Allows 50 percent sales and use tax exemption for telephone, mail-order, and internet transactions by qualified businesses within Urban Enterprise Zone; allows quarterly tax returns for qualified businesses; increases allowable administrative expenses by qualified municipalities.

A4424

ASSEMBLY, No. 4424

STATE OF NEW JERSEY

222nd LEGISLATURE

�

INTRODUCED FEBRUARY 19, 2026

Sponsored by:

Assemblyman� SEAN T. KEAN

District 30 (Monmouth and Ocean)

SYNOPSIS

���� Allows 50 percent sales and use tax exemption for
telephone, mail-order, and internet transactions by qualified businesses within
Urban Enterprise Zone; allows quarterly tax returns for qualified businesses;
increases allowable administrative expenses by qualified municipalities.

CURRENT VERSION OF TEXT

���� As introduced.

��

An Act
concerning urban enterprise zones, amending P.L.1983,
c.303, and supplementing P.L.1966, c.30 (C.54:32B-1 et seq.).

����
Be It
Enacted
by the Senate and General Assembly of
the State of New Jersey:

���� 1.��� Section 3 of P.L.1983,
c.303 (C.52:27H-62) is amended to read as follows:

���� 3.��� As used in P.L.1983,
c.303 (C.52:27H-60 et seq.):

���� a.���� "Enterprise
zone" or "zone" means an urban enterprise zone designated by the
authority pursuant to P.L.1983, c.303 (C.52:27H-60 et seq.);

���� b.��� "Authority" or
"UEZ Authority" means the New Jersey Urban Enterprise Zone Authority
created by P.L.1983, c.303 (C.52:27H-60 et seq.);

���� c.���� "Qualified
business" means any entity authorized to do business in the State of New
Jersey which, at the time of designation as an enterprise zone or a
UEZ-impacted business district, is engaged in the active conduct of a trade or
business in that zone or district; or an entity which, after that designation
but during the designation period, becomes newly engaged in the active conduct
of a trade or business in that zone or district and has at least 25 percent of
its full-time employees employed at a business location in an eligible block
group as defined under section 12 of P.L.2021, c.197 (C.52:27H-99), and which
employees meet one or more of the following criteria:

���� (1)�� Residents within the
zone, the district, within another zone or within a qualifying municipality; or

���� (2)�� Unemployed for at least
six months prior to being hired and residing in New Jersey, and recipients of
New Jersey public assistance programs for at least six months prior to being
hired, or either of the aforesaid; or

���� (3)�� Determined to be low
income individuals pursuant to
[
the
Workforce Investment Act of 1998, Pub.L.105-220 (29 U.S.C. s.2811)
]

subsection
(36) of section 3 of the Workforce Innovation and Opportunity Act,
Pub.L.113-128 (29 U.S.C. s.3102(36))
;

���� Approval as a qualified
business shall be conditional upon meeting all outstanding tax obligations, and
may be withdrawn by the authority if a business is continually delinquent in
meeting its tax obligations;

���� d.��� "Qualifying
municipality" means any municipality that was previously designated as a
qualifying municipality prior to the effective date of P.L.2021, c.197;

���� e.���� "Public
assistance" means income maintenance funds administered by the Department
of Human Services or by a county welfare agency;

���� f.���� "Zone development
corporation" means a nonprofit corporation or association created or
designated by the governing body of a qualifying municipality to formulate and
propose a preliminary zone development plan pursuant to section 9 of P.L.1983,
c.303 (C.52:27H-68) and to prepare, monitor, administer and implement the zone
development plan;

���� g.��� "Zone development
plan" means a plan adopted by the governing body of a qualifying
municipality for the development of an enterprise zone therein, and for the
direction and coordination of activities of the municipality, zone businesses
and community organizations within the enterprise zone toward the economic
betterment of the residents of the zone and the municipality;

