P.L.2011, CHAPTER 84, approved June 30, 2011

Senate, No. 2981

 


An Act decreasing the minimum corporation business tax on certain New Jersey subchapter S corporations, amending P.L.1945, c.162.

 

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

 

     1.    Section 5 of P.L.1945, c.162 (C.54:10A-5) is amended to read as follows:

     5.    The franchise tax to be annually assessed to and paid by each taxpayer shall be the greater of the amount computed pursuant to this section or the alternative minimum assessment computed pursuant to section 7 of P.L.2002, c.40 (C.54:10A-5a); provided however, that in the case of a taxpayer that is a New Jersey S corporation, an investment company, a professional corporation organized pursuant to P.L.1969, c.232 (C.14A:17-1 et seq.) or a similar corporation for profit organized for the purpose of rendering professional services under the laws of another state, or a person operating on a cooperative basis under Part I of Subchapter T of the federal Internal Revenue Code of 1986, 26 U.S.C. s.1381 et seq., there shall be no alternative minimum assessment computed pursuant to section 7 of P.L.2002, c.40 (C.54:10A-5a).

     The amount computed pursuant to this section shall be the sum of the amount computed under subsection (a) hereof, or in the alternative to the amount computed under subsection (a) hereof, the amount computed under subsection (f) hereof, and the amount computed under subsection (c) hereof:

     (a)   That portion of its entire net worth as may be allocable to this State as provided in section 6, multiplied by the following rates:  2 mills per dollar on the first $100,000,000.00 of allocated net worth; 4/10 of a mill per dollar on the second $100,000,000.00; 3/10 of a mill per dollar on the third $100,000,000.00; and 2/10 of a mill per dollar on all amounts of allocated net worth in excess of $300,000,000.00; provided, however, that with respect to reports covering accounting or privilege periods set forth below, the rate shall be that percentage of the rate set forth in this subsection for the appropriate year:

            Accounting or Privilege

            Periods Beginning on or            The Percentage of the Rate

            after:                                         to be Imposed Shall be:

            April 1, 1983                                                    75%

            July 1, 1984                                                     50%

            July 1, 1985                                                     25%

            July 1, 1986                                                     0

     (b)   (Deleted by amendment, P.L.1968, c.250, s.2.)

     (c)   (1) For a taxpayer that is not a New Jersey S corporation, 3 1/4% of its entire net income or such portion thereof as may be allocable to this State as provided in section 6 of P.L.1945, c.162 (C.54:10A-6) plus such portion thereof as is specifically assigned to this State as provided in section 5 of P.L.1993, c.173 (C.54:10A-6.1); provided, however, that with respect to reports covering accounting or privilege periods or parts thereof ending after December 31, 1967, the rate shall be 4 1/4%; and that with respect to reports covering accounting or privilege periods or parts thereof ending after December 31, 1971, the rate shall be 5 1/2%; and that with respect to reports covering accounting or privilege periods or parts thereof ending after December 31, 1974, the rate shall be 7 1/2%; and that with respect to reports covering privilege periods or parts thereof ending after December 31, 1979, the rate shall be 9%; provided however, that for a taxpayer that has entire net income of $100,000 or less for a privilege period and is not a partnership the rate for that privilege period shall be 7 1/2% and provided further that for a taxpayer that has entire net income of $50,000 or less for a privilege period and is not a partnership the rate for that privilege period shall be 6 1/2%.

     (2)   For a taxpayer that is a New Jersey S corporation:

     (i)    for privilege periods ending on or before June 30, 1998 the rate determined by subtracting the maximum tax bracket rate provided under N.J.S.54A:2-1 for the privilege period from the tax rate that would otherwise be applicable to the taxpayer's entire net income for the privilege period if the taxpayer were not an S corporation provided under paragraph (1) of this subsection for the privilege period; and

