Senator JEFF VAN DREW
District 1 (Cape May, Atlantic and Cumberland)
Senator JIM WHELAN
District 2 (Atlantic)
Prohibits imposition of corporation business tax on certain foreign corporations carrying passengers into and out of State in motor vehicle or motorbus.
CURRENT VERSION OF TEXT
An Act prohibiting the imposition of the corporation business tax on certain foreign corporations by reason of their carrying passengers into and out of the State in a motor vehicle or motorbus, amending P.L.1945, c.162.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 2 of P.L.1945, c.162 (C.54:10A-2) is amended to read as follows:
2. Every domestic or foreign corporation which is not hereinafter exempted shall pay an annual franchise tax for each year, as hereinafter provided, for the privilege of having or exercising its corporate franchise in this State, or for the privilege of deriving receipts from sources within this State, or for the privilege of engaging in contacts within this State, or for the privilege of doing business, employing or owning capital or property, or maintaining an office, in this State. And such franchise tax shall be in lieu of all other State, county or local taxation upon or measured by intangible personal property used in business by corporations liable to taxation under this act.
A foreign corporation shall not be deemed to be deriving receipts, engaging in contacts, doing business, employing or owning capital or property in the State, for the purposes of this act, by reason of (1) the maintenance of cash balances with banks or trust companies in this State, or (2) the ownership of shares of stock or securities in this State if such shares or securities are pledged as collateral security, or deposited with one or more banks or trust companies or brokers who are members of a recognized security exchange, in safekeeping or custody accounts, or (3) the taking of any action by any such bank or trust company or broker, which is incidental to the rendering of safekeeping or custodian service to such corporation, or (4) notwithstanding any provisions of this section to the contrary, by the operation of a motor vehicle or motorbus operated over public highways or public places in this State for the carriage of passengers in transit from a location outside this State to a destination in this State and for the carriage of those passengers in transit from a location in this State to a location outside this State.
A taxpayer's exercise of its franchise in this State is subject to taxation in this State if the taxpayer's business activity in this State is sufficient to give this State jurisdiction to impose the tax under the Constitution and statutes of the United States.
(cf: P.L.2002, c.40, s.1)
2. This act shall take effect immediately and apply retroactively to privilege periods beginning on or after January 1, 2001.
This bill prohibits the imposition of the corporation business tax on foreign (out-of-State) corporations whose only contact with the State of New Jersey is the carriage of passengers into the State in a motor vehicle or motorbus operated over the public highways, the delivery of those passengers to a destination in the State, and the return of those passengers to a location outside the State.
P.L.2002, c.40 extended the reach of the New Jersey corporation business tax to a corporation that derives income from New Jersey sources, explicitly expanding the reach of the tax to the full extent permitted under the United States Constitution and federal statute. This bill limits the corporation business tax so it is not imposed on a corporation whose only connection with the State is the delivery of passengers to a location in the State. The changes provided by this bill are retroactive to January 1, 2001.
Since the State began collecting tax on foreign tour bus operators, operators bringing visitors to New Jersey have suspended or threatened to suspend future trips into the State. The loss of tax revenues resulting from this bill will be offset by the sales and use tax and the casino revenue tax generated by tour bus visitors that spend money in this State.