LEGISLATIVE FISCAL ESTIMATE
[Third Reprint]
ASSEMBLY, No. 4077
STATE OF NEW JERSEY
222nd LEGISLATURE
DATED: JULY 2, 2026
SUMMARY
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Synopsis: |
Imposes various taxes and fees on correctional service businesses to offset social costs of incarceration. |
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Type of Impact: |
Annual State revenue and cost increases. |
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Agencies Affected: |
Department of the Treasury. |
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Office of Legislative Services Estimate |
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Fiscal Impact |
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Annual |
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State Revenue Increase |
Indeterminate |
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State Cost Increase |
Indeterminate |
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Local Revenue Increase |
Indeterminate |
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· The Office of Legislative Services (OLS) finds that imposing taxes and fees on correctional service businesses in the State would lead to an annual State revenue increase.
· The two private correctional facilities that operate in the State would be subject to a to be determined annual regulatory cost-recovery fee in addition to roughly $14.5 million in annual taxes and fees.
· The OLS notes that, to the extent the correctional service businesses increase prices in response to increased taxes and fees, the State will incur a cost increase for these services.
BILL DESCRIPTION
This bill establishes the Knowledge, Accountability, and Rights in Incarceration Markets Act, or the KARIM Act, and imposes additional taxes and fees on the correctional service business. A correctional service business is defined as any for-profit entity that provides services including dining or food services, laundry, maintenance, or transportation for any criminal or civil detention facility operating within the State. A correctional service business does not include reentry services, inmate services, or pass-through contracts, such as telecommunication services including telephone calls, and video visitation, electronic communications including email, or commissary services.
Under the bill, a taxpayer that operates a correctional service business in the State is subject to a fee equal to eight percent of the consideration given, gross receipts, or contracted to be given, by the public entity to the taxpayer for the provision of correctional services.
The bill provides that the Division of Taxation will assess a regulatory cost-recovery on all correctional service businesses based on the costs to the State due to inspection, oversight, emergency response and public health services related to detention services.
Finally, correctional service businesses are assessed a surtax in addition to the taxpayer’s tax liability under the State’s Corporation Business Tax Act, in an amount equal to three percent of the taxpayer's allocated taxable net income for any privilege period. The revenues collected from the surtax are to be credited to the Societal Rehabilitation Support Fund in support of the fund’s purposes, except that three percent of these revenues are required to be appropriated, one percent to each entity, to: 1) support programs provided by the State, 2) support programs provided by the county in which the correctional facility that is being provided services by the correctional service business is located, and 3) to support police and fire services provided by the municipality in which the correctional facility that is being provided services by the correctional service business is located.
FISCAL ANALYSIS
EXECUTIVE BRANCH
None received.
OFFICE OF LEGISLATIVE SERVICES
The OLS finds that imposing taxes and fees on correctional service businesses in the State would lead to an annual State revenue increase.
There are two private correctional facilities in the State that would be subject to the taxes and fees imposed by this bill: Elizabeth Detention Center, run by CoreCivic, Inc., and Delaney Hall Detention Facility, run by The Geo Group, Inc. The OLS estimates that CoreCivic, Inc would be liable for up to $1.6 million due to the fee on the value of the Elizabeth Detention Center contract, a yet to be determined amount for the regulatory cost-recovery fee, and up to $620,000 for the corporation business tax surcharge. The Geo Group, Inc. would be liable for up to $5.3 million on the value of the Delaney Hall Detention Facility contract, an undetermined amount for the regulatory cost-recovery fee, and up to $1.3 million for the corporation business tax surcharge. For other correctional service businesses that provide services for criminal or civil detention facilities, the bill will lead to indeterminate State revenue increases.
Per research conducted by the OLS, the value of the most recent contract between the U.S. Immigration and Customs Enforcement and the Elizabeth Detention Center equaled roughly $20 million per year, therefore an eight percent fee on the contract would equal $1.6 million. The reported value of the contract between U.S. Immigration and Customs Enforcement and the Delaney Hall Detention Facility is $1 billion over 15 years, or roughly $66.7 million annually, therefore an eight percent fee on the contract would equal $5.3 million. The correctional service businesses that contract with the State subject to this tax would lead to both State revenue and cost increases. The State would collect eight percent tax which would lead to an increase in State revenues. The OLS notes that, to the extent the correctional service businesses increase prices in response to increased taxes and fees, the State will incur a cost increase for these services. The OLS cannot estimate the magnitude of these cost and revenue increases.
The two private correctional facilities would be subject to the regulatory cost-recovery fees set forth by the bill. There would be an indeterminate State revenue cost that would be based on the fee set forth by the Division of Taxation.
The bill also imposes a private prison surtax in addition to the corporation’s tax liability under the corporate business tax equal to three percent of the corporation’s allocated taxable net income for any privilege period in which it operates a private correctional facility in the State. The OLS does not have access to the corporations’ allocated taxable net income. The OLS assumes that the reported revenues of the detention facilities in the State may serve as a sufficient proxy, noting it is likely a slight overestimate.
The correctional service businesses that contract with the State subject to this three percent surtax would lead to both revenue and cost increases. The State would collect the three percent surtax which would lead to an increase in State revenues. To the extent the correctional service businesses increase prices in response to increased taxes and fees, the State will incur a cost increase for these services. The OLS cannot estimate the magnitude of these cost and revenue increases.
The OLS assumes that all correctional service business that contract with the State are currently subject to the Corporation Business Tax and the Corporate Transit Fee. For purposes of this estimate, the term Corporation Business Tax includes the affiliated Corporate Transit Fee. In determining allocable entire net income, businesses may deduct certain taxes and fees imposed by New Jersey as ordinary business expenses. To the extent that the charges established under the bill are interpreted in a manner consistent with the Division of Taxation's treatment of deductible business expenses, the bill would also result in concurrent Corporation Business Tax revenue losses.
In 2025, CoreCivic, Inc. reported $22.6 million in revenue for Elizabeth Detention Facility, therefore a three percent surtax would net increase State revenue by roughly $620,000. The Geo Group went into contract with the federal government in 2025 and thus did not report revenues for Delaney Hall Detention Center. However, Delaney Hall’s annual report indicates that the facility generates roughly $50,000 per bed annually, thus an estimate of a 1,000-bed facility would equal $50 million per year and a three percent surtax on such would increase State revenue by roughly $1.3 million.
The OLS notes that the bill requires that, of the surtax revenues, one percent each will be appropriated to local government units for: 1) programs provided by the county in which the correctional facility that is being provided services by the correctional service business is located, and 2) police and fire services provided by the municipality in which the correctional facility that is being provided services by the correctional service business is located. This would represent a revenue increase for these counties and municipalities.
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Section: |
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Analyst: |
Assistant Fiscal Analyst |
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Approved: |
Thomas Koenig Legislative Budget and Finance Officer |
This legislative fiscal estimate has been produced by the Office of Legislative Services due to the failure of the Executive Branch to respond to our request for a fiscal note.
This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).