N.J. Admin. Code § 18:7-3.22

Current through Register Vol. 56, No. 21, November 4, 2024

Section 18:7-3.22 - New jobs investment tax credit

(a) Corporate taxpayers are allowed a credit against the portion of the corporation business tax that is attributable to, and the direct consequence of, the taxpayer's qualified investment in a new or expanded business facility in this State which results in the creation of new jobs.

1. For a small business taxpayer, as defined in N.J.S.A. 54:10A-5.5, at least five new jobs must be created. For any other taxpayer, at least 50 new jobs must be created. The median annual compensation for the new jobs must be at least $ 27,000, adjusted for inflation beginning January 1, 1994, as provided in N.J.S.A. 54:10A-5.6e. The employer should rank the new employees by annual compensation. If the middle employee has compensation less than $ 27,000, the lowest ranking jobs should be deleted from the list until the median of the remaining list is at least $ 27,000. (If there is an even number on the list, the top half must be greater than $ 27,000.) The number of employees on this revised list is the number of new jobs created for purposes of this credit.

2.For privilege periods beginning on and after January 1, 2002, the eligibility standards for the New Jobs Investment Tax Credit Act have been expanded to include small or mid-size business taxpayers. For tax year 2002 such taxpayers shall have annual payroll of $ 5,000,000 or less and annual gross receipts of not more than $ 10,000,000. Such amounts will be adjusted annually for inflation commencing January 1, 2003, by an annual inflation adjustment factor, which prescribed amount shall be rounded to the next lowest multiple of $ 50.00. "Annual inflation adjustment factor" means the factor calculated by dividing the consumer price index for urban wage earners and clerical workers for the nation, as prepared by the United States Department of Labor for September of the calendar year prior to the calendar year in which the tax year begins, by that index for September of the calendar year two years prior to the calendar year in which the tax year begins.

i. In addition for privilege periods beginning on and after January 1, 2002, for eligible taxpayers the applicable new jobs factor for five new jobs is 0.01. For each five additional new jobs over the additional five, up to 100 total new jobs, the applicable new jobs factor of 0.01 shall be increased by adding to it 0.01, up to a maximum new jobs factor 0.20.

(b) The amount of the credit shall be determined by multiplying the amount of the taxpayer's qualified investment, as defined in 54:10A-5.8, in property purchased for business relocation or expansion, as defined in 54:10A-5.5, by the taxpayer's new job factor determined under 54:10A-5.9.

1. The amount of the credit shall be taken over a five year period, at the rate of one-fifth of the amount per taxyear, beginning with the tax year in which the taxpayer places the qualified investment into service or use in this State.

(c) The aggregate annual credit allowed for a tax year shall be an amount equal to the sum of one-fifth of the allowable credit for qualified investment placed into service or use during a prior tax year, plus one-fifth of the allowable credit for qualified investment placed into service or use during the current tax year.

1. The amount of the credit shall not reduce the tax liability by more than 50 percent of that portion of the taxpayer's tax liability otherwise due for all tax years which is attributable to and the direct result of the taxpayer's qualified investment.

2. The amount of the tax credit shall not reduce the tax liability below the statutory minimum tax provided at N.J.S.A. 54:10A-5.7b.

3. If the credit exceeds the limitations in (c) through (c)2 above, the amount of credit remaining shall be refunded to the taxpayer. The amount refunded to the taxpayer shall not exceed 50 percent of the sum of the amount of property taxes timely paid in the taxable year pursuant to 54:4-1 et seq. and the amount of implicit property taxes paid through rent or lease payments in respect of property taxable pursuant to 54:4-1 et seq., and for which taxes another party that is not a related person is liable, which is attributable to and the direct result of the taxpayer's qualified investment. Any excess amount may not be carried forward.

(d) The credit shall only be applied against corporation business tax liability attributable to, and the direct result of, the taxpayer's qualified investment.

1. If the taxpayer's liability for corporation business tax, local property tax, and implicit property tax paid through rental or lease on property subject to local tax and for which taxes another party that is not a related person is liable, are not solely attributable to the taxpayer's qualified investment, then the amount of such taxes so attributable may be determined by multiplying the amount of tax due under those tax acts for the tax year by the ratio of compensation paid during the taxable year to all employees of the taxpayer employed in New Jersey whose positions are directly attributable to the qualified investment, to total compensation paid during the taxable year to all employees of the taxpayer employed in New Jersey.

2. Any credits allowable under 54:10A-5.3 (recycling tax credit), 52:27H-78 (urban enterprise zone credit), and 55:19-13 (urban development corporation credit) shall be applied against and reduce only the amount of corporation business tax not apportioned to the qualified investment under this act. Any excess of those credits may be applied against the amount of corporation business tax apportioned to the qualified investment under this act that is not offset by the amount of annual credit against the tax allowed under the act for the tax year, unless their application is otherwise prohibited by the applicable credit statutes.

