June 30, 2009 - Tracking Legislation Important to the New Jersey Business Community
Governor Corzine Signs Fiscal 2010 State Budget
Governor Corzine signed into law A-4100 yesterday, the fiscal 2010 state budget bill, and related revenue bills. The $28.99 billion budget was balanced with $4.5 billion in spending cuts, $2 billion in federal stimulus funds and over $1.3 billion in tax increases. Since the Governor’s initial budget proposal in March, the spending plan was revised downward as the projected deficit grew due to tax collections that fell significantly short of estimates. Last week the members of the Legislature and Administration were able to increase the budget plan a bit when collections from the state tax amnesty program came in $500 million higher than expected. Most of the unanticipated revenues were dedicated to the restoration of property tax rebates for families with incomes up to $75,000.
For the last several months, the State Chamber has been opposing provisions in the budget that would increase taxes on the employer community. While these tax bills were signed into law yesterday, some of the bills have been amended to mitigate the damage. We have also been urging legislators and Administration to ensure that these tax increases expire at the end of the 2010 fiscal year.
Fiscal 2010 State Budget – A-4100 (Greenwald/D-6; Schaer/D-36; Pou/D-35): Appropriates $28.99 billion in state funds and $13.9 billion in federal funds for the state budget for fiscal year 2009-10. The State Chamber is concerned about the impact the budget will have on the employer community, especially small businesses, such as S Corporations, LLCs and Partnerships, as well as large companies that pay the corporate business tax, and insurance companies. The budget relies heavily on generating revenue from high-end earners, even though the income tax is not a stable revenue source.
Raising the Income Tax Rate – A-4102 (Watson Coleman/D-15): Assembly passed 42-35, Senate passed 21-18, Governor Corzine signed into law on June 30. Increases for one year the income tax rate from 6.37 percent to 8 percent on those earning between $400,000 and $500,000, increases the rate from 8.97 percent to 10.25 percent on income over $500,000, and increases the rate from 10.25 percent to 10.75 percent on those with incomes over $1 million. This bill also suspends for one year the property tax deduction for non-seniors earning more than $250,000. Those earning more than $150,000 but less than $250,000 are allowed a deduction of $5,000. These changes impact small business owners since many of them - S Corporations, LLCs or Partnerships - pay taxes through their owner’s income. Additionally, the bill taxes New Jersey lottery winnings that exceed $10,000.
Extending the Corporation Business Tax – A-4105 (Pou/D-35; Evans/D-35): Assembly passed 43-34, Senate passed 21-18, Governor Corzine signed into law on June 30. Extends for one year the 4 percent surtax that was imposed on businesses in 2006 as part of their overall corporation business tax (CBT) liability. This extension impacts our larger companies that employ thousands and pay millions in property and corporate taxes to the state and local municipalities. Additionally, the bill decouples the CBT from a federal tax provision that would have allowed businesses to defer their debt income.
Raising Tax on Insurance Premiums – A-4108 (Cryan/D-20; Coutinho/D-29): Assembly passed 42-35, Senate passed 21-18, Governor Corzine signed into law on June 30. Committees passed, scheduled for vote today. Increases for one year the tax rate on group accident and health insurance premiums paid by insurance companies from 1 percent to 1.35 percent. This bill also increases the premium tax on surplus lines carriers from 3 percent to 5 percent, makes a one-time transfer of $60 million from the surplus lines fund to the Health Care Subsidy Fund, and imposes a one-year 1.35 percent premium tax on dental service corporations. Raising the cost of health and dental insurance will ultimately lead to higher healthcare costs on consumers, making insurance less affordable and accessible.
COMMERCE
NJ Fair Debt Collection Practices Act – A-2493 (Burzichelli/D-3; Milam/D-1; DeAngelo/D-14; Evans/D-35): Assembly passed 61-17. Establishes state guidelines under which debt collectors may conduct business and institutes penalties, including punative damages, for violations. The State Chamber opposes this legislation because it duplicates existing federal law and regulations; it adds an additional burden on the employer community; and creates confusion and unintended consequences on employers and consumers.
ECONOMIC DEVELOPMENT
Allowing Non-Age-Restricted Housing – S-2577 (Sarlo/D-36; Vitale/D-19; Greenwald/D-6; Malone/R-30; Cruz-Perez/D-5): Assembly passed 46-28, sent to the Governor. The Governor's conditional veto language provides for a flat 20 percent affordable housing set-aside and allows municipalities to consider whether a conversion would be "detrimental to the public good." Additionally, the bill directs the courts to consider "the reasonableness of the decision of the approving board" when deciding an appeal.
Expanding the Neighborhood Revitalization State Tax Credit Act – A-2623 (McKeon/D-27; Jasey/D-27; Evans/D-35): Senate passed 26-12, sent to the Governor. Revises the Neighborhood Revitalization State Tax Credit Act by extending eligibility to areas that are adjacent to neighborhoods and participating in the Neighborhood Revitalization Tax Credit Program The program is designed to foster the revitalization of areas of New Jersey’s distressed cities. The adjacent area must share similar socioeconomic characteristics with the eligible neighborhood, as determined by the Commissioner of Community Affairs.
NJ Economic Stimulus Act of 2009 – A-4048 (Roberts/D-5; Coutinho/D-29; Diegnan/D-18; Wisniewski/D-19; Chivukula/D-17; Spencer/D-29): Assembly passed 50-27, Senate passed 24-12, sent to the Governor. This bill is intended to stimulate economic growth throughout the state by modifying redevelopment, affordable housing and higher education financing laws, and by expanding incentive programs.