     (ii)   For a taxpayer that has entire net income in excess of $100,000 for the privilege period, for privilege periods ending on or after July 1, 1998, but on or before June 30, 2001, the rate shall be 2%,

     for privilege periods ending on or after July 1, 2001, but on or before June 30, 2006, the rate shall be 1.33%,

     for privilege periods ending on or after July 1, 2006, but on or before June 30, 2007, the rate shall be 0.67%, and

     for privilege periods ending on or after July 1, 2007 there shall be no rate of tax imposed under this paragraph; and

     (iii) For a taxpayer that has entire net income of $100,000 or less for privilege periods ending on or after July 1, 1998, but on or before June 30, 2001 the rate for that privilege period shall be 0.5%, and for privilege periods ending on or after July 1, 2001 there shall be no rate of tax imposed under this paragraph.

     (iv)  The taxpayer's rate determined under subparagraph (i), (ii) or (iii) of this paragraph shall be multiplied by its entire net income that is not subject to federal income taxation or such portion thereof as may be allocable to this State pursuant to sections 6 through 10 of P.L.1945, c.162 (C.54:10A-6 through 54:10A-10) plus such portion thereof as is specifically assigned to this State as provided in section 5 of P.L.1993, c.173 (C.54:10A-6.1).

     (3)   For a taxpayer that is a New Jersey S corporation, in addition to the amount, if any, determined under paragraph (2) of this subsection, the tax rate that would otherwise be applicable to the taxpayer's entire net income for the privilege period if the taxpayer were not an S corporation provided under paragraph (1) of this subsection for the privilege period multiplied by its entire net income that is subject to federal income taxation or such portion thereof as may be allocable to this State pursuant to sections 6 through 10 of P.L.1945, c.162 (C.54:10A-6 through 54:10A-10).

     (d)   Provided, however, that the franchise tax to be annually assessed to and paid by any investment company or real estate investment trust, which has elected to report as such and has filed its return in the form and within the time provided in this act and the rules and regulations promulgated in connection therewith, shall, in the case of an investment company, be measured by 40% of its entire net income and 40% of its entire net worth, and in the case of a real estate investment trust, by 4% of its entire net income and 15% of its entire net worth, at the rates hereinbefore set forth for the computation of tax on net income and net worth, respectively, but in no case less than $250, and further provided, however, that the franchise tax to be annually assessed to and paid by a regulated investment company which for a period covered by its report satisfies the requirements of Chapter 1, Subchapter M, Part I, Section 852(a) of the federal Internal Revenue Code shall be $250.

     (e)   The tax assessed to any taxpayer pursuant to this section shall not be less than $25 in the case of a domestic corporation, $50 in the case of a foreign corporation, or $250 in the case of an investment company or regulated investment company.  Provided however, that for privilege periods beginning in calendar year 1994 and thereafter the minimum taxes for taxpayers other than an investment company or a regulated investment company shall be as provided in the following schedule:

     Period Beginning                  Domestic                     Foreign

     In Calendar Year                 Corporation                  Corporation

                                                Minimum Tax               Minimum Tax

                        1994                            $  50                            $100

                        1995                            $100                            $200

                        1996                            $150                            $200

                        1997                            $200                            $200

                        1998                            $200                            $200

                        1999                            $200                            $200

                        2000                            $200                            $200

                        2001                            $210                            $210

and for calendar years 2002 through 2005 the minimum tax for all taxpayers shall be $500, and for calendar year 2006 [and thereafter] through calendar year 2011 the minimum tax for all corporations, and for privilege periods beginning in calendar year 2012 and thereafter the minimum tax for corporations that are not New Jersey S corporations shall be based on the New Jersey gross receipts, as defined for the purposes of this section pursuant to section 7 of P.L.2002, c.40 (C.54:10A-5a), of the taxpayer pursuant to the following schedule:

                   New Jersey Gross Receipts:                      Minimum Tax:

