Assembly Approves Benson, Freiman “Pass-Through Business Alternative Income Tax Act”

Assembly Approves Benson, Freiman “Pass-Through Business Alternative Income Tax Act”

 

          (TRENTON) – Helping New Jersey businesses affected by federal tax reform ease the burden on an individual’s income tax, the full Assembly advanced legislation Monday sponsored by Assemblymen Daniel Benson and Roy Freiman to allow business owners to pay income tax at the entity level instead of on an individual level.

“Federal changes to S.A.L.T have had a great impact on homeowners and businesses,” said Benson (D-Mercer, Middlesex). “This tax payment option could save business owners $450 million annually without costing the state any money in lost revenues. Protecting New Jersey businesses against sweeping federal changes ensures New Jersey’s economy stays on the right track and business owners continue to thrive.”

The bill (A-4807), called the “Pass-Through Business Alternative Income Tax Act,” would be an elective entity-level tax paid by pass-through businesses and provide an offsetting credit for taxpayers.

“This legislation is an important piece to protecting New Jersey’s businesses from unfair and unwarranted tax reform coming out of Washington,” said Freiman (D-Somerset, Mercer, Middlesex, Hunterdon). “This is a clear win for the New Jersey’s businesses, and for our economic future.”

Pass-through businesses may be small and medium-sized, privately owned entities that operate for federal and state personal income tax purposes as pass-through entities and not actual income tax paying entities.  For each of these entities, the taxable income is reported on the member’s personal tax return, and taxes are paid by the individual.  The ability of these individuals to deduct these personal state income tax payments are now restricted as federal personal itemized deductions to no more than $10,000 per year, but are not capped for businesses to use as unlimited business expenses that can reduce the income passed on to their individual members.  The bill creates an optional entity-level tax on pass-through businesses.

The Assembly approved the legislation 77-0.

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