A4373

An Act allowing tax credits for the purchase of steel and aluminum for manufacturing, and supplementing P.L.1945, c.162 (C.54:10A-1 et seq.) and Title 54A of the New Jersey Statutes.

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

1. a. If a taxpayer’s tax credit application is certified by the authority pursuant to subsection b. of this section, the director shall allow the 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 25 percent of the amount paid by the taxpayer for the purchase of steel or 10 percent of the amount paid by the taxpayer for the purchase of aluminum during the privilege period. The director shall allow the tax credit only if the steel or aluminum is intended for use by the taxpayer as raw materials in the production of tangible personal property at a manufacturing facility.

b. To qualify for a tax credit pursuant to this section, a taxpayer’s application for a tax credit shall be certified by the authority as meeting the eligibility criteria established in this subsection. The authority may approve an application for a tax credit if the authority determines that the tax credit allowed pursuant to this section will result in a net positive benefit for the State. In determining if the tax credit allowed pursuant to this section will result in a net positive benefit for the State, the authority may consider if: (1) in the absence of the tax credit, the number of full-time employees will be reduced; (2) granting the tax credit will result in the creation of additional jobs for full-time employees; or (3) in the absence of the tax credit, the manufacturing facility may relocate all or part of its operations to a place or places outside the State.

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. A taxpayer may carry forward an unused credit resulting from the limitations of subsection d. of this section, if necessary, for use in the seven privilege periods following the privilege period for which the credit is allowed.

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 (C.54:10A-5).

e. The director shall not allow a taxpayer a credit pursuant to this section for the value of steel or aluminum that is included in the calculation of a credit allowed against the “New Jersey Gross Income Tax Act,” N.J.S.54A:1-1 et seq., allowed pursuant to section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill).

f. As used in this section:

“Authority” means the New Jersey Economic Development Authority established by section 4 of P.L.1974, c.80 (C.34:1B-4).

"Manufacturing equipment" means machinery, apparatus, or equipment used in the production of tangible personal property that is eligible for the sales tax exemption pursuant to subsection a. of section 25 of P.L.1980, c.105 (C.54:32B-8.13).

"Manufacturing facility" means a business location in the State, including but not limited to a factory, mill, or plant, at which more than 50 percent of the business personal property that is housed in the facility is manufacturing equipment.

2. a. If a taxpayer’s tax credit application is certified by the authority pursuant to subsection b. of this section, the director shall allow the taxpayer a credit against the tax otherwise due pursuant to the “New Jersey Gross Income Tax Act,” N.J.S.54A:1-1 et seq., in an amount equal to 25 percent of the amount paid by the taxpayer for the purchase of steel or 10 percent of the amount paid by the taxpayer for the purchase of aluminum during the taxable year. The director shall allow the tax credit only if the steel or aluminum is intended for use by the taxpayer as raw materials in the production of tangible personal property at a manufacturing facility.

c. A taxpayer shall apply the credit awarded 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. A taxpayer may carry forward an unused credit resulting from the limitations of subsection d. of this section, if necessary, for use in the seven taxable years following the taxable year for which the credit is allowed.

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 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 and shall not reduce the tax liability to an amount less than zero.

e. The director shall not allow a taxpayer a credit pursuant to this section for the value of steel or aluminum that is included in the calculation of a credit against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), allowed pursuant to section 1 of P.L. , c. (C. ) (pending before the Legislature as this bill).

f. (1) A business entity that is classified as a partnership for federal income tax purposes shall not be allowed a credit directly, but the amount of credit of a taxpayer in respect of a distributive share of partnership income under the “New Jersey Gross Income Tax Act,” N.J.S.54A:1-1 et seq., shall be determined by allocating to the taxpayer that proportion of the credit acquired by the partnership that is equal to the taxpayer's share, whether or not distributed, of the total distributive income or gain of the partnership for its taxable year ending within or with the taxpayer's taxable year.

(2) A New Jersey S corporation shall not be allowed a credit directly, but the amount of credit of a taxpayer in respect of a pro rata share of S corporation income under the “New Jersey Gross Income Tax Act,” N.J.S.54A:1-1 et seq., shall be determined by allocating to the taxpayer that proportion of the credit acquired by the New Jersey S corporation that is equal to the taxpayer's share, whether or not distributed, of the total pro rata share of S corporation income of the New Jersey S corporation for its privilege period ending within or with the taxpayer's taxable year.

g. As used in this section:

“Authority” means the New Jersey Economic Development Authority established by section 4 of P.L.1974, c.80 (C.34:1B-4).

3. This act shall take effect immediately, and sections 1 and 2 shall apply to taxable years or privilege periods commencing on or after January 1 next following the date of enactment. Sections 1 and 2 shall become inoperable upon the expiration or rescission of Presidential Proclamation 9704 of March 8, 2018 (Adjusting Imports of Aluminum Into the United States) and Presidential Proclamation 9705 of March 8, 2018 (Adjusting Imports of Steel Into the United States).

STATEMENT

This bill allows gross income tax and corporation business tax credits for the purchase of steel and aluminum for use as a component of tangible personal property at a manufacturing facility. The bill is intended to offset the effect of the 25 percent tariff on steel, and 10 percent tariff on aluminum, imposed by President Donald J. Trump on March 8, 2018.

The bill allows a taxpayer a credit against the gross income tax and the corporation business tax in an amount equal to 25 percent of the amount paid by the taxpayer for the purchase of steel or 10 percent of the amount paid by the taxpayer for the purchase of aluminum. The director will allow the tax credit only if the steel or aluminum is intended for use by the taxpayer as raw materials in the production of tangible personal property at a manufacturing facility. To receive the tax credit, a taxpayer must file an application with the Economic Development Authority demonstrating that the tax credit allowed pursuant to this bill will result in a net positive benefit for the State. A taxpayer may show that such a benefit exists by demonstrating that receipt of the credit will result in the hiring or retention of full-time employees at the manufacturing facility or stops the taxpayer from relocating the manufacturing facility out-of-State.

The credits created by this bill under the corporation business tax and gross income tax are mutually exclusive such that no taxpayer may take a credit under both impositions for the same purchase of steel or aluminum. The credits afforded under this bill will be available in the privilege period and taxable year commencing after the effective date, but the bill allows a taxpayer to carry over certain unused credits to future privilege periods or taxable years.

The tax credits provided under this bill will no longer be available upon the expiration or rescission of Presidential Proclamation 9704 of March 8, 2018 (Adjusting Imports of Aluminum Into the United States) and Presidential Proclamation 9705 of March 8, 2018 (Adjusting Imports of Steel Into the United States).