SENATE ENVIRONMENT COMMITTEE

STATEMENT TO

SENATE, No. 1525

with committee amendments

STATE OF NEW JERSEY

DATED: DECEMBER 16, 1996

      The Senate Environment Committee favorably reports Senate Bill No. 1525 with committee amendments.

      Senate Bill No. 1525 amends the "Spill Compensation and Control Act," to change the way the tax imposed upon certain owners or operators of major facilities is calculated.

      The act currently imposes a tax on facilities that produce, refine, store, handle transfer or transport hazardous substances, to ensure compensation for cleanup costs and damages due to the discharge of petroleum products and other hazardous substances. The tax is capped for a taxpayer that paid the tax in 1986 at 125% of the tax due for the 1986 calender year plus $0.0025 per barrel of hazardous substance transferred.

      This bill would change that calculation for certain taxpayers. As amended by the committee, for taxes due after January 1, 1996, in computing 125% of taxes due and payable by the taxpayer during the 1986 tax year, a taxpayer would include in the 1986 base only taxes arising out of the operations of major facilities that caused the taxpayer to incur a tax liability in 1986 and continue to cause the taxpayer to incur a liability during the current year.

      Also, the bill changes the tax rate for any transfer of a hazardous substance that is, or contains, elemental phosphorus from the greater of $0.015 per barrel or 1% of fair market value plus $0.0025 per barrel to a flat $0.015 per barrel. In computing taxes due and payable by the taxpayer during the 1986 tax year for purposes of determining the 125% of 1986 liability cap amount, the 1986 taxes for any transfer that is, or contains, elemental phosphorus will be recalculated at a rate of $0.015 per barrel.

      The change in the calculation of the 1986 base amount will reduce the 1986 base amount, which will reduce the current cap amount. No current inventory of facilities taken out of service since 1986 is available for determining the reduction in revenue.

      The limitation on the tax accessed for substances that are, or that contain, elemental phosphorus is necessary due to the relatively few producers of this material and the competitive nature of the industry.

      The cap recalculation is being made in order to fix an inequity in the manner in which the law has been implemented. It was represented to the committee that certain taxpayers who had more than one major facility in 1986 and who filed separate tax forms for each facility were able to obtain lower overall caps when one of their facilities closed because the cap was calculated on a per facility basis. The committee was told that this is not the case for taxpayers who filed combined tax returns for multiple facilities and who have closed a facility. These taxpayers must now pay the tax based on a cap that includes the closed facility.

      The committee does not have sufficient information to determine the fiscal impacts of the recalculation of the 1986 cap. In order to limit those impacts, and to eliminate an incentive to close a facility in order to get a tax benefit, the committee limited the cap provisions to those taxpayers that filed joint tax returns for multiple major facilities since 1986 and who have closed one or more of those facilities prior to January 1, 1996. The committee amendments also change the retroactive provisions of the bill from January 1, 1995 to January 1, 1996 and make a technical change.

      As amended by the committee, this bill is identical to Assembly Bill No. 1668 as amended by committee.