                        Less than $100,000                  . . . . . . . .$500

                        $100,000 or more but

                                    less than $250,000       . . . . . . . $750

                        $250,000 or more but

                                    less than $500,000       . . . . . .  $1,000

                        $500,000 or more but

                                    less than $1,000,000    . . . . . . $1,500

                        $1,000,000 or more                  . . . . . . $2,000

     and for privilege periods beginning in calendar year 2012 and thereafter the minimum tax for corporations that are New Jersey S corporations shall be based on the New Jersey gross receipts, as defined for the purposes of this section pursuant to section 7 of P.L.2002, c.40 (C.54:10A-5a), of the taxpayer pursuant to the following schedule:

                   New Jersey Gross Receipts:                      Minimum Tax:

                        Less than $100,000                  . . . . . . .$375

                        $100,000 or more but

                                    less than $250,000       . . . . . . . $562.50

                        $250,000 or more but

                                    less than $500,000       . . . . . .  $750

                        $500,000 or more but

                                    less than $1,000,000    . . . . . . $1,125

                        $1,000,000 or more                  . . . . . . $1,500

provided however, that for a taxpayer that is a member of an affiliated group or a controlled group pursuant to section 1504 or 1563 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.1504 or 1563, and whose group has total payroll of $5,000,000 or more for the privilege period, the minimum tax shall be $2,000 for the privilege period.

     (f)    In lieu of the portion of the tax based on net worth and to be computed under subsection (a) of this section, any taxpayer, the value of whose total assets everywhere, less reasonable reserves for depreciation, as of the close of the period covered by its report, amounts to less than $150,000, may elect to pay the tax shown in a table which shall be promulgated by the director.

     (g)   Provided however, that for privilege periods beginning on or after January 1, 2001 but before January 1, 2002 the franchise tax annually assessed to and paid by a taxpayer:

     (1)   that is a limited liability company or foreign limited liability company classified as a partnership for federal income tax purposes shall be the amount determined pursuant to the provisions of section 3 of P.L.2001, c.136 (C.54:10A-15.6); or

     (2)   that is a limited partnership or foreign limited partnership classified as a partnership for federal income tax purposes shall be the amount determined pursuant to the provisions of section 4 of P.L.2001, c.136 (C.54:10A-15.7).

     (h)   Provided however, that for privilege periods beginning on or after January 1, 2002 the franchise tax annually assessed to and paid by a taxpayer that is a partnership shall be the amount determined pursuant to the provisions of section 12 of P.L.2002, c.40 (C.54:10A-15.11).

     (i)    (Deleted by amendment, P.L.2008, c.120)

(cf: P.L.2008, c.120, s.1)

 

     2.    This act shall take effect immediately.

 

 

STATEMENT

 

     This bill decreases the minimum corporation business tax on New Jersey subchapter S corporations.  New Jersey subchapter S corporations are corporations, regardless of where they are organized or headquartered, that have made the federal subchapter S election to be exempt from taxation on their regular income and have made the New Jersey election to be exempt from corporation business tax on their regular income.

     Currently, all corporations subject to corporation business tax, including New Jersey subchapter S corporations, are subject to minimum tax based on the New Jersey gross receipts of the taxpayer corporation as follows:

            New Jersey Gross Receipts:                 Minimum Tax:

                        Less than $100,000                                $500

                        $100,000 or more but

                                    less than $250,000                     $750

                        $250,000 or more but

                                    less than $500,000                   $1,000

                        $500,000 or more but

                                    less than $1,000,000                $1,500

                        $1,000,000 or more                             $2,000

     The minimum tax of corporations that are members of affiliated or controlled groups with total payrolls of $5 million or more is $2,000 annually.

     This bill provides a 25% cut in the minimum tax payable by a New Jersey subchapter S corporation, for taxable periods beginning on or after January 1, 2012, as follows:

            New Jersey Gross Receipts:                 Minimum Tax:

                        Less than $100,000                                $375

                        $100,000 or more but

                                    less than $250,000                     $562.50

                        $250,000 or more but

                                    less than $500,000                     $750

                        $500,000 or more but

                                    less than $1,000,000                $1,125

                        $1,000,000 or more                             $1,500

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

 

 

                                

 

     Decreases the minimum corporation business tax on certain New Jersey subchapter S corporations by 25%.