S2479

An Act providing credits against the corporation business tax and the gross income tax for certain employer-provided child care expenditures, supplementing P.L.1945, c.162 (C.54:10A-1 et seq.) and chapter 4 of Title 54A of the New Jersey Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. a. For privilege periods beginning in the three calendar years following the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill), a taxpayer shall be allowed a credit against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), in an amount equal to 50 percent of up to $50,000 of expenses paid or incurred by the taxpayer to acquire, construct, reconstruct, renovate, or otherwise improve real property in this State that is to be used by the taxpayer, or another person under contract or agreement with the taxpayer, to conduct, maintain, and operate a qualified child care center primarily for the children of individuals employed by the taxpayer.

b. To be eligible to apply the credit allowed in accordance with subsection a. of this section against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), a taxpayer shall make and enter into an agreement with the director on or before the last day of the privilege period for which the credit is first applied.

The agreement shall require the taxpayer to submit to the director all receipts, bills, invoices, and other similar documents that the director determines to be necessary to verify the costs paid or incurred by the taxpayer.

The agreement shall require the taxpayer to demonstrate to the director that the real property acquired, constructed, reconstructed, renovated, or otherwise improved in this State is not part of the principal residence of the taxpayer or part of the principal residence of an individual employed by the taxpayer.

The agreement shall require the taxpayer to demonstrate to the director that the real property acquired, constructed, reconstructed, renovated, or otherwise improved in this State is used by the taxpayer, or another person under contract or agreement with the taxpayer, to conduct, maintain, and operate a qualified child care center primarily for the children of individuals employed by the taxpayer on the date the agreement is entered into.

The agreement shall require the taxpayer to use the real property acquired, constructed, reconstructed, renovated, or otherwise improved in this State to conduct, maintain, and operate, either directly or indirectly by another person under contract or agreement with the taxpayer, a qualified child care center primarily for the children of individuals employed by the taxpayer for a period of 60 consecutive months beginning on the first day of the first month next following the date the agreement is entered into.

The agreement shall require the taxpayer to notify the director in writing if, at any time during the 60-month period in which the real property is required to be used as a qualified child care center, the real property is not used by the taxpayer, or another person under contract or agreement with the taxpayer, to conduct, maintain, and operate a qualified child care center primarily for the children of individuals employed by the taxpayer.

The agreement shall require the taxpayer to repay the amount of credit allowed in accordance with subsection a. of this section that has been applied to reduce the taxpayer’s liability for tax, and shall prohibit the taxpayer from applying any unused amount of credit allowed in accordance with subsection a. of this section, if the taxpayer is required to notify the director of the taxpayer’s failure to conduct, maintain, and operate a qualified child care center during the 60-month period in which the real property is required to be used as a qualified child care center; provided, however, that the taxpayer shall not be required to repay the amount of any credit, or be prohibited from applying any unused credit, allowed in accordance with subsection a. of this section, if the taxpayer’s failure to conduct, maintain, and operate the qualified child care center during the 60-month period results from a casualty loss, involving the qualified child care center, or if another person, under contract or agreement with the taxpayer and the director, assumes the taxpayer’s responsibility to use the real property to conduct, maintain, and operate a qualified child care center primarily for the children of individuals employed by that person for the remainder of the 60-month period.

The agreement shall require the director to assess the amount of any credit allowed in accordance with subsection a. of this section that is required to be repaid by the taxpayer, give notice of the assessment to the taxpayer, and make demand upon the taxpayer for payment of the assessment to be made within 30 days of the date notice and demand is mailed to the taxpayer by the director.

The agreement shall require the taxpayer to pay to the director interest on an assessment, or any portion of an assessment, that is not paid in full within 30 days of the date notice and demand is mailed at a rate of three percentage points above the prime rate assessed for each month or fraction thereof, compounded annually at the end of each year, from the date the credit allowed in accordance with subsection a. of this section was first applied to reduce the taxpayer’s liability for tax, or the date the taxpayer made and filed an application with the director for a tax credit transfer certificate, until the date payment is made.

