Budget hearings this week in New Jersey highlighted how major corporations are utilizing a law led by the New Jersey Business & Industry Association (NJBIA) to benefit from revised corporate tax policies. The 2023 legislation, signed by Governor Phil Murphy, altered the treatment of net operating losses (NOLs) and global intangible low-taxed income (GILTI) under state law.
During a session focused on revenue updates from the state's April 15 tax returns, Senate Budget Chair Paul Sarlo questioned the downward adjustment in Corporation Business Tax (CBT) projections from February to May. "Does that have something to do with the net operating loss law that some corporations have taken advantage of?" Sarlo asked Oscar Mendez, an analyst from the Office of Legislative Services. Mendez confirmed, "That is right on the dot, chairman."
Treasurer Elizabeth Muoio provided budget committees with a revenue update indicating a reduction in anticipated CBT collections by $508.5 million. NJBIA Chief Government Affairs Officer Christopher Emigholz noted that with the addition of a 2.5% Corporate Transit Fee (CTF), total revenue from corporate business taxes is expected to be $745.9 million less for the current fiscal year.
The 2023 reform, sponsored by Sarlo and Assemblywoman Eliana Pintor Marin, allows combined businesses to share NOLs, which was previously not permitted. "Previous law did not allow the pooling of NOLs between combined businesses resulting in the inability to fully utilize them," said Emigholz.
Before this reform, New Jersey taxed income earned abroad by U.S.-controlled corporations more aggressively than neighboring states like Pennsylvania, which does not tax GILTI at all. Meanwhile, New York and Connecticut only tax 5% of GILTI. The new law aligns New Jersey's policy with these states by allowing corporations to deduct 50% of GILTI from their tax base.
Emigholz expressed satisfaction with how these changes are benefiting corporations: "We are very happy that our corporations, who provide many jobs in the state and around the country and galvanize our economy, are taking advantage of these reforms." He also acknowledged ongoing collaboration with Governor Murphy's administration: "We also continue to thank the Murphy administration for working with the business community on these complex rules."
