MILAM BILL TO MODIFY TAX FORMULA ADVANCES

Corporate tax reform legislation sponsored by Assembly Budget Chairman Louis D. Greenwald, Assemblyman Matthew W. Milam and Assemblywoman L. Grace Spencer to create jobs and economic growth was released Tuesday by an Assembly panel.
The bill (A-1676) modifies the business tax formula used to determine the corporate income subject to tax by the state from a three-factor formula to a single sales factor formula.
It was released unanimously by the Assembly Budget Committee chaired by Greenwald as part of the Legislature’s “Back to Work NJ’ job creation and economic development initiative.
“Anything we can to give businesses the ability to hire, expand and invest in New Jersey is a smart approach,” said Milam (D-Atlantic/Cape May/Cumberland). “We need to make certain New Jersey businesses have the confidence needed to spark economic development. This change will help provide that confidence at a time when businesses need it most.”
The portion of the corporate income subject to tax by a state is determined by the proportion of activity in the state to the total activity of the corporation.
The New Jersey corporation business tax employs a three-fraction formula that apportions a share of a corporation’s income to this state based on a weighted average of the following fractions a corporation’s property in this state over the corporation’s total property, a corporation’s sales in this state over the corporation’s total sales and the corporation’s payroll in this state over the corporation’s total payroll.
Currently, the sales fraction accounts for 50 percent of the apportionment and the property and payroll fractions each account for 25 percent of the apportionment.
This bill replaces the three-factor formula with a single sales factor formula.
The change is phased-in over three years, beginning after July 1, 2010.