Legislative Update 7/1/2011
Friday, 01 July 2011
July 1, 2011 - Tracking Legislation and Other Items Important to the Business Community:
Governor Christie Signs Fiscal 2012 State Budget On Thursday, June 30th, Governor Christie signed into law S-4000, the Fiscal 2012 State Budget bill, which appropriates $29.7 billion. Earlier in the week the Democratic majority crafted their own budget, which appropriated $30.6 billion, and included additional money for their priorities. Governor Christie used his line item veto to trim $900 million from the Democrats' budget, saying that the majority party's revenue estimates were too high.
The Legislature passed A-4202, which increases the income tax rate from 8.97 percent to 10.75 percent on taxpayers with income greater than $1 million for 2011 and 2012. Governor Christie vetoed this measure.
The NJ Chamber strongly opposed this legislation. This income tax rate increase would impact business owners, as well as individual taxpayers, since many small businesses, such as S Corporations, LLCs, sole proprietorships and partnerships, pay taxes through their owner's income. This tax hike would discourage business owners from creating and retaining jobs or expanding their investments in New Jersey.
Further, the income tax is an extremely volatile revenue source and relying on income from high earners has contributed to the state's budget shortfall. New Jersey cannot depend on income from highearners as a predictable revenue stream.
New Jersey already has one of the highest top income tax rates in the nation, and increasing it would further add to the state's competitive disadvantage. New Jersey's neighboring states, such as Pennsylvania and Delaware, have lower top rates, and New York's top rate is scheduled to expire at the end of 2011, which would result in New Jersey having the highest top rate in the region.
The NJ Chamber supports the tax reforms included in the budget and appreciates the work of the Legislature and the Christie Administration to improve New Jersey's business tax climate and enhance our state's competitiveness.
Tax reforms and incentives in the budget include:
S-2981 (Greenstein/ D-14; Sarlo/D-36; Coutinho/D-29; Coughlin/D-19; Burzichelli/D-3) - The minimum tax to be paid by S-corporations is reduced by 25 percent. This change will provide relief because these businesses pay both the minimum tax and the income tax.
S-2980 (Whelan/D-2; Sarlo/D-36; Lampitt/ D-6; Prieto D-32; Barnes/D-18; Chivukula/D-17) - The Research and Development credit to offset corporate tax liability is increased from 50 percent to 100 percent.
The Transitional Energy Facility Assessment (TEFA) is phased out over three years beginning in 2012. This "temporary" assessment was scheduled to end in 2002 but had been extended every year.
Funding for the Technology Business Tax Certificate Transfer Program is increased from $30 million to $60 million. This program enables unprofitable technology and biotechnology companies to sell their unused net operating losses and research and development credits.
The Governor's initial budget proposal included additional tax reforms - struck from the final budget - which the NJ Chamber will continue to advocate for:
Exempt from sales tax the cost of installation and support of electronically delivered business software. Current law already exempts from sales tax the purchase of electronically delivered software for business use.
Increase the estate tax exemption from $675,000 to $1 million. This change will increase retention and attraction of small and family owned businesses and bring New Jersey more in line with other states.
For additional information about the state budget, contact Mary Ellen Peppard.
LANDMARK PENSION AND BENEFITS REFORM SIGNED INTO LAW
Governor Christie signed into law historic pension and benefits reform P.L.2011, c.78 (S-2937 - Sweeney/D-3; Pennacchio/R-26; Greenwald/D-6; O'Scanlon/R-12): This new law makes changes to pension and health care benefits for public employees. Changes include establishing new pension committees; increasing employee contribution rates; suspending the automatic cost-of-living adjustments to retirees; increasing the membership of the State Investment Council; and increasing the amount that public employees are required to contribute toward their health care benefits coverage based upon level of compensation. This landmark legislation will begin the process of stabilizing the state's fiscal health.
MINIMIZING THE UNEMPLOYMENT INSURANCE TAX INCREASE SIGNED INTO LAW
Governor Christie signed into law a measure that avoids a steep tax hike on business A-3819 (Egan/D-17; Evans/D-35; Pou/D-35; Wisniewski/D-19): Governor signed on June 30. This new law phases in an automatic Unemployment Insurance (UI) tax increase over a three year period, reducing the tax increase this year on the employer community. The law also modifies the UI trust fund reserve ratios which are used to set employer UI tax rates in such a manner so that larger reserves will be required in the UI trust fund than under the current law before employer UI taxes are reduced.
Modernizing Plan Approvals - S-483 (Lesniak/D-20; Coutinho/D-29; Quigley/D-32; Wagner/D-38; Watson Coleman/D-15): Senate passed 36-0. Assembly passed 73-2-1 and sent to Governor. This bill amends the Municipal Land Use Law by expanding the availability of General Development Plan approvals to projects with a nonresidential floor area of 150,000 square feet or more or with 100 residential dwelling units or more. It is for sites of 100 acres or less in smart growth areas. This change reflects the current necessity for vertical development.
