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Assembly Commerce and Economic Development Committee Statement to Assembly, No. 2624, Dated March 5, 2020

Summary

Statement of the Assembly Commerce and Economic Development Committee of the State of New Jersey, dated March 5, 2020, reporting Assembly Bill 2624 favorably with committee amendments. The bill establishes a manufacturing reinvestment account program for manufacturing businesses with 50 or fewer employees that are current on their State tax obligations. Through the gross income tax and the corporation business tax it offers a deduction for deposits, deferred taxation of account earnings, and a rate reduction on earnings at distribution. A business may deposit up to $100,000 a year for up to five years, and qualified withdrawals for New Jersey manufacturing equipment, machinery or workforce development receive a one-half rate reduction on earnings.

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ASSEMBLY COMMERCE AND ECONOMIC DEVELOPMENT COMMITTEE

STATEMENT TO

ASSEMBLY,
No. 2624

with
committee amendments

STATE
OF NEW JERSEY

DATED: MARCH
5, 2020

The Assembly Commerce and Economic Development
Committee reports favorably Assembly Bill No. 2624, with committee amendments.

As
amended, this bill would establish the manufacturing reinvestment account
program for the purpose of making it easier for New Jersey’s small manufacturing
businesses to invest in manufacturing machinery and equipment, and in workforce
development. The bill would incentivize capital investment and workforce
training in New Jersey through the use of tax reductions, deferrals, and
deductions.

The program would be available to manufacturing
businesses that are current on their State tax obligations and which have 50 or
fewer employees.

The bill establishes three types of incentives for
qualified businesses through the gross income tax and the corporation business
tax:

(1) a tax deduction for amounts deposited in a
manufacturing reinvestment account for future use on qualified capital
purchases and workforce training;

(2) deferred taxation on account earnings; and

(3) a rate reduction for the earnings on account
deposits, upon distribution.

Under
the program, a small manufacturing business may deposit up to $100,000 in a
manufacturing reinvestment account annually for up to five years. Earnings in
an account are not taxed until withdrawn. For withdrawals made during an
account’s five-year life for spending on New Jersey based manufacturing
equipment, machinery, or workforce development, the business would receive a
one-half rate reduction on the withdrawn account earnings. Nonqualified withdrawals
are included in whole in taxable income

without
the rate reduction on earnings.

COMMITTEE AMENDMENTS :

The committee amended the bill to: (1) expand the
types of financial institutions that may hold a manufacturing reinvestment
account; (2) direct the Department of the Treasury to establish a process to
qualify manufacturers to participate in the program; and (3) make a technical
correction.

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