New Jersey-2010-A3878-Introduced

An Act providing a credit against the corporation business tax and the gross income tax for certain small businesses that receive qualifying loans, supplementing P.L.1945, c.162 (C.54:10A-1 et seq.) and chapter 4 of Title 54A of the New Jersey Statutes.

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

1. As used in section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill):

"Financial institution" means a State or federally chartered bank, savings bank, savings and loan association or credit union.

"Qualifying loan" means a loan made by a financial institution to a small business in the amount of no less than $10,000 and no greater than $500,000 for the small business to either hire new employees, make payroll payments to current employees, or make capital investments in that small business.

"Small business" means a business which has its principal place of business in the State, is independently owned and operated, and qualifies as a small business concern within the meaning of the federal "Small Business Act," 15 U.S.C. s.631 et seq.

2. a. A small business shall be allowed a credit against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), in an amount equal to ten percent of the small business's liability for such tax for a privilege period that the small business received a qualifying loan from a financial institution.

b. The order of priority of the application of the credit allowed under this section and any other credits allowed by law shall be as prescribed by the director. The amount of the credit applied under this section against the tax imposed pursuant to section 5 of P.L.1945, c.162 for a privilege period, together with any other credits allowed by law, shall not exceed 50 percent of the tax liability otherwise due and shall not reduce the tax liability to an amount less than the statutory minimum provided in subsection (e) of section 5 of P.L.1945, c.162. An unused credit may be carried forward, if necessary, for use in the first privilege period following the privilege period for which the credit is allowed.

c. The director shall develop, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), criteria for determining eligibility under this section, in consultation with the State Treasurer and the New Jersey Economic Development Authority, including proof that the small business received a qualifying loan and used the proceeds of the qualifying loan exclusively for one or more of the purposes of a qualifying loan under this act.

3. As used in section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill):

"Financial institution" means a State or federally chartered bank, savings bank, savings and loan association or credit union.

4. a. A small business shall be allowed a credit against the tax otherwise due under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., in an amount equal to ten percent of the small business's liability for such tax for a taxable year during which the small business received a qualifying loan from a financial institution.

b. If the credit allowed under this section reduces the tax liability otherwise due to zero, any amount of credit remaining shall be paid to the small business as a refund of an overpayment of tax pursuant to N.J.S.54A:9-7, provided however, that subsection (f) of that section, concerning the allowance of interest, shall not apply. The director shall determine the form and manner by which a taxpayer shall apply for and receive a refund of an overpayment pursuant to this section.

c. The director shall develop, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), criteria for determining eligibility under this section, in consultation with the State Treasurer and the New Jersey Economic Development Authority, including proof that the small business received a qualifying loan from a financial institution and used the proceeds of the qualifying loan exclusively for one or more of the purposes of a qualifying loan under this act.

5. This act shall take effect immediately. Sections 1 and 2 shall apply to privilege periods beginning after the date of enactment. Sections 3 and 4 shall apply to taxable years beginning after the date of enactment.

STATEMENT

This bill gives small businesses, as defined in the bill, a ten percent credit against their corporate business tax liability in the privilege period, or gross income tax liability in the taxable year, respectively, in which the small business received a qualifying loan from a financial institution, as defined in the bill, in an amount of no less than $10,000 and no greater than $500,000 for the small business to either hire new employees, make payroll payments to current employees, or make capital investments in that small business. The purpose of this bill is to encourage eligible small businesses to take out loans for one of the aforementioned purposes. The Director of the Division of Taxation is required to develop, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), criteria for determining eligibility, in consultation with the State Treasurer and the New Jersey Economic Development Authority, including proof that the small business received a qualifying loan from a financial institution and used the amount of the qualifying loan for one of the aforementioned purposes under this bill.