S2577

An Act allowing purchase of discounted credits against future income tax liabilities, establishing the “COVID-19 Economic Recovery Fund,” and supplementing Title 54A of the New Jersey Statutes.

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

1. There is established in the Department of the Treasury a fund to be known as the “COVID-19 Economic Recovery Fund.” The State Treasurer shall credit to the COVID-19 Economic Recovery Fund, on or before December 31, 2021, the revenue collected pursuant to section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill).

2. a. For the tax year beginning on January 1, 2021 and ending on December 31, 2021, a taxpayer that has a tax liability under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., may purchase from the Department of the Treasury credits against the taxpayer’s liabilities under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq. for any of the succeeding five tax years. The amount of credit for any specific tax year shall not exceed the amount of tax due for tax year 2019 or tax year 2020, whichever is greater. The cost to purchase the credits shall be as follows:

(1) the cost to purchase a credit allowable for tax year 2022 shall be equal to 97 percent of the credit purchased;

(2) the cost to purchase a credit allowable tax year 2023 shall be equal to 94 percent of the credit purchased;

(3) the cost to purchase a credit allowable for tax year 2024 shall be equal to 91 percent of the credit purchased;

(4) the cost to purchase a credit allowable for tax year 2025 shall be equal to 88 percent of the credit purchased; and

(5) the cost to purchase a credit allowable for tax year 2026 shall be equal to 85 percent of the amount of the credit purchased.

b. The order of priority in which the tax credits allowed pursuant to this section and any other tax credits allowed by law may be taken shall be as prescribed by the director. The amount of the tax credits applied under this section against the tax imposed pursuant to “New Jersey Gross Income Tax Act,” N.J.S.54A:1-1 et seq. for a taxable year, when taken together with any other payments, credits, deductions, and adjustments allowed by law shall not reduce the tax liability of the taxpayer to an amount less than zero. The amount of the tax credits otherwise allowable under this section which cannot be applied for the taxable year due to the limitations of this section or other provisions of N.J.S.54A:1-1 et seq. may be carried forward, if necessary, to the seven taxable years following the taxable year for which the tax credits were first allowed.

c. (1) A business entity that is classified as a partnership for federal income tax purposes shall not be allowed a tax credit pursuant to this section directly, but the amount of tax credit of a taxpayer in respect of a distributive share of entity income, shall be determined by allocating to the taxpayer that proportion of the tax credit acquired by the entity that is equal to the taxpayer's share, whether or not distributed, of the total distributive income or gain of the entity for its taxable year ending within or with the taxpayer's taxable year.

(2) A New Jersey S Corporation shall not be allowed a tax credit pursuant to this section directly, but the amount of tax credit of a taxpayer in respect of a pro rata share of S Corporation income, shall be determined by allocating to the taxpayer that proportion of the tax 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.

d. The Department of the Treasury shall not allow a taxpayer to purchase a credit pursuant to this section after an aggregate total of $5,000,000,000 has been deposited into the COVID-19 Economic Recovery Fund.

3. a. The agencies receiving moneys from the COVID-19 Economic Recovery Fund pursuant to this section shall maximize coordination in the allocation of moneys in the fund to avoid overlap between the uses of the fund prescribed in this section.

b. Moneys in the COVID-19 Economic Recovery Fund, after appropriation for payment of administrative costs authorized pursuant to subsection c. of this section, shall be appropriated and used for the following purposes:

(1) Twenty percent shall be allocated to the Department of Education to provide funding for elementary schools, secondary schools, and public institutions of higher education in the State, giving priority to schools experiencing budget deficits as a result of the COVID-19 pandemic;

(2) Fifteen percent shall be allocated to the New Jersey Economic Development Authority to provide funding for economic development programs administered by the authority, giving priority to economic development programs that benefit businesses and nonprofit organizations facing economic hardships as a result of the COVID-19 pandemic;

(3) Fifteen percent shall be allocated to the Department of Labor and Workforce Development to provide funding for services related to worker protections;

(4) Ten percent shall be allocated to the Department of Health to provide funding for programs that benefit residents of the State in need of health or nutritional assistance;

(5) Ten percent shall be allocated to the Department of Human Services to provide funding for programs that benefit residents of the State in need of medical assistance or welfare services;

(6) Eight percent shall be allocated to the Department of Community Affairs to provide funding for programs that prevent homelessness; and

(7) Four percent shall be allocated to the Department of Transportation to provide funding for infrastructure projects.

c. (1) The Department of the Treasury may use up to four percent of the total amount in the COVID-19 Economic Recovery Fund to pay for administrative costs justifiable and approved in the annual budget process, incurred by the department in administering the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill).