The agreement shall stipulate that an assessment, and any interest on an assessment, required to be paid by the taxpayer is a deficiency with respect to the payment of a State tax. The director shall be provided all rights, powers, and duties authorized under the State Uniform Tax Procedure Law, R.S.54:48-1 et seq., to ensure the payment, collection, or recovery of the deficiency and the taxpayer shall be afforded all protections, rights, and remedies allowed under R.S.54:48-1 et seq. to challenge, protest, or appeal the deficiency or any determination or decision rendered in connection with the deficiency.

c. If two or more taxpayers pay or incur costs on or after the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill), to acquire, construct, reconstruct, renovate, or otherwise improve real property in this State that is to be used jointly by the taxpayers, or another person under contract or agreement with the taxpayers, to conduct, maintain, and operate a qualified child care center primarily for the children of individuals employed by the taxpayers, each taxpayer shall be allowed a credit in accordance with subsection a. of this section for that portion of the costs paid or incurred by that taxpayer; provided however, that to be eligible to apply the credit allowed in accordance with subsection a. of this section to reduce a liability for tax each taxpayer separately shall make and enter into an agreement with the director in accordance with subsection b. of this section.

d. The order of priority of the application of the credit allowed in accordance with subsection a. of this section and any other credits allowed by law against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5) shall be as prescribed by the director.

The amount of credit allowed in accordance with subsection a. of this section that is applied against the tax liability of the taxpayer for a privilege period, together with any other credits allowed against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), shall not exceed 50 percent of the tax liability otherwise due, and shall not reduce the tax liability otherwise due, to an amount less than the statutory minimum provided in subsection (e) of section 5 of P.L.1945, c.162 (C.54:10A-5).

The amount of any credit allowed in accordance with subsection a. of this section that is not applied to reduce the tax liability of the taxpayer for a privilege period due to the limitations and conditions of this subsection may be carried forward, if necessary, to be used by the taxpayer against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5) in each of the seven privilege periods following the privilege period for which the credit is allowed.

e. As used in this section:

“Grow NJ Kids” means New Jersey’s quality rating improvement system designed to raise the quality of child care and early learning programs.

“Highly compensated employee” means the individuals employed by the taxpayer who, in the aggregate, receive the top 25 percent of all employee compensation paid by the taxpayer.

“Qualified child care center” means a facility that is licensed as a child care center by the Department of Children and Families in accordance with the “Child Care Licensing Act,” P.L.1983, c.492 (C.30:5B-1 et seq.), and participates in Grow NJ Kids; provided, however, that a “qualified child care center” shall not include a facility licensed by the department if:

the principal use of the facility is for some purpose other than the care, development, and supervision of children, unless the facility is the principal residence of the person who owns and operates the qualified child care center;

the facility is not used on a regular basis to provide for the care, development, and supervision of children;

enrollment in the facility is not open to children of individuals employed by the taxpayer; or

use of the facility is limited or restricted under procedures, criteria, or other systems of selection that unfairly discriminate in favor of highly compensated employees, or that unfairly discriminate in favor of individuals employed by the taxpayer on the basis of race, creed, religion, sex, national origin, disability, or marital status.

2. a. For privilege periods beginning in the three calendar years following the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill), a taxpayer shall be allowed a credit against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), in an amount equal to:

50 percent of up to $50,000 of expenses paid or incurred by the taxpayer during the privilege period to conduct, maintain, and operate a qualified child care center of the taxpayer that is used primarily by the children of individuals employed by the taxpayer;

50 percent of up to $50,000 of the amount paid by the taxpayer during the privilege period to another person to conduct, maintain, and operate, under contract or agreement with the taxpayer, a qualified child care center of the taxpayer that is used primarily by the children of individuals employed by the taxpayer;

50 percent of up to $50,000 of the amount paid by the taxpayer during the privilege period to another person, under contract or agreement with the taxpayer, for the provision of child care to children of individuals employed by the taxpayer at a qualified child care center; or

10 percent of up to $50,000 of the cost paid or incurred by the taxpayer during the privilege period for the provision, by the taxpayer or by another person under contract or agreement with the taxpayer, of qualified child care information and referral services to individuals employed by the taxpayer.

b. If two or more taxpayers jointly pay or incur costs or jointly pay amounts eligible for the credit allowed in accordance with subsection a. of this section during the privilege period, each taxpayer shall be allowed a credit for that portion of the costs paid or incurred by that taxpayer or that portion of the amounts paid by that taxpayer.

c. The order of priority of the application of the credit allowed in accordance with subsection a. of this section and any other credits allowed by law against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5) shall be as prescribed by the director.