Specific provisions include allowing a municipality to establish a local Economic Redevelopment and Growth Grant program to encourage redevelopment projects by reimbursing developers for project financing gaps, as well as expanding the Urban Transit Hub Tax Credit Program by lowering the capital investment threshold from $75 million to $50 million, expanding the credit to light rail stations, revising forfeiture requirements, and permitting owners to meet employment requirements by aggregating employments of tenants. The bill also expands the Technology Business Tax Certificate Transfer Program, which allows unprofitable technology and biotechnology businesses to sell their unused net operating losses (NOLs) and R&D tax credits. The bill suspends the 2.5 percent COAH fee and allows a refund for commercial and industrial projects that have been issued either preliminary approval or final approval before July 1, 2010. The bill allows certain municipalities to impose a tax on the rental of motor vehicles within designated industrial zones to fund redevelopment projects and allows higher education institutions to enter into agreements with private entities or municipalities to finance higher education projects.
While the bill contains significant elements that will benefit the state, our concerns with provisions in the bill pertaining to new taxes and fees, no-bid contracts, prevailing wage mandates, and project labor agreements will ultimately diminish the value of the legislation.
ENERGY
Solar, Wind and Biomass Energy Generation on Farms – S-1538 (Smith/D-17; Bateman/R-16): Senate passed 37-0. Allows the owner of a preserved farm to install and operate solar, wind or biomass energy generation facilities for the purpose of generating power or heat. This legislation will provide New Jersey farmers with the ability to integrate renewable energy into their agricultural operations and allow excess energy to be sold to the grid under limited terms.
Mandated Prevailing Wage on Energy Projects – A-3372 (Barnes/D-18; Diegnan/D-18; Egan/D-17; Evans/D-35): Senate passed 26-9, sent to the Governor. Requires businesses to pay prevailing wage on any project receiving more than $11,892 in financial assistance from the state Board of Public Utilities. This legislation will ultimately drive up costs for energy efficiency or renewable energy projects by mandating higher union-scale prevailing wages to contractors.
GOVERNMENT REFORM
Adopting and Distributing Constitution and Bylaws – S-930 (Weinberg/D-37; Allen/R-7; Greenstein/D-14; Handlin/R-13; Vainieri Huttle/D-37; Johnson/D-37; Vandervalk/R-39): Assembly passed 73-0, Senate passed 35-4, sent to the Governor. Requires county political party committees to adopt and distribute a constitution and bylaws, and file a certified list of committee members with the county clerk. The constitution and bylaws must also include procedures for removing a committee officer who is unwilling or unable to serve his or her office in the county committee.
Transferring Municipal Tax Assessment to the County – S-2356 (Sweeney/D-3; Oroho/R-24; Burzichelli/D-3; Riley/D-3): Senate passed 25-7, Assembly passed 55-23, sent to the Governor. Establishes a pilot program in Gloucester County for the transfer of the municipal property tax assessment function to a county assessor. As amended by the committee, the bill requires the state to reimburse each municipality for the costs associated with the revaluation from either the Sharing Available Recourses Efficiently Fund or the Consolidation Fund. The bill also requires the Local Unit Alignment, Reorganization and Consolidation Commission to study this program and issue a report no later than February 1 of the sixth year of the pilot program.
Permits Municipal Absentee Policies – A-2784 (McKeon/D-27; Malone/R-30; Coutinho/D-29; Johnson/D-37; Cruz-Perez/D-5): Senate passed 38-0, sent to the Governor. Permits municipalities to establish strict absentee policies for members of authorities, boards and commissions established by the municipalities in order to better enable these entities to function. The bill also requires municipalities to compile and maintain a roster of its local authorities, boards and commissions in order to provide information to residents interested in serving their municipality. It also sets forth a model form for municipalities to provide to those interested in serving on a municipal authority, board or commission.
LABOR
Expanding Employment Protection to Emergency Responders: A-1263 (Moriarty/D-4; Burzichelli/D-3; Love/D-4): Assembly passed 76-3. The Emergency Responders Employment Protection Act would provide employment protection for volunteer emergency responders who, because they are providing emergency services in response to a state of emergency or emergency call, fail to report to work.
TAXATION
Improving NJ’s Corporate Governance Laws – A-2884 (Albano/D-1; DeAngelo/D-14; Love/D-4; Diegnan/D-18; Watson Coleman/D-15; Lampitt/D-6) and A-2885 (Milam/D-1; Love/D-4; Albano/D-1; Diegnan/D-18; Watson Coleman/D-15; Lampitt/D-6): Senate passed A-2884 by a vote of 38-0 and A-2885 by a vote of 37-1. Both bills were sent to the Governor. The bills are designed to update New Jersey's corporate governance laws to make it easier for corporations to conduct business in the state. Many of the legislative changes proposed are modeled on Delaware General Corporation Law, such as increasing the options by which a corporation can merge, acquire or consolidate with a non-incorporated business.
Extending Investments in the State’s Pension Funds – S-2552 (Sweeney/D-3; O'Toole/R-40; Schaer/D-36; Gusciora/D-15): Assembly passed 65-12, sent to the Governor. Provides the Division of Investment and the State Investment Council with more investment options for the state's Cash Management and pension funds for one year. The bill is intended to provide liquidity to New Jersey community banks and to provide the Director of the Division of Investment with the flexibility to safeguard the value of the fund portfolios.
