FISCAL NOTE

ASSEMBLY, No. 5323

STATE OF NEW JERSEY

222nd LEGISLATURE

 

DATED: JULY 2, 2026

 

 

SUMMARY

 

Synopsis:

Modifies eligibility for alternative business calculation adjustment allowed under gross income tax.

Type of Impact:

Annual revenue gain to the Property Tax Relief Fund

Agency Affected:

Department of the Treasury

 

 

Executive Estimate

Fiscal Impact

Fiscal Year 2027 

 

Annual State Revenue Gain

$120.0 million

 

 

Office of Legislative Services Estimate

Fiscal Impact

FY 2027 

FY 2028

FY 2029

 

Annual State Revenue Gain

$128.6 million

$132.4 million

$136.4 million

 

 

·         The Office of Legislative Services (OLS) generally agrees with the Executive estimate that restricting the alternative business calculation adjustment under the gross income tax will increase FY 027 State revenue collections by about $120.0 million.  The OLS only projects a moderately larger impact in FY2027 and extends its forecast to two additional fiscal years.

 

 

BILL DESCRIPTION

 

      The bill will limit the alternative business calculation adjustment under the gross income tax beginning with tax year 2026. 

      The adjustment currently permits all gross income taxpayers with certain categories of business income to use 50 percent of the losses in one category of business income to offset their taxable income from another.  Unused deduction amounts may be carried forward for up to 20 years. 

      The bill will limit eligibility to taxpayers with gross incomes not exceeding $1 million, reduce the deduction to 25 percent for taxpayers with gross incomes over $500,000 but no more than $1.0 million, and maintain the deduction as is for taxpayers with gross incomes not exceeding $500,000. 

 

FISCAL ANALYSIS

 

EXECUTIVE BRANCH

 

      The Department of the Treasury estimates that this bill will increase State revenues by $120.0 million in FY2027.

 

OFFICE OF LEGISLATIVE SERVICES

 

      The OLS generally agrees with the Executive’s revenue projection that the bill will increase State revenue collections by about $120.0 million in FY2027 but estimates a moderately larger impact.   Specifically, the OLS forecasts that the bill will raise State revenues by $128.6 million in FY2027, $132.4 million in FY2028, and $136.4 million in FY2029. 

      The OLS bases its estimate on data provided by the Department of the Treasury, which indicate that the tax year 2024 State revenue loss from the Alternative Business Calculation Adjustment totaled $192.6 million with 245,000 tax return filers using the adjustment.  The data also show that had the bill been in effect in tax year 2024, nearly 55,000 tax return filers would have been negatively affected.  Of that total, roughly half would have been excluded from the deduction altogether, while the other half would have qualified only for a reduced deduction percentage. 

 

 

Section:

Legislative Budget and Finance Office

Analyst:

Oscar Mendez

Revenue and Economic Policy Analyst

Approved:

Thomas Koenig

Legislative Budget and Finance Officer

 

 

This fiscal note has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).