The amount of credit allowed in accordance with subsection a. of this section that is applied against the tax liability of the taxpayer for a privilege period, together with any other credits allowed against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), shall not exceed 50 percent of the tax liability otherwise due, and shall not reduce the tax liability otherwise due to an amount less than the statutory minimum provided in subsection (e) of section 5 of P.L.1945, c.162 (C.54:10A-5).

d. As used in this section:

“Grow NJ Kids” means New Jersey’s quality rating improvement system designed to raise the quality of child care and early learning programs.

“Highly compensated employee” means the individuals employed by the taxpayer who, in the aggregate, receive the top 25 percent of all employee compensation paid by the taxpayer.

“Qualified child care center” means a facility that is licensed as a child care center by the Department of Children and Families in accordance with the “Child Care Licensing Act,” P.L.1983, c.492 (C.30:5B-1 et seq.), and participates in Grow NJ Kids; provided however, that a “qualified child care center” shall not include a facility licensed by the department if:

the facility is not used on a regular basis to provide for the care, development, and supervision of children;

enrollment in the facility is not open to children of individuals employed by the taxpayer; or

“Qualified child care information and referral services” means services that, at a minimum, identify local child care services, provide information describing local child care services available to individuals employed by the taxpayer, and make referrals of individuals employed by the taxpayer to appropriate child care services when openings are available.

3. a. For the three taxable years following the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill), a taxpayer shall be allowed a credit against the tax otherwise due for the taxable year under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., in an amount equal to 50 percent of up to $50,000 of expenses paid or incurred by the taxpayer to acquire, construct, reconstruct, renovate, or otherwise improve real property in this State that is to be used by the taxpayer, or another person under contract or agreement with the taxpayer, to conduct, maintain, and operate a qualified child care center primarily for the children of individuals employed by the taxpayer.

b. To be eligible to apply the credit allowed in accordance with subsection a. of this section against the tax otherwise due for the taxable year under N.J.S.54A:1-1 et seq., a taxpayer shall make and enter into an agreement with the director on or before the last day of the taxable year for which the credit is first applied.

The agreement shall require the taxpayer to demonstrate to the director that the real property acquired, constructed, reconstructed, renovated, or otherwise improved in this State is used by the taxpayer, or another person under contract or agreement with the taxpayer, to conduct, maintain, and operate a qualified child care center primarily for the children of individuals employed by the taxpayer on the date the agreement is entered into.

The agreement shall require the taxpayer to repay the amount of credit allowed in accordance with subsection a. of this section that has been applied to reduce the taxpayer’s liability for tax, and shall prohibit the taxpayer from claiming any unused amount of credit allowed in accordance with subsection a. of this section, if the taxpayer is required to notify the director of the taxpayer’s failure to conduct, maintain, and operate a qualified child care center during the 60-month period in which the real property is required to be used as a qualified child care center; provided however, that the taxpayer shall not be required to repay the amount of any credit, or be prohibited from applying any unused credit, allowed in accordance with subsection a. of this section, if the taxpayer’s failure to conduct, maintain, and operate the qualified child care center during the 60-month period results from a casualty loss, involving the qualified child care center, or if another person, under contract or agreement with the taxpayer and the director, assumes the taxpayer’s responsibility to use the real property to conduct, maintain, and operate a qualified child care center primarily for the children of individuals employed by that person for the remainder of the 60-month period.

