ASSEMBLY APPROPRIATIONS COMMITTEE

 

STATEMENT TO

 

ASSEMBLY, No. 5580

 

with committee amendments

 

STATE OF NEW JERSEY

 

DATED:  NOVEMBER 14, 2019

 

      The Assembly Appropriations Committee reports favorably Assembly Bill No. 5580, with committee amendments.

      As amended, this bill extends, by five years, the availability period for corporation business tax and gross income tax credits for certain expenses incurred for the production of certain film and digital media content. The bill also raises the annual tax credit cap related to film production from $75,000,000 to $100,000,000, and provides for additional potential increases to the cap under certain circumstances.

      Under existing law, these tax credits are available to a taxpayer with qualifying production expenses during a privilege period or taxable year that commences on or after July 1, 2018, but before July, 1, 2023.  The bill provides that the tax credits are to be available to a taxpayer with qualifying production expenses during a privilege period or taxable year commencing on or after July 1, 2018, but before July, 1, 2028.

 

COMMITTEE AMENDMENTS:

      The committee amended the bill to:

      increase the annual cap related to film production from $75,000,000 to $100,000,000;

      correct the duration of the annual tax credit caps from fiscal year 2024 to 2029 so that the duration of the tax credits caps are consistent with the duration of the tax credit program;

      require that the film tax credits be administered so that: (1) any remaining amounts of the annual allocation be rolled-over to increase the annual allocation for the next year, and (2) any amounts of approved tax credits that the authority certifies as no longer subject to redemption or transfer also be rolled-over to increase the annual allocation for the next year. The amendments, however, cap the cumulative annual allocation increase to $50,000,000; and

      correct citations and grammar.

 

FISCAL IMPACT:

      The OLS concludes that the bill will have an indeterminate net impact on State finances.  The bill could have a potential negative net impact of up to $700 million on the State General Fund and the Property Tax Relief Fund, and a potential revenue increase to affected local governments.  Under current law, the State could lose up to $425 million in revenue because of the existing tax credits and caps. This bill increases the annual cap of the tax credits for qualified film production by $25 million from $75 million to $100 million and therefore increases the cost of the tax credits by $100 million for the remaining four years of the initial five years of the program. This assumes that bill is extended in time for the increased cap to be used in FY 2020.  

      The bill also extends the lifespan of the tax credits by five years.  As a result, the cost of the tax credits for the five years beginning with FY 2024 can result in a total loss of revenue of $550 million.  

      The bill also allows the Economic Development Authority (EDA) to carry forward any unredeemed or non-transferred tax credits from prior fiscal years to subsequent fiscal years.  As a result, the EDA can access $50 million in unredeemed tax credits from FY 2019.

      The bill could also result in indirect state and local revenue gain through “multiplier effects” that allow more money to flow through the economy and thus result in sales and use tax gain for the State and also increase property value and result in property tax gain for local governments.