Development Tax Moratorium - S-2974 (Lesniak/D-20; Sweeney/D-3; Coutinho/D-29; Bucco/R-25): Senate passed 34-0. Assembly passed 78-0 and sent to Governor. This bill extends the moratorium on the 2.5 percent fee on non-residential construction projects for two years (until July 1, 2013). The bill also requires the return of any fees already paid, provided the funds have not been spent by the municipality on affordable housing projects.
Senate Economic Growth Committee
Energy Incentives - A-906 (Chivukula/D-17; Greenstein/D-14; Vainieri Huttle/D-37): Senate passed 37-0 and sent to Governor. This bill provides equal opportunity for businesses that pay societal benefits charges to apply for certain energy-related incentives and funding.
RGGI - S-2946 (Sweeney/D-3; Smith, B./D-17; McKeon/D-27; Chivukula/D-17; Stender/D-22; Barnes/D-18; Gusciora/D-15; Vainieri Huttle/D-37): Senate passed 21-18. Assembly passed 43-34 and sent to Governor. This bill requires participation in the Regional Greenhouse Gas Initiative (RGGI). The NJ Chamber opposes this measure because the two-year-old RGGI program was not effective in cutting emissions of carbon dioxide and the program ultimately contributed to higher energy prices for residents and businesses in New Jersey. Additionally, only ten northeastern states were part of RGGI, while states like our neighboring Pennsylvania declined. Since Pennsylvania relies more on fossil fuels - such as dirty coal - energy costs there are lower, making it more business friendly than New Jersey.
Hydraulic Fracturing - S-2576 (Gordon/D-38; Greenstein/D-14; Bateman/R-16; Wagner/D-38; Gusciora/D-15; Vainieri Huttle/D-37; Conaway/D-7; Ramos/D-33): Senate passed 33-1. Assembly passed 58-11 and sent to Governor. This bill prohibits the drilling for natural gas using a process called hydraulic fracturing. This bill was originally introduced and reported from committee as a "moratorium" bill, requiring that an EPA study be completed. The bill was amended to "ban" the practice of hydraulic fracturing.
Assembly Health and Senior Services Committee
Mandated Benefits - A-2666 (Vanieri Huttle/D-37; Greenstein/D-14; Munoz, N./R-21; Ramos/D-33): Committee passed. This bill requires health insurers to cover oral cancer medications on the same basis as intravenous cancer medications. The bill also prohibits a contract or policy from imposing an increase in patient cost sharing for either intravenous or oral cancer medications that are covered under the contract or policy as of the effective date of the bill. This mandate will increase health care costs for employers, who are already struggling to afford their health insurance premiums.
Mandated Benefits - A-3868 (Conaway/D-7; Vainieri Huttle/D-37; Conners/D-7; Ramos/D-33): Committee passed. Assembly passed 63-10-5. This bill requires health insurance carriers that participate in the Individual Health Coverage Program and the Small Employer Health Benefits Program, and SHBP and SEHBP, to provide coverage for off-label use of a drug if the drug is recognized as being medically appropriate for the specific treatment for which it has been prescribed. The NJ Chamber is concerned that the bill will increase health care costs for the employer community.
Accountable Care Organization - S-2443 (Vitale/D-19; Whelan/D-2): Assembly passed 74-2-2. Senate passed 29-9 and sent to Governor. This bill establishes a Medicaid Accountable Care Organization Demonstration Project in the Department of Human Services. It is an innovative approach that increases health care quality in New Jersey, drives collaboration among health care professionals and has the potential to greatly reduce costs.
Employee leasing companies - S-2164 (Sweeney/D-3; Burzichelli/D-3; Prieto/D-32; Diegnan/D-18): Assembly passed 75-0. Senate passed 38-0 and sent to Governor. This bill makes various changes to several laws that affect the regulation and business operations of employee leasing companies, or professional employer organizations (PEOs). Employee leasing companies are business entities that manage human resources, employee benefits, health insurance, and payroll and workers' compensation for small businesses.
Consumer Benefits - A-3133 (Riley/D-3; Coughlin/D-19; Burzichelli/D-3): Assembly passed 77-0. This bill permits the use of rebates, allowances, concessions, or benefits for motor fuel purchases on credit, debit or rewards cards. Currently New Jersey is the only the only state in the region that does not allow consumers to earn discounts on gasoline through frequent shopper cards or debit cards. This bill provides New Jersey consumers with the same access to these promotions as other states.
Call the State Chamber Government Relations Department at (609) 989-7888 with questions or comments.