The agreement shall require the taxpayer to pay to the director interest on an assessment, or portion of an assessment, that is not paid in full within 30 days of the date notice and demand is mailed at a rate of three percentage points above the prime rate assessed for each month or fraction thereof, compounded annually at the end of each year, from the date the credit allowed in accordance with subsection a. of this section was first applied to reduce the taxpayer’s liability for tax, or the date the taxpayer made and filed an application with the director for a tax credit transfer certificate, until the date payment is made.

c. If two or more taxpayers pay or incur costs on or after the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill), to acquire, construct, reconstruct, renovate, or otherwise improve real property in this State that is to be used jointly by the taxpayers, or another person under contract or agreement with the taxpayers, to conduct, maintain, and operate a qualified child care center primarily for the children of individuals employed by the taxpayers, each taxpayer shall be allowed a credit in accordance with subsection a. of this section for that portion of the costs paid or incurred by that taxpayer; provided, however, that to be eligible to apply the credit allowed in accordance with subsection a. of this section to reduce a liability for tax each taxpayer separately shall make and enter into an agreement with the director in accordance with subsection b. of this section.

d. A business entity that is classified as a partnership for federal income tax purposes shall not be allowed the credit directly under N.J.S.54A:1-1 et seq., but the amount of credit of the taxpayer in respect of a distributive share of partnership income shall be determined by allocating to the taxpayer that proportion of the credit acquired by the partnership that is equal to the taxpayer's share, whether or not distributed, of the total distributive income or gain of the partnership for its taxable year ending within or with the taxpayer's taxable year.

A taxpayer that is a New Jersey S corporation shall not be allowed the credit directly under N.J.S.54A:1-1 et seq., but the amount of credit of a taxpayer in respect of a pro rata share of S corporation income shall be determined by allocating to the taxpayer that proportion of the credit acquired by the New Jersey S corporation that is equal to the taxpayer's share, whether or not distributed, of the total pro rata share of S corporation income of the New Jersey S corporation for its privilege period ending within or with the taxpayer's taxable year.

e. The order of priority of the application of the credit allowed in accordance with subsection a. of this section and any other credits allowed by law against the tax otherwise due for the taxable year under N.J.S.54A:1-1 et seq. shall be as prescribed by the director.

f. As used in this section:

“Grow NJ Kids” means New Jersey’s quality rating improvement system designed to raise the quality of child care and early learning programs.

“Highly compensated employee” means the individuals employed by the taxpayer who, in the aggregate, receive the top 25 percent of all employee compensation paid by the taxpayer.

“Qualified child care center” means a facility that is licensed as a child care center by the Department of Children and Families in accordance with the “Child Care Licensing Act,” P.L.1983, c.492 (C.30:5B-1 et seq.), and participates in Grow NJ Kids; provided however, that a “qualified child care center” shall not include a facility licensed by the department if:

the facility is not used on a regular basis to provide for the care, development, and supervision of children;

enrollment in the facility is not open to children of individuals employed by the taxpayer; or

4. a. For the three taxable years following the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill), a taxpayer shall be allowed a credit against the tax otherwise due for the taxable year under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., in an amount equal to:

50 percent of up to $50,000 of expenses paid or incurred by the taxpayer during the taxable year to conduct, maintain, and operate a qualified child care center of the taxpayer that is used primarily by the children of individuals employed by the taxpayer;

50 percent of up to $50,000 of the amount paid by the taxpayer during the taxable year to another person to conduct, maintain, and operate, under contract or agreement with the taxpayer, a qualified child care center of the taxpayer that is used primarily by the children of individuals employed by the taxpayer;

50 percent of up to $50,000 of the amount paid by the taxpayer during the taxable year to another person, under contract or agreement with the taxpayer, for the provision of child care to children of individuals employed by the taxpayer at a qualified child care center; or

10 percent of up to $50,000 of the cost paid or incurred by the taxpayer during the taxable year for the provision, by the taxpayer or by another person under contract or agreement with the taxpayer, of qualified child care information and referral services to individuals employed by the taxpayer.

b. If two or more taxpayers jointly pay or incur costs or jointly pay amounts eligible for the credit allowed in accordance with subsection a. of this section during the taxable year, each taxpayer shall be allowed a credit for that portion of the costs paid or incurred by that taxpayer or that portion of the amounts paid by that taxpayer.

c. A business entity that is classified as a partnership for federal income tax purposes shall not be allowed the credit directly under N.J.S.54A:1-1 et seq., but the amount of credit of the taxpayer in respect of a distributive share of partnership income shall be determined by allocating to the taxpayer that proportion of the credit acquired by the partnership that is equal to the taxpayer's share, whether or not distributed, of the total distributive income or gain of the partnership for its taxable year ending within or with the taxpayer's taxable year.

d. The order of priority of the application of the credit allowed in accordance with subsection a. of this section and any other credits allowed by law against the tax otherwise due for the taxable year under N.J.S.54A:1-1 et seq. shall be as prescribed by the director.

e. As used in this section:

“Grow NJ Kids” means New Jersey’s quality rating improvement system designed to raise the quality of child care and early learning programs.

