ASSEMBLY, No. 602

STATE OF NEW JERSEY

Introduced Pending Technical Review by Legislative Counsel

PRE-FILED FOR INTRODUCTION IN THE 1996 SESSION

By Assemblyman LUSTBADER

An Act providing for the exemption of certain activities from taxation under certain tax laws of the State of New Jersey, amending P.L.1945, c.163, and supplementing P.L.1946, c.174 (C.54:10B-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. Section 3 of P.L.1945, c.163 (C.54:10A-3) is amended to read as follows:

    3. The following corporations shall be exempt from the tax imposed by this act:

    (a) Corporations subject to a tax [assessed upon the basis of gross receipts, or] on insurance premiums collected;

    (b) Corporations which operate regular route autobus service within this State under operating authority conferred pursuant to R.S.48:4-3, provided, however, that such corporations shall not be exempt from the tax on net income imposed by section 5(c) of P.L.1945, c.162 (C.54:10A-5);

    (c) Railroad, canal corporations, savings banks, production credit associations organized under the Farm Credit Act of 1933, agricultural cooperative associations incorporated or domesticated under or subject to chapter 13 of Title 4 of the Revised Statutes and exempt under Subtitle A, Chapter 1F, Part IV, Section 521 of the federal Internal Revenue Code (26 U.S.C.§521), or building and loan or savings and loan associations;

    (d) Cemetery corporations not conducted for pecuniary profit or any private shareholder or individual;

    (e) Nonprofit corporations, associations or organizations established, organized or chartered, without capital stock, under the provisions of Title 15, 16 or 17 of the Revised Statutes, Title 15A of the New Jersey Statutes or under a special charter or under any similar general or special law of this or any other State, and not conducted for pecuniary profit of any private shareholders or individual;

    (f) Corporations subject to a tax under the provisions of P.L.1940, c.4 (C.54:30A-16 et seq.), P.L.1940, c.5 (C.54:30A-49 et seq.), or P.L.1991, c.184 (C.54:30A-18.6 et al.) or any statute or law imposing a similar tax or taxes;

    (g) Nonstock corporations organized under the laws of this State or of any other state of the United States to provide mutual ownership housing under federal law by tenants, provided, however, that the exemption hereunder shall continue only so long as the corporations remain subject to rules and regulations of the Federal Housing [Authority] Administration and the [Commissioner of the] Federal Housing [Authority] Commissioner holds membership certificates in the corporations and the corporate property is encumbered by a mortgage deed or deed of trust insured under the National Housing Act (48 Stat. 1246) as amended by subsequent Acts of Congress. In order to be exempted under this subsection, corporations shall annually file a report on or before August 15 with the commissioner, in the form required by the commissioner, to claim such exemption, and shall pay a filing fee of $25.00;

    (h) Corporations not for profit organized under any law of this State where the primary purpose thereof is to provide for its shareholders or members housing in a retirement community as same as defined under the provisions of the "Retirement Community Full Disclosure Act," P.L.1969, c.215 (C.45:22A-1 et seq.); [and]

    (i) Corporations which are licensed as insurance companies under the laws of another state, including corporations which are surplus lines insurers declared eligible by the Commissioner of Insurance pursuant to section 11 of P.L.1960, c.32 (C.17:22-6.45) to insure risks within this State;

    (j) A corporation or other entity which qualifies as a grantor trust under sections 671 et seq. of the Internal Revenue Cod of 1986, 26 U.S.C.§671 et seq., or any corresponding provision of any subsequent law or code, that holds mortgages, mortgage-backed securities, or any combination of mortgages and mortgaged-backed securities; and

    (k) A corporation or other entity which qualifies as a Real Estate Mortgage Investment Conduit (REMIC) under sections 860A et seq. of the Internal Revenue Code of 1986, 26 U.S.C.§860A et seq., or any corresponding provision of any subsequent Internal Revenue law or code.

(cf: P.L.1993, c.338, s.1)

    2. (New section) a. A trust or other entity which qualifies as a grantor trust under sections 671 et seq. of the Internal Revenue Code of 1986, 26 U.S.C.§671 et seq., or any corresponding provision of any subsequent Internal Revenue law or code, that holds mortgages, mortgage-backed securities, or any combination of mortgages and mortgage-backed securities, shall not be subject to any tax under the "Financial Business Tax Law (1946)," P.L.1946, c.174 (C.54:10B-1 et seq.).

    b. A Real Estate Mortgage Investment Conduit (REMIC) under sections 860A et seq. of the Internal Revenue Code of 1986, 26 U.S.C. §860A et seq., or any corresponding provision of any subsequent Internal Revenue law or code, shall not be subject to any tax under the "Financial Business Tax Law (1946)," P.L.1946, c.174 (C.54:10B-1 et seq.).

    3. (New section) a. A trust or other entity which qualifies as a grantor trust under sections 671 et seq. of the Internal Revenue Code of 1986, 26 U.S.C.§671 et seq., or any corresponding provision of any subsequent Internal Revenue law or code, that holds mortgages, mortgage-backed securities, or any combination of mortgages and mortgage-backed securities, shall not be subject to any tax under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq.

    b. A Real Estate Mortgage Investment Conduit (REMIC) under sections 860A et seq. of the Internal Revenue Code of 1986, 26 U.S.C. §860A et seq., or any corresponding provision of any subsequent Internal Revenue law or code, shall not be subject to any tax under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq.

    4. This act shall take effect immediately.

STATEMENT

    This bill provides grantor trusts which qualify under Internal Revenue Code sections 671 et seq. and Real Estate Mortgage Investment Conduits (REMICs) which qualify under Internal Revenue Code sections 860A et seq. exemption from taxation under the Corporation Business Tax Act (1945), the "Financial Business Tax Law (1946)," and the "New Jersey Gross Income Tax Act."

    Financial institutions and other organizations in New Jersey have been reluctant to establish trusts or REMICs in New Jersey, the assets of which consist of pools of mortgages and mortgage-backed securities, because the trusts and REMICs, under current laws, may be subject to taxation. Other states, including New York, have enacted legislation which exempts grantor trusts and REMICs from taxation. As a result, these trusts and REMICs have been established in those states.

    The legislation is not intended to adversely impact in any way the current law in New Jersey with respect to the taxability of grantor trusts or to alter the tax consequences to holders of interests in REMICs or grantor trusts, including those trusts that hold mortgages and mortgage-backed securities.

Exempts certain entities from taxation under certain tax laws of New Jersey.