A325

ASSEMBLY, No. 325

STATE OF NEW JERSEY

Introduced Pending Technical Review by Legislative Counsel

PRE-FILED FOR INTRODUCTION IN THE 1996 SESSION

By Assemblymen PASCRELL and ROBERTS

An Act eliminating the State retention of the municipal share of gross receipts and franchise taxes, amending P.L.1993, c.155, and P.L.1991, c.184.

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

1. Section 27 of P.L.1991, c.184 (C.54:30A-24.4) is amended to read as follows:

27. Commencing with State fiscal year [1993] 1994, amounts which annually are not apportioned or distributed for payment to municipalities and which are retained for State government use from the taxes paid pursuant to the provisions of subsection (a) of section 3 of P.L.1940, c.4 (C.54:30A-18), subsections a. and b. of section 2 of P.L.1991, c.184 (C.54:30A-18.6), section 9 of P.L.1940, c.4 (C.54:30A-24), subsections (a) and (b) of section 6 of P.L.1940, c.5 (C.54:30A-54), and taxes paid by gas and electric light, heat and power corporations pursuant to the provisions of subsection a. of section 10 of P.L.1991, c.184 (C.54:30A-54.6), subsections a. and b. of section 12 of P.L.1991, c.184 (C.54:30A-54.8), and section 14 of P.L.1940, c.5 (C.54:30A-62), shall not exceed [the amount remaining unapportioned or undistributed and retained for State government use from those revenues in State fiscal year 1992, net of any increase in amounts paid and retained for State use pursuant to subsections a. and b. of section 2 of P.L.1991, c.184 (C.54:30A-18.6) and section 9 of P.L.1940, c.4 (C.54:30A-24) and paid and retained for State use from gas and electric light, heat and power corporations pursuant to subsections a. and b. of section 12 of P.L.1991, c.184 (C.54:30A-54.8) and section 14 of P.L.1940, c.5 (C.54:30A-62)] $245,000,000; provided however, that for State fiscal year 1995 that amount shall be reduced by $24,500,000, and for each of the nine years thereafter that amount shall be reduced by a further $24,500,000, and provided further that for State fiscal year 2004 and fiscal years thereafter there shall be no amounts which annually are not apportioned or distributed for payment to municipalities and which are retained for State government use from such taxes paid. This section shall not apply to taxes paid or prepaid pursuant to provisions of general law identifying such taxes for State use, except for taxes prepaid in 1995 and each year thereafter pursuant to subsection b. of section 2 of P.L.1991, c.184 (C.54:30A-18.6) and subsection b. of section 12 of P.L.1991, c.184 (C.54:30A-54.8).

(cf: P.L.1991, c.184, s.27)

2. Section 28 of P.L.1991, c.184 (C.54:30A-61.4) is amended to read as follows:

28. Commencing with State fiscal year [1993] 1994, amounts which annually are not apportioned or distributed for payment to municipalities and which are retained for State government use from the taxes paid pursuant to the provisions of subsection (a) of section 3 of P.L.1940, c.4 (C.54:30A-18), subsections a. and b. of section 2 of P.L.1991, c.184 (C.54:30A-18.6), section 9 of P.L.1940, c.4 (C.54:30A-24), subsections (a) and (b) of section 6 of P.L.1940, c.5 (C.54:30A-54), and taxes paid by gas and electric light, heat and power corporations pursuant to the provisions of subsection a. of section 10 of P.L.1991, c.184 (C.54:30A-54.6), subsections a. and b. of section 12 of P.L.1991, c.184 (C.54:30A-54.8), and section 14 of P.L.1940, c.5 (C.54:30A-62), shall not exceed [the amount remaining unapportioned or undistributed and retained for State government use from those revenues in State fiscal year 1992, net of any increase in amounts paid and retained for State use pursuant to subsections a. and b. of section 2 of P.L.1991, c.184 (C.54:30A-18.6) and section 9 of P.L.1940, c.4 (C.54:30A-24) and paid and retained for State use from gas and electric light, heat and power corporations pursuant to subsections a. and b. of section 12 of P.L.1991, c.184 (C.54:30A-54.8) and section 14 of P.L.1940, c.5 (C.54:30A-62)] $245,000,000; provided however, that for State fiscal year 1995 that amount shall be reduced by $24,500,000, and for each of the nine years thereafter that amount shall be reduced by a further $24,500,000, and provided further that for State fiscal year 2004 and fiscal years thereafter there shall be no amounts which annually are not apportioned or distributed for payment to municipalities and which are retained for State government use from such taxes paid. This section shall not apply to taxes paid or prepaid pursuant to provisions of general law identifying such taxes for State use, except for taxes prepaid in 1995 and each year thereafter pursuant to subsection b. of section 2 of P.L.1991, c.184 (C.54:30A-18.6) and subsection b. of section 12 of P.L.1991, c.184 (C.54:30A-54.8).

(cf: P.L.1991, c.184, s.28)

3. This act shall take effect immediately.

STATEMENT

This bill reduces the maximum allowed State retention of the municipal share of gross receipts and franchise taxes to eliminate any State retention of that revenue collected for municipal use pursuant to general and permanent statutory law. The public utility gross receipts and franchise taxes were enacted in 1940 to provide for a uniform assessment system for the property of public utilities, to substitute for locally assessed property taxes; taxes were billed by and paid to the municipalities. In 1980 amendments were made to provide for the State to bill and collect the taxes, and since 1980 the has been controversy concerning the distribution to municipalities of the revenues collected by the State.

In 1991 the taxes imposed on gas and electric light, heat and power utilities were revised to shift the tax from a gross receipts tax to a unit tax, and to cap the amount of municipal gross receipts and franchise taxes that the State could retain for the General Fund. The stated purpose of capping the retention was for all municipalities to receive the benefits of the future growth in tax payments that could result from an increase in the units of energy being sold. The State annual retention was capped at the fiscal year 1992 retention amount. That legislation also changed the method of payment of the taxes to a prepayment system. Technical language was required to distinguish the cash flow due to the payment schedule changes from the payment of the current year liabilities.

This bill replaces the technical language defining the maximum State retention of the municipal share of gross receipts and franchise taxes with an amount specified to be $245,000,000, to eliminate any ambiguity as to the permitted maximum State annual retention. Beginning with State fiscal year 1995, and in each nine years thereafter until the $245,000,000 is reduced to zero, the maximum State retention is reduced by $24,500,000, or 10%. For State fiscal year 2004 and thereafter, there shall be no State retention of municipal share gross receipts and franchise tax revenues.

Phases out and then eliminates the State retention of municipal share of public utilities gross receipts and franchise taxes.