“Highly compensated employee” means the individuals employed by the taxpayer who, in the aggregate, receive the top 25 percent of all employee compensation paid by the taxpayer.

“Qualified child care center” means a facility that is licensed as a child care center by the Department of Children and Families in accordance with the “Child Care Licensing Act,” P.L.1983, c.492 (C.30:5B-1 et seq.), and participates in Grow NJ Kids; provided however, that a “qualified child care center” shall not include a facility licensed by the department if:

the facility is not used on a regular basis to provide for the care, development, and supervision of children;

enrollment in the facility is not open to children of individuals employed by the taxpayer; or

5. This act shall take effect immediately.

STATEMENT

This bill provides businesses with credits against the corporation business tax and the gross income tax for certain employer-provided child care expenditures. The bill allows the tax credits for the three calendar years beginning after enactment.

The bill permits businesses subject to the corporation business tax or the gross income tax to apply a credit against the tax liability otherwise due for a percentage of up to $50,000 of eligible expenditure made to acquire, construct, reconstruct, renovate, or otherwise improve real property to be used as a qualified child care center. The bill also permits businesses to apply a separate, additional credit for a percentage of up to $50,000 of eligible expenditures made in connection with the provision of certain child care services.

The bill provides that the amount of the credit allowed for the construction of a child care center is equal to 50 percent of up to $50,000 of the cost paid or incurred by a business to acquire, construct, reconstruct, renovate, or otherwise improve real property in this State that is to be used by the business, or another person under contract or agreement with the business, to conduct, maintain, and operate a qualified child care center primarily for the children of individuals employed by the business.

The bill provides that the amount of the credit allowed for the provision of child care services is equal to:

-- 50 percent of up to $50,000 of the cost paid or incurred by a business to conduct, maintain, and operate a qualified child care center of the business that is used primarily by the children of individuals employed by the business;

-- 50 percent of up to $50,000 of the amount paid by a business to another person to conduct, maintain, and operate, under contract or agreement with the business, a qualified child care center of the business that is used primarily by the children of individuals employed by the business;

-- 50 percent of up to $50,000 of the amount paid by a business to another person under contract or agreement with the business, for the provision of child care to children of individuals employed by the business at a qualified child care center; or

-- 10 percent of up to $50,000 of the cost paid or incurred by a business for the provision, by the business or by another person under contract or agreement with the business, of qualified child care information and referral services to individuals employed by the business.

The bill provides that to be eligible to apply the credit for the construction of a child care center a business must make and enter into an agreement with the Director of the Division of Taxation in the Department of the Treasury. The bill specifies that the agreement must require the business to demonstrate the intended use and status of the real property acquired, constructed, reconstructed, renovated, or otherwise improved in this State, and require the business to use that property to conduct, maintain, and operate a qualified child care center primarily for the children of individuals employed by the business for a 60-month period.

The bill defines a “qualified child care center” as a facility that is licensed as a child care center by the Department of Children and Families, and participates in Grow NJ Kids, but specifically excludes from that definition facilities licensed by the department if: the principal use of the facility is for some purpose other than the care, development, and supervision of children; the facility is not used on a regular basis to provide for the care, development, and supervision of children; enrollment in the facility is not open to children of individuals employed by the business claiming the credit; or use of the facility is limited or restricted under procedures, criteria, or other systems of selection that unfairly discriminate.

The purpose of this bill is to encourage New Jersey businesses to take a more active role in the provision of child care to employees and their children. Businesses that are active in providing child care typically have a more engaged and productive workforce and play an integral part in reducing the overall demand for quality, affordable child care in this State.