(2) The Department of Education, New Jersey Economic Development Authority, the Department of Labor and Workforce Development, the Department of Health, the Department of Human Services, the Department of Community Affairs, and the Department of Transportation may each use up to two percent of the total amount in the COVID-19 Economic Recovery Fund to pay for administrative costs justifiable and approved in the annual budget process, incurred by the respective authority or department in administering the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill).

d. The State Comptroller shall conduct or supervise independent audit and fiscal oversight functions of the COVID-19 Economic Recovery Fund and its uses.

4. Within one year after the date of enactment of P.L. , c. (C. ) (pending before the Legislature as this bill), the Department of the Treasury, in consultation with the New Jersey Economic Development Authority, the Department of Education, the Department of Health, the Department of Human Services, the Department of Community Affairs, the Department of Labor and Workforce Development, and the Department of Transportation, shall adopt, in accordance with the “Administrative Procedure Act,” P.L.1968, c.410 (C.52:14B-1 et seq.), guidelines and a priority ranking system to be used to assist in allocating funds pursuant to subsection b. of section 3 of P.L. , c. (C. ) (pending before the Legislature as this bill).

5. This act shall take effect immediately.

STATEMENT

This bill establishes the “COVID-19 Economic Recovery Fund” in the Department of the Treasury. The State Treasurer is to credit to the fund, on or before December 31, 2021, the revenue collected pursuant to this bill.

Under the bill, for the tax year beginning on January 1, 2021 and ending on December 31, 2021, a taxpayer that has a tax liability under the Gross Income Tax may purchase from the Department of the Treasury credits against future Gross Income Tax liability for any of the succeeding five tax years, in an amount not to exceed the taxpayer’s liability in tax year 2019 or 2020. The cost of purchased tax credits is to be as follows: the cost to purchase a credit for tax year 2022 is to be equal to 97 percent of the credit purchased; the cost to purchase a credit for tax year 2023 is to be equal to 94 percent of the credit purchased; the cost to purchase a credit for tax year 2024 is to be equal to 91 percent of the credit purchase; the cost to purchase a credit for tax year 2025 is to be equal to 88 percent of the credit purchased; and the cost to purchase a credit for tax year 2026 is to be equal to 85 percent of the amount of tax credit purchased.

Purchased tax credits may not reduce the tax liability of a taxpayer to less than zero, but unused credits may be carried forward, if necessary, to the seven taxable years following the taxable year for which the tax credit was first allowed.

The Department of the Treasury is not to allow a taxpayer to purchase tax credits pursuant to this bill after an aggregate total of $5,000,000,000 has been deposited into the fund.

Moneys in the fund, after appropriation for payment of administrative costs authorized pursuant to this bill, are to be appropriated and used for the following purposes:

(1) Twenty percent is to be allocated to the Department of Education to provide funding for elementary schools, secondary schools, and public institutions of higher education in the State, giving priority to schools experiencing budget deficits as a result of the COVID-19 pandemic;

(2) Fifteen percent is to be allocated to the New Jersey Economic Development Authority to provide funding for economic development programs administered by the authority, giving priority to economic development programs that benefit businesses and not-for-profit organizations facing economic hardships as a result of the COVID-19 pandemic;

(3) Fifteen percent is to be allocated to the Department of Labor and Workforce Development to provide funding for services related to worker protections;

(4) Ten percent is to be allocated to the Department of Health to provide funding for programs that benefit residents of the State in need of health or nutritional assistance;

(5) Ten percent is to be allocated to the Department of Human Services to provide funding for programs that benefit residents of the State in need of medical assistance or welfare services;

(6) Eight percent is to be allocated to the Department of Community Affairs to provide funding for programs that prevent homelessness; and

(7) Four percent is to be allocated to the Department of Transportation to provide funding for infrastructure projects.

Under the bill, the Department of the Treasury may use up to four percent of the total amount in the fund to pay for administrative costs justifiable and approved in the annual budget process, incurred by the department in administering the provisions of the bill. The Department of Education, New Jersey Economic Development Authority, the Department of Labor and Workforce Development, the Department of Health, the Department of Human Services, the Department of Community Affairs, and the Department of Transportation, may each use up to two percent of the total amount in the fund to pay for administrative costs justifiable and approved in the annual budget process, incurred by the authority or department in administering the provisions of the bill.

The bill provides that the State Comptroller is to conduct or supervise independent audit and fiscal oversight functions of the fund and its uses.