���� h.��� "Zone neighborhood
association" means a corporation or association of persons who either are
residents of, or have their principal place of employment in, a municipality in
which an enterprise zone has been designated pursuant to P.L.1983, c.303
(C.52:27H-60 et seq.); which is organized under the provisions of Title 15 of
the Revised Statutes or Title 15A of the New Jersey Statutes; and which has for
its principal purpose the encouragement and support of community activities
within, or on behalf of, the zone so as to (1) stimulate economic activity, (2)
increase or preserve residential amenities, or (3) otherwise encourage
community cooperation in achieving the goals of the zone development plan;

���� i.���� "Enterprise zone
assistance fund" or "assistance fund" means the fund created by
section 29 of P.L.1983, c.303 (C.52:27H-88);

���� j.���� "UEZ-impacted
business district" or "district" means an
economically-distressed business district classified by the authority as having
been negatively impacted by two or more adjacent urban enterprise zones in
which 50 percent less sales tax is collected pursuant to section 21 of
P.L.1983, c.303 (C.52:27H-80);

���� k.��� "Block group"
means statistical divisions of census tracts, that are generally defined by the
United States Census Bureau to contain between 600 and 3,000 people and are
used to present data and control block numbering;

���� l.���� "Municipal
Revitalization Index" means the index developed, maintained, and updated
from time to time, by the Department of Community Affairs ranking New Jersey's
municipalities according to separate indicators that measure diverse aspects of
social, economic, physical, and fiscal conditions in each locality;

���� m.�� "Qualified
assistance fund expense" means any reasonable expense related to:

���� (1)�� a construction project
improving, altering, or repairing the real property of a qualified business
located in an enterprise zone;

���� (2)�� full or part time
economic and community development positions in the municipality, other
governmental, or not-for-profit organization, or marketing;

���� (3)�� loans, grants, and
guarantees to businesses;

���� (4)�� payroll expenses,
personnel, services, and equipment purchases primarily for the provision of law
enforcement, fire protection, or emergency medical services within commercial
and transportation corridors located exclusively in an enterprise zone;

���� (5)�� planning and other
professional services related to economic and community development;

���� (6)�� cleaning and maintenance
of commercial and transportation corridors;

���� (7)�� the improvement of
public infrastructure in a commercial or transportation corridor and
transportation infrastructure located within an enterprise zone, including, but
not limited to, the payment of debt service related to the financing of a
transportation infrastructure project, and the pledge of funds credited to the
assistance fund toward the repayment of any loan issued by the State
Transportation Infrastructure Bank pursuant to section 34 of P.L.2016, c.56
(C.58:11B-10.4) or any government agency, for a transportation infrastructure
project, provided that up to 75 percent of any zone assistance funds may be
used to pay debt service related to the financing of the cost of a
transportation infrastructure project or pledged toward the repayment of any loan
for the cost of a transportation infrastructure project if such use is detailed
in that municipality's zone development plan certified by the UEZ Authority;

���� (8)�� the improvement of
public infrastructure related to a commercial, industrial, mixed use, or
multi-family residential property;

���� (9)�� employment and training
programs; or

���� (10) events meant to support
and draw activity into the enterprise zone, including fairs, festivals, and
concerts.

���� n. �� "UEZ
coordinator" means an individual designated by a qualified municipality or
zone development corporation as the individual in charge of the activities
related to the Urban Enterprise Zone program in that municipality;

���� o.��� "UZ-2
certification" means the UEZ Authority's certification of a qualified
business, pursuant to section 21 of P.L.1983, c.303 (C.52:27H-80), allowing the
qualified business an exemption to the extent of 50 percent of the tax imposed
under the "Sales and Use Tax Act," P.L.1966, c.30 (C.54:32B-1 et
seq.), when the sales transaction
[
physically
]
occurs
in-person,
or by mail order, telephone, internet, or similar transaction method, provided
that the qualified business maintains a physical place of business
within
an enterprise zone
, at which location items are regularly exhibited and
offered for retail sale, and the place of business is not utilized primarily
for the purpose of catalogue, mail order, or internet sales
.� The qualified
business may
[
deliver
]

be allowed
an exemption for the delivery of
merchandise to the purchaser at a location
outside an enterprise zone provided the sales transaction
[
was physically
made within the enterprise zone.� The regular tax rate shall be charged for
mail order, telephone, internet, and similar sales transactions delivered
within the State
]

otherwise qualifies for the
exemption
;

