A bill providing a tax break to small businesses has been signed into law.
Essentially, according to its sponsors, the bill requires the tax code to treat small businesses in the same way it treats corporations.
Assembly Democrats Lou Greenwald, Peter J. Barnes III, Gordon Johnson, Nellie Pou and Paul Moriarty said in a joint release Thursday that the law, S2754/A3870, is a slightly revised version of a measure, A3535, approved in January by the Legislature, only to be vetoed by the governor, then included in his budget plan four days later.
“Businesses could have already been taking advantage of this important tax cut if it wasn’t for the governor’s nonsensical veto, but as they say, imitation is the sincerest form of flattery, so I’m pleased to see this bill signed into law,” Greenwald said in a release.
Under current law, New Jersey’s personal income tax is calculated through 16 separately defined categories of income. Unlike the federal tax code and the tax laws of 48 other states, state tax law does not permit filers who generate income from different types of businesses to offset gains derived from one business entity with losses sustained from another, the lawmakers said.
The new law establishes an alternative business calculation under the gross income tax as a mechanism that permits taxpayers who generate income from different types of business entities to offset gains from one type of business with losses from another, and permits taxpayers to carry forward business-related losses for a period of up to 20 taxable years.
The law phases in the tax savings over five years beginning with tax year 2012. Once fully implemented, the maximum savings will be equal to 50 percent of the savings that would accrue from unlimited netting between these income categories and the net loss carry forward.
The law will also give small business owners the same ability to recoup losses over 20 years that large corporations currently enjoy under a Greenwald bill signed into law two years ago.