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• Maximum Income tax rate increased to 8.97%



• Property Tax Benefits revised & combined



• Depreciation and Section 179 further decoupled from Federal



• Increase in Realty Transfer fees



• 6% fee imposed on certain Cosmetic Medical and Dental Procedures



• Estimated Tax payments now required for sales of real property by Non-Residents



• Additional Fee on all phone lines



• Fee on sale of all new tires



• Increase in tax on cigarettes



• Net Operating Losses may be utilized to offset 50% of Entire Net Income



• Fee on HMO premiums



• Threshold for making MANDATORY EFTs reduced to $10,000 in tax



• Spill Tax and Air Toxic Surcharges increased.



• New Business Relocation Grant for employers moving more than 250 employees within New Jersey



• Sales Tax Exemption for employers relocating at least 250 employees within new Jersey



• Increase in the Maximum benefit available under the Tax Benefit Transfer Program



• Manufacturing Credit Doubled to 4% for “Small Manufacturers”



• Outdoor Advertising Fee Changes



• Ambulatory Care Facility Assessment

EXECUTIVE SUMMARIES

Most of these new taxes and fees were signed into law late in June just before New Jersey’s Fiscal year ended. Below is an outline of the new legislation followed by an executive summary of each of the provisions. We have summarized the new tax law into those changes impacting individuals and those changes impacting business.

TAXES & FEES IMPACTING INDIVIDUALS

• Property Tax Benefits Increased – This provision combines the homestead property tax rebate and Saver rebate. The Fair Program as it is entitled provides benefits to Homeowners and tenants with incomes below $ 200,000.
• Increased Gross Income Tax – Effective January 1, 2004 the tax rate on income in excess of $500,000 is taxed at a rate of 8.97%. This is an increase from the 6.37%.
• Realty Transfer Fee – For sales on or after August 1, 2004 the Realty Transfer Fee is increased for transfers of more than $ 350,000. Additional a new fee is collected from the buyer at 1% of the total consideration on Residential real estate for properties sold in excess of $ 1,000,000.
• Mobile Telecommunications Fee – Commencing with the billing periods ending after August 1, 2004 there is a $ .90 per line fee for land lines and wireless phone lines. The proceeds from this fee will be used to fund the 911 system.
• New Tire Fee – Commencing August 1, 2004 there will be a $ 1.50 fee imposed on the sale of all tires in New Jersey. This fee includes a $ 1.50 per tire fee on tires purchased with a new car.
• Cigarette Tax Increase – Effective July 1, 2004 the tax on a cigarette is $ .12 or $ 2.40 per pack. This is an increase of $ .35 per pack.
• Estimated Tax on Income from the Sale of Real Property – Effective August 1, 2004 proof of filing or estimated taxes must be presented to the county recording officer at the time the deed is filed.
• Cosmetic Medical and Dental Procedures – Effective September 1, 2004 there is a 6% fee imposed on certain cosmetic medical procedures.

TAXES & FEES IMPACTING BUSINESSES

• Depreciation decoupling – For property placed in service on or after January 1, 2004 the law decouples from federal depreciation. Accordingly, no additional first year depreciation is allowed and the Section 179 deduction is limited to $ 25,000. This now applies to both the corporate business tax as well as the personal income tax. Therefore this now applies to S Corporations, Partnerships, Limited Liability Companies, sole practitioners (schedule C filers) as well as C corporations.
• Net Operating Loss – For privilege periods beginning in 2004 and calendar year 2005 Net Operating Losses can only be used to the extent of 50% of entire net income.
• HMO Assessment – Effective June 30, 2004 there is an interim assessment imposed on the premiums paid to purchase health insurance in the state regulated market. The assessment is 1% of the premiums.
• Electronic Funds Transfer Threshold – Effective June 29, 2004 the law now requires taxpayers to remit taxes electronically if their prior year tax liability was equal to or greater than $ 10,000.
• Spill Tax - Effective retroactively to January 1, 2004 the tax rates imposed by the spill tax is increase to $.0023 per barrel for some items and 1.53% for other substances.
• Air Toxics Surcharge – Effective June 29, 2004 there is an annual surcharge ranging from $ .10 to $ 10.00 per pound of toxic substances released.
• Business Retention and Relocation Grant (“BRRAG”) – provides a grant of up to $ 1,500 per employee for moving at least 250 employees from one location in New Jersey to another location.
• There is a sales tax exemption available to companies for building new facilities and relocating at least 500 employees within the state. A lower limit of 250 employees if the company is in either the manufacturing or life sciences industry.
• The Maximum annual incentive available under the Technology Transfer Program is increased by $ 20,000,000 to $ 60,000,000.
• The Manufacturing Equipment and Investment credit is doubled for small manufacturers. A small manufacturer is one with 50 or fewer employees and entire net income.
• An annual fee is imposed on the gross receipts of certain licensed ambulatory care facilities. This fee will be monitored and collected by the Department of Health and Senior Services.
• A 6% fee is collected on the retail sale of outdoor advertising space (Billboard). This fee will be reduced to 4% for the period July 1, 2006 through June 30, 2007.

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