New Jersey Administrative Code › Title 18 - TREASURY - TAXATION › Chapter 7 - CORPORATION BUSINESS TAX ACT › Subchapter 3A - URBAN ENTERPRISE ZONES ACT › Section 18:7-3A.4 - Credits against total tax for new employees and investments in urban enterprise zones

Current through Register Vol. 56, No. 14, July 15, 2024
(a) Section 19 of the Urban Enterprise Zones Act,
				N.J.S.A.
				52:27H-78, is applicable to a qualified business
				in an enterprise zone, only if the Urban Enterprise Zone Authority specifically made
				section 19 applicable when the enterprise zone was designated. Under section 19, any
				qualified business (as defined in
				N.J.A.C.
				18:7-3A.2 ) that is actively engaged in the
				conduct of a business from a location within an enterprise zone (as defined in
				N.J.A.C. 18:7-3A.2), which business in that location consists primarily of
				manufacturing or other business that is not primarily considered as a retail sales
				business, or as a warehousing business, shall receive an enterprise zone employees
				tax credit against the amount of tax imposed under
				N.J.S.A.
				54:10A-5 (N.J.S.A.
				54:10A-1 et seq., the Corporation Business Tax
				Act). The credit shall only be available for new employees hired on or after the
				date of designation of the enterprise zone, or the date of commencement of business
				in the enterprise zone, whichever is later.
(b) A one-time credit of $ 1,500 shall be allowed
				for each new full-time, permanent employee employed at that location who is a
				resident of the qualifying municipality (as defined in N.J.A.C. 18:7-3A.2) in which
				the designated enterprise zone is located, or any other qualifying municipality in
				which an urban enterprise zone is located, who was, immediately before employment by
				the taxpayer, unemployed for at least 90 days, or dependent upon public assistance
				as the primary source of income. Further qualifications for this benefit are in (e)
				and (f) below.
(c) A one-time credit of
				$ 500.00 shall be allowed for each new full-time, permanent employee employed at
				that location who is a resident of the qualifying municipality (as defined in
				N.J.A.C. 18:7-3A.2) in which the designated enterprise zone is located, or any other
				qualifying municipality in which an urban enterprise zone is located, who does not
				meet the requirements of (b) above, and who was not, immediately before employment
				by the taxpayer, employed at a location within the qualifying municipality in which
				the qualified business is located. Further qualifications for this credit are in (e)
				and (f) below.
(d) See
				N.J.S.A.
				52:27H-78.c for alternate tax benefit. The statute
				allows a corporation business tax credit to qualified small businesses (under 50
				employees) that were in business in the zone prior to designation of the zone and
				that make an investment in the zone. These businesses may obtain an eight percent
				investment credit, to be applied against corporation business tax, by entering into
				an agreement, approved by the Urban Enterprise Zone Authority, with the zone city,
				to make an investment in the urban enterprise zone which contributes substantially
				to the economic attractiveness of the zone. These expenditures may include
				improvement of the appearance or customer facilities of its place of business or
				improvements in landscaping, recreation, police and fire protection, etc., in the
				zone.
(e) The enterprise zone employee
				tax credits provided in (b) and (c) above, shall be allowed in the tax year
				immediately following the tax year in which the new full-time, permanent employee
				was first employed by the taxpayer, but shall only be allowed if the employee for
				whom credit is claimed was employed by the taxpayer for at least six continuous
				months during the tax year for which the credit is claimed. The credit shall be
				permitted in any tax year of a 20 year period from the date of designation of the
				enterprise zone, or in any tax year of a period of 20 tax years from the date within
				that designation period upon which the taxpayer is first subject to the corporation
				business tax under
				N.J.S.A.
				54:10A-1 et seq., whichever is later. The
				termination of designation as an enterprise zone at the end of the 20-year
				designation period shall not terminate the eligibility period under this
				section.
(f) The employee tax credit is
				available only for new full-time, permanent employees who have been employed by the
				qualified business for at least six continuous months during the year for which the
				credit is claimed. For a new employee to be considered a full-time, permanent
				employee, the total number of full-time, permanent employees, including the new
				employee, employed by the qualified business during the calendar year must exceed
				the greatest number of full-time, permanent employees employed in the zone by the
				qualified business during any prior calendar year since the zone was designated.
				"Calendar year" means the year the new employees are hired. The comparison is made
				to the peak employment on any date during the calendar years prior to the calendar
				year in which the new employees are hired, not the employment level on the last date
				of prior calendar years. The new employees must then continue to be employed during
				the following year in which the credit is claimed for six continuous months.
Example 1: ABC Company is a qualified business. The highest number
				  of full-time permanent employees the company has employed in any prior calendar
				  years since the zone was designated was 100. ABC Company employs 100 employees in
				  Year 1 and hires five new employees in June of Year 10. The five new employees
				  reside in the qualifying municipality in which the zone is located and, immediately
				  prior to employment by the qualified business, were unemployed for at least 90 days.
				  The five new employees remain with the company through June 30 of Year 11. ABC
				  Company may claim the employee tax credit for the Year 11 tax year for the employees
				  hired in Year 10. The employees remained employed by ABC Company for at least six
				  continuous months during the year for which the credit is claimed (Year 11). The
				  five new employees are considered full-time permanent employees because the total
				  number of full-time permanent employees, including the new employees, employed by
				  ABC during the Year 10 calendar year (105) exceeded the greatest number of full-time
				  permanent employees employed in the zone by ABC Company in prior calendar years
				  (100). The total credit is $ 7,500 ($ 1,500 x 5).
Example 2: Same facts as above except that in March of Year 11 ABC
				  Company terminated two of the employees hired in Year 10, and in April of Year 11
				  hires three new employees. The new employees reside in the qualifying municipality
				  in which the zone is located and, although they were not unemployed for at least 90
				  days prior to employment by the qualified business or on public assistance, they
				  were not employed, immediately prior to employment by the qualified business, within
				  the qualifying municipality in which the qualified business is located. The new
				  employees remained with ABC Company through December of Year 12. ABC may claim the $
				  1,500 credit for the Year 11 tax year only for the three employees hired in Year 10
				  who were not terminated, since the two terminated employees would not have worked
				  for six continuous months during the year for which the credit is claimed. ABC may
				  claim the $ 500.00 credit for the Year 12 tax year for each of the three employees
				  hired in Year 11 since they remained with ABC for six continuous months in Year 12
				  and the highest number of employees in Year 11 (106) exceeded the highest number of
				  full-time permanent employees (105) in prior calendar years. The $ 1,500 credit
				  could not be claimed for the three employees hired in Year 11 because they were not
				  unemployed or on public assistance.
(g) Enterprise zone employee tax credits or
				enterprise zone investment tax credits under this section shall not reduce the
				taxpayer's tax liability under
				54:10A-1 et seq. in any tax year by
				more than 50 percent or the amount otherwise due, but any unused employee or
				investment tax credits may be carried forward by the taxpayer to the next succeeding
				tax year and be applied against 50 percent of that year's tax, but not beyond the 20
				year totals set forth in (e) above.
(h)
				The credit shall not exceed an amount which would reduce the total tax liability
				below the statutory minimum. For minimum tax see
				18:7-3.4.