New Jersey legislators have reached a compromise that offers tax breaks for major New Jersey companies, including easing the state’s treatment of how foreign-earned income is taxed, according to two business lobbyists involved in the negotiations. It is trying to develop a comprehensive legislative plan.
State legislators have been active on Gov. Phil Murphy’s (Democrat) proposed changes to the corporate business tax. reduce the burden Some of the largest companies operating in the state, including Johnson & Johnson, Pfizer Inc., and Anheuser-Busch. The effort is intended to make New Jersey more competitive with neighboring states such as Pennsylvania, which just lowered its corporate tax rate earlier this year.
The draft follows months of negotiations between the New Jersey Department of Taxation, business leaders in the New Jersey Business & Industry Association and the state Chamber of Commerce to change the state’s corporate business tax while preserving revenue. It’s part of a deal that’s been done. neutral.
The plan does not directly address the state’s current corporate tax rate of 11.5%, but according to business chief government affairs officer Chris Emigholz, the amount companies pay for foreign income and the state’s is expected to reduce its net operating loss treatment. Associations that have been involved in the preparation of the proposal.
“It’s what we’ve wanted for years. It’s what they’ve wanted for years,” Emiholz said, referring to the administration. It’s not like I’m putting it in, but I’m getting enough of both.”
The Treasury Department is still discussing proposals with lawmakers to find potential sponsor bills, Emiholz said.
Murphy’s office and an aide to the Democratic Senate Budget Committee declined to comment on the pending bill.
Changes in GILTI
The proposal would significantly reduce the amount of state tax income earned by U.S.-controlled foreign corporations, a category of foreign income created by the 2017 federal tax code known as Global Intangible Low Taxable Income (GILTI). is called
New Jersey is one of many states that tax this. type of incomeand have the highest tax rates of any of these states. New Jersey is currently directing taxpayers to exempt 50% of GILTI, while neighboring New York exempts him from 95% of its tax base. The proposed change would align the two state exemptions on this issue.
“I don’t think it’s appropriate for states to really pursue foreign income like we do. New Jersey is currently pursuing 50% of GILTI,” said Emigholz.
GILTI was developed as follows. A new category of foreign income under tax law Section 951A Discourage multinationals, especially technology and pharmaceutical companies, from shifting revenues from patents and trademarks to controlled foreign companies based in low-tax countries. Under federal law, a multinational company can face federal taxation of 10.5% of him if a foreign company under its control pays less than 13.125% of his taxes offshore.
Additional charge Sunset
That’s because the pending bill already supports Murphy’s ability to eliminate New Jersey’s corporate tax surcharge in 2023.
“A deal is a deal,” Murphy said. Bloomberg interview Early this month.
In 2018, New Jersey’s corporate tax rate “temporarily” went from 9% to 11.5%. It was to be gradually reduced to 10.5% in 2020 and back to 9% in 2021. Instead, the temporary surcharge, which applies to corporate profits over $1 million, was extended by lawmakers in 2020 until the end of 2023. Other states have double-digit corporate tax rates.
Michael Egenton, executive vice president of government relations at the New Jersey Chamber of Commerce, who was also involved in negotiating the draft, said, “If there’s such a divide between us and the surrounding states, it’s going to be a big problem. will be,” he said. Specification.
A progressive statewide coalition has already pushed back plans to allow state leaders to scrap the additional tax, calling it a $600 million tax cut for businesses.
The surcharge is paid by the top 2% of the richest businesses operating in New Jersey. This includes global companies such as Amazon.com Inc. and Walmart Inc. that make profits in New Jersey but are not headquartered here.
“This is a misguided tax plan,” said Sheila Leinertson, senior policy analyst at the New Jersey Policy Perspective. “At a time when people are struggling to get through the hard times, or face the possibility of another recession, we believe that those with little income will feel the effects of the recession first and recover last. So when you donate $600 million in general income, who’s got the bag?”