���� p.��� "UZ-4
certification" means the UEZ Authority's certification of a qualified
business, pursuant to section 8 of P.L.2021, c.197 (C.52:27H-79.1), allowing a
contractor of the qualified business to make tax-free purchases of materials,
supplies, and services for the exclusive use of erecting a structure or
building on, or substantially improving, altering, or repairing, the real
property of a qualified business located in an enterprise zone at the address
indicated on the qualified business's application for certification to the UEZ
Authority;

���� q.��� "UZ-5
certification" means the UEZ Authority's certification of a qualified
business, as defined under section 20 of P.L.1983, c.303 (C.52:27H-79),
allowing the qualified business to make tax-free purchases of office and
business equipment and supplies, furnishings, trade fixtures, repair, or
construction materials and all other tangible personal property (other than
motor vehicles and motor vehicle parts and supplies) for the exclusive use or
consumption on the premises of the qualified business within an enterprise zone
at an address indicated on the qualified business's application for
certification to the UEZ Authority.� The exemption may be used only for
personal property controlled by the qualified business.� This exemption shall
also apply to delivery charges and charges for services performed for a
qualified business at its zone location, including repair, janitorial, and
maintenance services;

���� r.���� "Economic Distress
Index" means a standardized score developed and maintained by the
Department of Community Affairs that equally incorporates the block group
unemployment rate and median household income according to the most recent
five-year estimate by the United States Census Bureau;

���� s.���� "Commercial
corridor" means the land area with frontage on a State, county, local, or
rail thoroughfare in an enterprise zone which is predominantly commercial or
industrial;

���� t.���� "Transportation
corridor" means a broad geographical band that follows a general
directional flow or connects major sources of trips. It may contain a number of
streets and highways and transit lines or routes;

���� u.��� "Improvement of
transportation infrastructure" means the undertaking of a capital project
for the construction, repair, upgrade, or maintenance of transportation
infrastructure;

���� v.��� "Transportation
infrastructure" includes, but is not limited to:

���� (1)�� all public highways,
roads, bridges, and streets in the State, whether maintained by the State or by
any county, municipality, or other political subdivision; and

���� (2)�� public transportation
facilities used in connection with public transportation service, such as
passenger stations, shelters, and terminals, automobile and bus parking
facilities, ramps, track connections, signal systems, power systems,
information and communication systems, roadbeds, transit lanes or
rights-of-way, equipment storage and servicing facilities, bridges, grade
crossings, rail cars, locomotives, motorbuses and other motor vehicles,
maintenance and garage facilities, revenue handling equipment, and any other
equipment, facility, or property useful or related to the provision of public
transportation service;

���� w.�� "Public
transportation service" means rail passenger service, motorbus regular
route service, paratransit service, motorbus charter service, and ferry
passenger service;

���� x.��� "Rail passenger
service" means and includes the operations of a railroad, subway, street,
traction, or electric railway for the purpose of carrying passengers in this
State or between points in this State and points in other states;

���� y.��� "Motorbus regular
route service" means and includes the operation of any motorbus or
motorbuses on streets, public highways, or other facilities over a fixed route
and between fixed termini on a regular schedule for the purpose of carrying
passengers for hire or otherwise in this State or between points in this State
and points in other states;

���� z.���� "Paratransit
services" means and includes any service, other than motorbus regular
route service and charter services, including, but not limited to, dial-a-ride,
non-regular route, jitney or community minibus, and shared-ride services such
as vanpools, limousines, or taxicabs which are regularly available to the
public.� Paratransit services shall not include limousine or taxicab service
reserved for the private and exclusive use of individual passengers;

���� aa.�� "Motorbus charter
service" means and includes subscription, tour, other special motorbus
services, school bus services, or charter services as set forth in section 7 of
P.L.1979, c.150 (C.27:25-7); and

���� bb.� "Ferry passenger
service" means any service which involves the carriage of persons for
compensation or hire by waterborne craft in this State or between points in
this State and points in other states.

