A3650

An Act allowing a corporation business tax and gross income tax credit for the acquisition cost of equipment used in the manufacture of ENERGY STAR products, and supplementing P.L.1945, c.162 (C.54:10A-1 et seq.) and chapter 4 of Title 54A of the New Jersey Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. a. As used in this act:

"ENERGY STAR product" means a product that has been authorized by the United States Department of Environmental Protection and the United States Department of Energy to carry the ENERGY STAR label indicating that the product meets the departments’ energy efficiency guidelines for the product class.

"Equipment" means machinery, apparatus or equipment acquired by purchase for use or consumption by the taxpayer directly and primarily in the production of tangible personal property by manufacturing, processing, assembling or refining, as provided in subsection a. of section 25 of P.L.1980, c.105 (C.54:32B-8.13), having a useful life of four or more years, placed in service in this State. Qualified equipment does not include tangible personal property which the taxpayer contracts or agrees to lease or rent to another person or licenses another person to use.

b. The director shall allow a taxpayer 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 50 percent of the acquisition cost of equipment to be used in the manufacture of ENERGY STAR products in this State. If the taxpayer uses the equipment to also manufacture products that do not carry the ENERGY STAR label, the credit shall be equal to 50 percent of the equipment’s acquisition cost multiplied by the percentage that the amount of time the taxpayer uses the equipment to manufacture ENERGY STAR products constitutes relative to the total amount of time the taxpayer uses the equipment.

c. A taxpayer shall apply the credit awarded against the taxpayer’s liability under section 5 of P.L.1945, c.162 (C.54:10A-5) for the current privilege period as of the date of the credit's approval. If the taxpayer cannot use the entire credit amount for the privilege period in which the credit is first approved, the taxpayer may carry the credit or the remainder thereof over and apply it against the taxpayer’s liability under section 5 of P.L.1945, c.162 (C.54:10A-5) for the five privilege periods following the privilege period in which the director first approved the credit.

d. The director shall prescribe the order of priority of the application of the credit allowed under this section and any other credits allowed by law against the tax imposed under section 5 of P.L.1945, c.162 (C.54:10A-5). The amount of the credit 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 exceed 50 percent of the tax liability otherwise due and 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.

2. a. As used in this act:

"Pass-through entity" means a partnership or a New Jersey S corporation.

b. The director shall allow a taxpayer a credit against the tax otherwise due under N.J.S.54A:1-1 et seq. in an amount equal to 50 percent of the acquisition cost of equipment to be used in the manufacture of ENERGY STAR products in this State. If the taxpayer uses the equipment to also manufacture products that do not carry the ENERGY STAR label, the credit shall be equal to 50 percent of the equipment’s acquisition cost multiplied by the percentage that the amount of time the taxpayer uses the equipment to manufacture ENERGY STAR products constitutes relative to the total amount of time the taxpayer uses the equipment.

c. A pass-through entity shall not be allowed a credit under this section directly, but it may elect in writing, according to procedures established by the director, to transfer all or a portion of the credit to shareholders, members or partners of the pass-through entity. If the director authorizes the transfer of the unused credit to the shareholders, members or partners of a pass-through entity, a shareholder, member or partner shall receive a credit amount equal to the total unused credit transferred by the pass-through entity for the taxable year multiplied by the percentage of the pass-through entity's distributive income to which the shareholder, member or partner is entitled.

d. A taxpayer shall apply the credit allowed under this section against the taxpayer’s liability under N.J.S.54A:1-1 et seq. for the current taxable year as of the date of the credit's approval. The taxpayer may apply the credit only against that portion of the liability for the taxable year that the taxpayer's income defined under subsection b. of N.J.S.54A:5-1 for the taxable year bears to the taxpayer's entire gross income for that year. If the taxpayer cannot use the entire credit amount for the taxable year in which the credit is first approved, the taxpayer may carry the credit or the remainder thereof over and apply it against the taxpayer’s liability under N.J.S.54A:1-1 et seq. for the five taxable years following the taxable year in which the director first approved the credit.

e. The director shall prescribe the order of priority of the application of the credit allowed under this section and any other credits allowed by law against the tax imposed under N.J.S.54A:1-1 et seq.. The amount of the credit applied under this section against the tax imposed pursuant to N.J.S.54A:1-1 et seq. for a taxable year, together with any other credits allowed by law, shall not exceed 50 percent of the tax liability otherwise due.

3. The director shall submit to the Governor, the President of the Senate, and the Speaker of the General Assembly in February of each year an annual report evaluating the effectiveness of the tax credits provided pursuant to sections 1 and 2 of P.L. , c. , (C. ) (now before the Legislature as this bill) in stimulating growth in the manufacture of ENERGY STAR products in this State. The report shall include, but not be limited to, in total and by manufacturer having been approved for the tax credit, the number of manufacturers granted a credit, the credit amounts approved and claimed, and the impact of the tax credit on employment and the economy of the State of New Jersey. The report shall be based on data available from the application filed with the director for allocation of the tax credits. Notwithstanding any provision of law to the contrary, the information contained in the report shall be public information. The report may also include any recommendation to amend or repeal the provisions of this act or to modify the administration of the tax credit, or both, and any other information the director may deem useful and appropriate.

4. This act shall take effect immediately and shall apply to taxable years commencing on or after January 1 next following enactment.

STATEMENT

This bill aspires to cut greenhouse gas emissions by lowering the production cost of energy-efficient products so that their prices to consumers can drop. Specifically, it allows taxpayers to claim a corporation business tax or gross income tax credit in the amount of 50 percent of the acquisition cost of equipment used on their New Jersey premises in the manufacture of products carrying the ENERGY STAR label. The bill also requires the Director of the Division of Taxation in the Department of the Treasury to prepare an annual report on the effectiveness of the tax credit in stimulating growth in the manufacture of such products in New Jersey.

Through the ENERGY STAR program, the United States Environmental Protection Agency (EPA) and the United States Department of Energy seek to promote the use of energy efficient products and practices by households, businesses, and non-for-profit organizations so as to reduce the nation’s greenhouse gas emissions. The Clean Energy Program by the New Jersey Board of Public Utilities partners with the ENERGY STAR program in offering incentives to use ENERGY STAR products and practices.

According to the EPA, in 2005, Americans purchased about 175 million ENERGY STAR products such as appliances, heating and cooling equipment, home electronics, office equipment, and lighting that offer consumers energy savings of between 10 and 90 percent relative to standard models. The EPA estimates that ENERGY STAR helped to avert 35 million metric tons of national greenhouse gas emissions in 2005 and saved Americans $12 billion on their utility bills. Overall, energy savings amounted to an estimated 150 billion kilowatt hours or four percent of total 2005 electricity demand.