ASSEMBLY BUDGET COMMITTEE

STATEMENT TO

ASSEMBLY, No. 5607

STATE OF NEW JERSEY

DATED:  JUNE 17, 2019

      The Assembly Budget Committee reports favorably Assembly Bill No. 5607.

      This bill authorizes the State Treasurer to establish an expedited business dissolution or reinstatement initiative and makes various changes to the State’s business registration statutes.

      Under current law, businesses, including corporations and limited liability companies, may have their charters revoked or placed on an inactive list for failing to make required filings (e.g. annual reports or tax returns) with the Department of the Treasury.  Businesses that fall into lapsed status and that wish to reinstate or dissolve their charters in an orderly fashion are required to follow multiple overlapping steps.  Corporations are required to obtain a tax clearance certificate and pay any outstanding taxes, fees, and penalties. 

      This bill is intended to improve the State’s business registry program by establishing a temporary scheme to help approximately 370,000 business entities that are presently in an inactive or revoked status to achieve reinstatement, or execute a streamlined termination to end their operations, without risk of exposure to additional tax compliance issues by filing a single application and supporting documentation with the Division of Revenue and Enterprise Services (DORES) in the Department of the Treasury.  Under the temporary program, business would be required to pay an administrative fee of $500 and attest that they have satisfied any known tax obligations.

      The bill also makes structural improvements to the business registration program by: eliminating the reinstatement fee for late filing; establishing a grace period for waiver of the tax clearance requirement for recently revoked entities; establishing a uniform tax clearance procedure for all for-profit entities following the grace period; and requiring enhanced communications with businesses regarding compliance, due dates, and other matters related to their business status.

      Finally, the bill adjusts and realigns the current annual report fee structure.  The annual report fee for for-profit entities increases by $25 (from $50 to $75) and the annual report fee for non-profit entities increases by $5 (from $25 to $30).  These fee amounts have not been increased since 2002. 

FISCAL IMPACT:

      The Office of Legislative Services (OLS) estimates that the bill will result in an indeterminate increase in State commercial recording fee revenues collected by DORES.  The OLS does not have data that it may use to provide a definitive estimate of the fiscal impact of this legislation.  The Executive anticipates the bill will generate approximately $25 million in Fiscal Year 2020.  The OLS neither agrees nor disagrees with the Executive’s projection due to the unique nature of this initiative and the degree of uncertainty regarding the number of businesses that will participate in the program.

      Additional State revenue collections will be higher in Fiscal Year 2020 because the State will receive fee payments from business entities that participate in the 180-day expedited business dissolution or reinstatement initiative.

      The increase in annual report filing fees authorized by the bill will also catalyze additional State revenue collections in Fiscal Year 2020 and beyond, they will be offset by a loss of business entity reinstatement fee revenues, as they are eliminated by the bill.