Lawmakers often use state and federal tax laws to encourage certain types of business activity, or to discourage activities in lieu of banning them. Tax breaks often serve as incentives to investors and entrepreneurs to focus on a particular industry or market. Bills pending in the U.S. Congress and the New Jersey Legislature propose various tax incentives for businesses, including technology investments, infrastructure development, and hurricane relief. Supporters of these bills hope to promote job creation by spurring business activity. Critics contend, however, that similar New Jersey incentives have not had the desired impact on job creation in the past. New Jersey and New York businesses should be aware of pending legislation in order to take advantage of any tax breaks or tax incentives that might benefit them.
On April 9, 2013, a Democratic lawmaker from Maryland introduced H.R. 1415, the Innovative Technologies Investment Incentive Act of 2013 (ITIIA), in the U.S. House of Representatives. The bill would allow a tax credit for qualified investments in “high technology and biotechnology business concerns,” H.R. 1415 § 2 (113th Cong.), equal to twenty-five percent of the investment amount. This would be a direct credit against the amount of tax owed by the investor, as opposed to a deduction from the investor’s total taxable income. The total amount of the credit would be subject to a nationwide limit of $500 million per year, and the Small Business Administration (SBA) would be responsible for allocating credits among qualified investors. To qualify for the credit, the investment must be a stock purchase or other capital investment in a high-tech or biotechnology business with less than five hundred employees. Investors must hold onto their investments for at least three years. The purpose of the bill is to encourage investment in technology and biotechnology companies, which in turn will hopefully promote innovation and job creation.
In New Jersey, legislators have introduced A-3680, the Economic Opportunity Act of 2013 (EOA), which would grant tax breaks and incentives for redevelopment projects and other activities, including the repair of damage caused by The bill would restructure New Jersey’s five business incentive programs into two programs, the Economic Redevelopment and Growth Program and Grow New Jersey.
Supporters of the EOA say it will promote business growth and lead to more jobs. At least one New Jersey legislator, who is also a business owner, has complained that state taxes are so high that he would prefer to move his business to neighboring Pennsylvania. By that standard, tax incentives might be welcome news to many New Jersey business owners. Critics of the EOA, however, note that a seemingly drastic increase in tax incentives, with more tax breaks given to businesses since 2010 than in the previous decade, has not necessary translated into significant job growth or other gains for the state. The state’s planning and transportation agencies also reportedly worry that the incentives in the EOC could lead to further urban sprawl.
Samuel C. Berger, PC’s business attorneys represent New York and New Jersey businesses and entrepreneurs in a wide range of legal issues. We offer fixed-fee packages of legal services to help businesses understand their rights and obligations and allow them to grow and run smoothly. To speak to a member of our skilled legal team, contact us today online or at (212) 380-8117.
More Blog Posts:
New Limited Liability Company Act to Take Effect in New Jersey in 2013, New York & New Jersey Business Lawyer Blog, October 26, 2012
New Jersey Small Business Owners Urge State to Pass Health Insurance Exchange Law, New York & New Jersey Business Lawyer Blog, September 27, 2012
Proposed Reduction in Corporate Tax Rate May Not Benefit Many New York Small Businesses, New York & New Jersey Business Lawyer Blog, March 1, 2012
Photo credit: By Boghog2 (Own work. This image was created with PyMOL.) [Public domain], via Wikimedia Commons.