An Act eliminating a limit on the application of the research expense credit allowed pursuant to the corporation business tax, amending P.L.1993, c.175.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 1 of P.L.1993, c.175 (C.54:10A-5.24) is amended to read as follows:
1. a. A taxpayer shall be allowed a credit, subject to the provisions of subsection b. of this section, against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), in an amount equal to
(1) 10% of the excess of the qualified research expenses for the [fiscal or calendar accounting year (referred to hereafter in this section as the "tax year")] privilege period over the base amount; and
(2) 10% of the basic research payments for the privilege period
determined in accordance with section 41 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.41, as in effect on June 30, 1992, and provided that subsection (h) of 26 U.S.C. s.41 relating to termination shall not apply. Provided however, that the terms "qualified research expenses," "base amount," "qualified organization base amount period," "basic research" and any other terms determined by the Director of the Division of Taxation to affect the calculation of the credit shall include only expenditures for research conducted in this State.
b. No credit shall be allowed under section 42 of P.L.1987, c.102 (C.54:10A-5.3), or under the "Manufacturing Equipment and Employment Investment Tax Credit Act," P.L.1993, c.171 (C.54:10A-5.16 et al.), or under P.L.1993, c.170 (C.54:10A-5.4 et seq.), for property or expenditures for which a credit is allowed, or which are includable in the calculation of a credit allowed, under this section.
[The tax imposed for a fiscal or calendar accounting year pursuant to section 5 of P.L.1945, c.162, shall first be reduced by the amount of any credit allowed pursuant to section 19 of P.L.1983, c.303 (C.52:27H-78), then by any credit allowed pursuant to section 12 of P.L.1985, c.227 (C.55:19-13), then by any credit allowed pursuant to section 42 of P.L.1987, c.102 (C.54:10A-5.3), then by any credit allowed under section 3 of P.L.1993, c.170 (C.54:10A-5.6), and then by any credit allowed under section 3 or 4 of P.L.1993, c.171 (C.54:10A-5.18 or C.54:10A-5.19), prior to applying any credits allowable 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. Credits allowable pursuant to this section shall be applied in the order of the [credits' tax years] privilege periods for which the credits were allowed.
[The] For privilege periods beginning before January 1, 2012, the amount of the credits applied under this section against the tax imposed pursuant to section 5 of P.L.1945, c.162, for [an accounting year] the privilege period shall not exceed 50% 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.
For privilege periods beginning on or after January 1, 2012, the amount of the credits applied under this section against the tax imposed pursuant to section 5 of P.L.1945, c.162, for the privilege period 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.
The amount of [tax year] credit otherwise allowable under this section which cannot be applied for the [tax year] privilege period due to the limitations of this subsection may be carried over, if necessary, to the seven [accounting years] privilege periods following a credit's [tax year] privilege period.
(cf: P.L1993, c.175, s.1.)
2. This act shall take effect immediately.
This bill eliminates the limit on the application of the corporation business tax research expense credit to 50% of liability otherwise due for the tax period.
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.
This bill removes a restriction on the application of the credit. 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. The bill retains the restriction that the credit may not reduce the tax liability to less than the statutory minimum.
Eliminates limit on application of corporation business tax research credit to 50% of liability otherwise due.