on utilities over the next three years.

The governor also vetoed legislation that would have done the following: raised taxes on individuals and businesses with taxable gross income exceeding $1 million; increased the exclusion from annual gross income of certain benefits (i.e., pension, annuity, endowment, life insurance contract, disability, and retirement income) received by senior and disabled taxpayers; and increased the amount of the state earned income tax credit to 25% of the federal earned income tax credit (EITC).

Minimum corporation business tax on S corporations: S.B. 2981, Laws 2011, provides that for tax periods beginning on and after January 1, 2012, the minimum corporation business tax on S corporations is decreased by 25%, as follows:

  • if New Jersey gross receipts are less than $100,000, the minimum tax is $375;
  • if New Jersey gross receipts are $100,000 or more but less than $250,000, the minimum tax is $562.50;
  • if New Jersey gross receipts are $250,000 or more but less than $500,000, the minimum tax is $750;
  • if New Jersey gross receipts are $500,000 or more but less than $1 million, the minimum tax is $1,125; and
  • if New Jersey gross receipts are $1 million or more, the minimum tax is $1,500.

The minimum tax of New Jersey S corporations that are members of affiliated or controlled groups with total payrolls of $5 million or more will remain at $2,000 annually.

Corporate business tax research credit: S.B. 2980, Laws 2011, eliminates the limit on the application of the corporation business tax research expense credit for tax periods beginning on and after January 1, 2012. Currently, the research expense credit is equal to 10% of the increase in “qualified research expenses” (research performed by or for the taxpayer) in a tax year over a base amount, plus 10% of the “basic research payments” (university research funded by the taxpayer) in a tax period. The credit is limited to expenditures made in New Jersey. This bill does not affect the allowance of the credit, but removes a restriction on its application. Currently, the amount of research credit applied in any tax period may not exceed 50% of the tax otherwise due and may not reduce the tax liability to less than the statutory minimum (currently $500 to $2,000 annually, depending on the gross receipts of the taxpayer). This bill eliminates the restriction that the amount of credit may not exceed 50% of the tax otherwise due for tax periods beginning on or after January 1, 2012. This bill retains the restriction that the credit may not reduce the tax liability to less than the statutory minimum.

Property tax provisions: S.B. 4000, Laws 2011, provides that for purposes of the Homestead Benefit Program, residents who are 65 years of age or older at the close of the tax year, or residents who are allowed to claim a personal deduction as a blind or disabled taxpayer, with gross income in excess of $100,000 but not in excess of $150,000 for tax year 2010 are eligible for a benefit in the amount of 5% of the first $10,000 of property tax paid. Those with gross income not in excess of $100,000 for tax year 2010 are eligible for a benefit in the amount of 10% of the first $10,000 of property taxes paid. Those with gross income in excess of $150,000 for tax year 2010 are excluded from the program.

Residents who are not 65 years of age or older at the close of the tax year, or residents who are not allowed to claim a personal deduction as a blind or disabled taxpayer, with gross income in excess of $50,000 but not in excess of $75,000 for tax year 2010 are eligible for a benefit in the amount of 6.67% of the first $10,000 of property taxes paid. Those with gross income not in excess of $50,000 for tax year 2010 are eligible for a benefit in the amount of 10% of the first $10,000 of property taxes paid. Those with gross income in excess of $75,000 for tax year 2010 are excluded from the program. The benefits are calculated based on the 2006 property tax amounts assessed or as would have been assessed on the October 1, 2010 principal residence of eligible applicants.

For purposes of the senior and disabled citizens’ property tax freeze, citizens with annual income of more than $70,000 are not eligible for property tax reimbursements in fiscal year 2012. S.B. 2980, Laws 2011, effective June 30, 2011, applicable as noted; S.B. 2981, Laws 2011, effective June 30, 2011, applicable as noted; S.B. 4000, Laws 2011, effective July 1, 2011; S.B. 4001, Laws 2011, effective June 30, 2011; Press Release, Office of New Jersey Gov. Chris Christie, June 30, 2011.

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