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A4077 3R FISCAL ESTIMATE
LEGISLATIVE FISCAL ESTIMATE
[Third Reprint]
ASSEMBLY, No. 4077
STATE OF NEW JERSEY
222nd LEGISLATURE
DATED: JULY 2, 2026
SUMMARY
Synopsis:
Imposes various taxes and fees on correctional service
businesses to offset social costs of incarceration.
Type of Impact:
Annual State revenue and cost increases.
Agencies Affected:
Department of the Treasury.
Office of
Legislative Services Estimate
Fiscal Impact
Annual
State Revenue
Increase
Indeterminate
State Cost Increase
Indeterminate
Local Revenue
Increase
Indeterminate
�
The Office of Legislative Services (OLS) finds that imposing taxes
and fees on correctional service businesses in the State would lead to an
annual State revenue increase.
�
The two private correctional facilities that operate in the State
would be subject to a to be determined annual regulatory cost-recovery fee in
addition to roughly $14.5 million in annual taxes and fees.
�
The OLS notes that, to the extent the correctional service businesses
increase prices in response to increased taxes and fees, the State will incur a
cost increase for these services.
BILL DESCRIPTION
����� This bill establishes the Knowledge, Accountability,
and Rights in Incarceration Markets Act, or the KARIM Act, and imposes
additional taxes and fees on the correctional service business. A correctional
service business is defined as any for-profit entity that provides services
including dining or food services, laundry, maintenance, or transportation for
any criminal or civil detention facility operating within the State.� A
correctional service business does not include reentry services, inmate
services, or pass-through contracts, such as telecommunication services
including telephone calls, and video visitation, electronic communications
including email, or commissary services.
����� Under the bill, a taxpayer that operates a
correctional service business in the State is subject to a fee equal to eight
percent of the consideration given, gross receipts, or contracted to be given,
by the public entity to the taxpayer for the provision of correctional services.
����� The bill provides that the Division of Taxation will
assess a regulatory cost-recovery on all correctional service businesses based
on the costs to the State due to inspection, oversight, emergency response and
public health services related to detention services.
����� Finally, correctional service businesses are assessed
a surtax in addition to the taxpayer�s tax liability under the State�s
Corporation Business Tax Act, in an amount equal to three percent of the
taxpayer's allocated taxable net income for any privilege period.� The revenues
collected from the surtax are to be credited to the Societal Rehabilitation
Support Fund in support of the fund�s purposes, except that three percent of
these revenues are required to be appropriated, one percent to each entity, to:
1) support programs provided by the State, 2) support programs provided by the
county in which the correctional facility that is being provided services by
the correctional service business is located, and 3) to support police and fire
services provided by the municipality in which the correctional facility that
is being provided services by the correctional service business is located.
FISCAL ANALYSIS
EXECUTIVE BRANCH
����� None received.
OFFICE OF LEGISLATIVE SERVICES
����� The OLS finds that imposing taxes and fees on correctional
service businesses in the State would lead to an annual State revenue increase.
����� There are two private correctional facilities in the
State that would be subject to the taxes and fees imposed by this bill:
Elizabeth Detention Center, run by CoreCivic, Inc., and Delaney Hall Detention
Facility, run by The Geo Group, Inc. The OLS estimates that CoreCivic, Inc
would be liable for up to $1.6 million due to the fee on the value of the
Elizabeth Detention Center contract, a yet to be determined amount for the
regulatory cost-recovery fee, and up to $620,000 for the corporation business
tax surcharge. The Geo Group, Inc. would be liable for up to $5.3 million on
the value of the Delaney Hall Detention Facility contract, an undetermined
amount for the regulatory cost-recovery fee, and up to $1.3 million for the
corporation business tax surcharge. For other correctional service businesses
that provide services for criminal or civil detention facilities, the bill will
lead to indeterminate State revenue increases.�
����� Per research conducted by the OLS, the value of the
most recent contract between the U.S. Immigration and Customs Enforcement and
the Elizabeth Detention Center equaled roughly $20 million per year, therefore
an eight percent fee on the contract would equal $1.6 million. The reported
value of the contract between U.S. Immigration and Customs Enforcement and the
Delaney Hall Detention Facility is $1 billion over 15 years, or roughly $66.7
million annually, therefore an eight percent fee on the contract would equal
$5.3 million.� The correctional service businesses that contract with the State
subject to this tax would lead to both State revenue and cost increases. The
State would collect eight percent tax which would lead to an increase in State
revenues. �The OLS notes that, to the extent the correctional service
businesses increase prices in response to increased taxes and fees, the State
will incur a cost increase for these services. The OLS cannot estimate the
magnitude of these cost and revenue increases.
����� The two private correctional facilities would be
subject to the regulatory cost-recovery fees set forth by the bill.� There
would be an indeterminate State revenue cost that would be based on the fee set
forth by the Division of Taxation.
����� The bill also imposes a private prison surtax in
addition to the corporation�s tax liability under the corporate business tax
equal to three percent of the corporation�s allocated taxable net income for
any privilege period in which it operates a private correctional facility in
the State. The OLS does not have access to the corporations� allocated taxable
net income. The OLS assumes that the reported revenues of the detention
facilities in the State may serve as a sufficient proxy, noting it is likely a slight
overestimate.
����� The correctional service businesses that contract with
the State subject to this three percent surtax would lead to both revenue and
cost increases. The State would collect the three percent surtax which would
lead to an increase in State revenues. To the extent the correctional service
businesses increase prices in response to increased taxes and fees, the State
will incur a cost increase for these services. The OLS cannot estimate the
magnitude of these cost and revenue increases.
����� The OLS assumes that all correctional service business
that contract with the State are currently subject to the Corporation Business
Tax and the Corporate Transit Fee. �For purposes of this estimate, the term
Corporation Business Tax includes the affiliated Corporate Transit Fee.� In
determining allocable entire net income, businesses may deduct certain taxes
and fees imposed by New Jersey as ordinary business expenses. �To the extent
that the charges established under the bill are interpreted in a manner
consistent with the Division of Taxation's treatment of deductible business
expenses, the bill would also result in concurrent Corporation Business Tax
revenue losses.
����� In 2025, CoreCivic, Inc. reported $22.6 million in
revenue for Elizabeth Detention Facility, therefore a three percent surtax
would net increase State revenue by roughly $620,000. The Geo Group went into
contract with the federal government in 2025 and thus did not report revenues
for Delaney Hall Detention Center. However, Delaney Hall�s annual report
indicates that the facility generates roughly $50,000 per bed annually, thus an
estimate of a 1,000-bed facility would equal $50 million per year and a three
percent surtax on such would increase State revenue by roughly $1.3 million.
����� The OLS notes that the bill requires that, of the
surtax revenues, one percent each will be appropriated to local government
units for: 1) programs provided by the county in which the correctional
facility that is being provided services by the correctional service business
is located, and 2) police and fire services provided by the municipality in
which the correctional facility that is being provided services by the
correctional service business is located.� This would represent a revenue
increase for these counties and municipalities.
��
Section:
Revenue, Finance and Appropriation
s
Analyst:
Humphrey Akujobi
Assistant Fiscal Analyst
Approved:
Thomas Koenig
Legislative Budget and Finance Officer
This legislative fiscal estimate has been produced by the
Office of Legislative Services due to the failure of the Executive Branch to
respond to our request for a fiscal note.
This fiscal estimate has been prepared pursuant to P.L.1980,
c.67 (C.52:13B-6 et seq.).