(e) The unused portion of the credit shall be forfeited if the property is disposed of prior to the end of its recovery period, or ceases to be used in a new or expanded business facility, except where the cessation is due to fire, flood, storm, or other casualty, pursuant to the provisions of N.J.S.A. 54:10A-5.10 and 5.11. Except when the cessation is due to fire, flood, storm, or other casualty, the taxpayer shall redetermine the amount of credit allowed in earlier years pursuant to the calculation under N.J.S.A. 54:10A-5.10.b. The taxpayer shall then file a reconciliation statement with its annual corporation business tax return for the year in which the forfeiture occurs, and pay any additional taxes owed due to the reduction of the amount of credit allowable for such earlier years, together with any penalty and interest for failure to pay any such tax as provided in the State Uniform Procedure Law.

1. If the average number of employees attributable to the qualified investment falls below the minimum number of new jobs created upon which the taxpayer's annual credit was based, the credit shall be redetermined and the excess forfeited for the current tax year and for each succeeding year pursuant to the calculations required under 54:10A-5.1 0c.

(f)N.J.S.A. 54:10A-5.13 requires the taxpayer to make written application to the Director of the Division of Taxation for allowance of the credit. No prior approval will be required if the return and Form 304 claiming the credit are filed on or before the original due date of the return. However, the return will be reviewed upon filing, and the Division will notify the taxpayer if the credit is disallowed. If the taxpayer applies for an extension to file Form CBT-100 or CBT-100S, a letter application from the taxpayer requesting allowance of the credit must accompany the request for extension, Form CBT-200T. The recordkeeping requirements of N.J.S.A. 54:10A-5.12 for qualified property must be followed.

EXAMPLE

New Jersey Investment Tax Credit Calculation

Corporation ABC in the current year purchases and installs the following at location D in New Jersey:

1. A newly constructed building for $ 1,000,000;

2. Equipment with three year life for $ 100,000;

3. Equipment with five year life for $ 200,000; and

4. An airplane for $ 100,000.

At location E in New Jersey, the corporation makes repairs on existing facilities for $ 250,000.

At location F in New Jersey, the corporation purchases a building, owned and used by an unrelated party, for $ 500,000.

All locations are in New Jersey. None of the locations are in an urban enterprise zone.

In the prior year Corporation ABC had 50 employees, all at location E, with annual payroll of $ 2,000,000 and gross receipts of $ 5,000,000. In the current year Corporation ABC employs 120 people, 50 at location E, 65 at location D, and five at location F, all with income above $ 30,000, and has gross receipts of $ 10,000,000 and payroll of $ 5,000,000. The 65 employees at location D are all newly hired New Jersey residents with total compensation of $ 3,000,000. The corporation business tax liability for Corporation ABC in the current year is $ 10,000.

Corporation ABC should compute its current year New Jersey investment tax credit this way: (Line reference numbers are to Form 304 (1-95) New Jobs Investment Tax Credit.)

First, calculate the allowable investment base as follows:

Qualified investment:
line 4(a) with three year life	0.35 x $100,000 =	$ 35,000
line 4(b) with five year life	0.70 x 200,000 =	140,000
line 4(c) with seven year or more life	1.00 x 1,000,000 =	1,000,000
line 5 Sum of lines 4(a), 4(b), and 4(c)	$ 1,175,000
The investment base is

(The airplane purchase does not qualify; the repairs at location E do not qualify; and the purchase of existing property at location F does not qualify. See N.J.S.A. 54:10A-5.5 and N.J.A.C. 18:7-3.22(b).)

Second, calculate the number of eligible new jobs created as follows in order to arrive at the new jobs factor:

line 6(a) Average New Jersey employment for this tax year	120
line 6(b) Average New Jersey employment for last tax year	50
line 6(c) Subtract line 6(b) from line 6(a)	70
line 6(d) Divide line 6(a) by 2	60
line 6(e) Number of eligible new jobs	65
line 6(f) Smaller of 6(c), 6(d), or 6(e)	60
line 7(a) Divide line 6(f) by 50 with no remainder	1
line 7(b) Multiply line 7(a) by .005	.005
line 7(c) Enter the smaller of .10 or line 7(b)	.005

(The number of eligible jobs is limited to 60, one-half total employment. ABC is, with $ 10,000,000 in gross receipts, not a small taxpayer in the current year.)

The new jobs factor is .005.

Third, calculate the maximum annual credit:

line 8 Multiply line 7(c) line 2 .2

.005 $ 1,175,000 .2 =

$1,175

line 9 Qualified investment from prior two years	0
line 10 Aggregate Annual Credit:
(Sum of lines 8, 9(a), 9(b), 9(c), and 9(d))	$ 1,175

Fourth, calculate tax attributable to new investment which is eligible to be offset by the credit (which is proportional to compensation of new employees relative to all employees).

line 11 Compensation of all new jobs in New Jersey attributable to the qualified investment	$ 3,000,000
line 12 Total compensation of all employees in New Jersey	$ 5,000,000
line 13 Divide line 11 by line 12	.60
line 14 Enter tax liability from front page of CBT
line 15 Multiply line 13 by line 11 CBT-100 page 1	6,000
Fifth, arrive at the allowable credit:
line 16 Multiply line 15 by 50 percent	$ 3,000
line 17 Enter the smaller of line 10 or line 16	1,175

N.J. Admin. Code § 18:7-3.22

Amended by 49 N.J.R. 1694(a), effective 6/19/2017