(cf: P.L.2024, c.80, s.1)

���� 2.��� Section 29 of P.L.1983,
c.303 (C.52:27H-88) is amended to read as follows:

���� 29. a. (1) There is created an
enterprise zone assistance fund to be held by the State Treasurer, which shall
be the repository for all moneys required to be deposited therein under section
21 of P.L.1983, c.303 (C.52:27H-80), as amended by this act, P.L.2023, c.282,
and moneys appropriated annually to the fund.� All moneys in the fund shall be
held and disbursed in accordance with this section and section 11 of P.L.2021,
c.197 (C.52:27H-98) as necessary to fulfill the purposes of this section and
subject to the requirements hereinafter prescribed. The State Treasurer may
invest and reinvest any moneys in the fund, or any portion thereof, to
strengthen capital structures, leverage additional debt capital, and increase
lending and investing in economically disadvantaged communities, and in any
other manner that advances the goals of the Urban Enterprise Zone program,
including, but not limited to, legal obligations of the United States or of the
State or of any political subdivision thereof or government-sponsored
enterprises. Any income from, interest on, or increment to moneys so invested
or reinvested shall be included in the fund.

���� The amount in the enterprise
zone assistance fund, which shall be available to fulfill the purposes of this
section, shall be as follows:

���� (a)�� In the first five State
fiscal years next following the effective date of P.L.2021, c.197, 100 percent
of the amount determined pursuant to section 11 of P.L.2021, c.197
(C.52:27H-98) shall be available to fulfill the purposes of this section;

���� (b)�� In the sixth State
fiscal year next following the effective date of P.L.2021, c.197, 95 percent of
the amount determined pursuant to section 11 of P.L.2021, c.197 (C.52:27H-98)
shall be available to fulfill the purposes of this section and five percent of
such amount shall be deposited in the General Fund;

���� (c)�� In the seventh State
fiscal year next following the effective date of P.L.2021, c.197, 90 percent of
the amount determined pursuant to section 11 of P.L.2021, c.197 (C.52:27H-98)
shall be available to fulfill the purposes of this section and 10 percent of
such amount shall be deposited in the General Fund;

���� (d)�� In the eighth State
fiscal year next following the effective date of P.L.2021, c.197, 85 percent of
the amount determined pursuant to section 11 of P.L.2021, c.197 (C.52:27H-98)
shall be available to fulfill the purposes of this section and 15 percent of
such amount shall be deposited in the General Fund;

���� (e)�� In the ninth State
fiscal year next following the effective date of P.L.2021, c.197, 80 percent of
the amount determined pursuant to section 11 of P.L.2021, c.197 (C.52:27H-98)
shall be available to fulfill the purposes of this section and 20 percent of such
amount shall be deposited in the General Fund; and

���� (f)�� In the 10th State fiscal
year next following the effective date of P.L.2021, c.197, 75 percent of the
amount determined pursuant to section 11 of P.L.2021, c.197 (C.52:27H-98) shall
be available to fulfill the purposes of this section and 25 percent of such
amount shall be deposited in the General Fund.

���� (2) The State Treasurer shall
maintain separate accounts for each enterprise zone designated under P.L.1983,
c.303 (C.52:27H-60 et seq.) that is in good standing with the UEZ Authority in
accordance with rules adopted by the UEZ Authority, and one in the authority's
name for the administration of the Urban Enterprise Zone program, and for
providing grants, including planning grants, investments, loans, or other
guaranties related to qualified assistance fund expenses.� The State Treasurer
shall credit to each account an amount of the moneys deposited in the fund and
available to fulfill the purposes of this section, which amount shall be
determined by a weighted formula that applies 50 percent weight to a zone
municipality's number of commercial and industrial parcels as recorded by the
municipal tax assessor, its Municipal Revitalization Index Distress Score, as
determined by the Department of Community Affairs, and the average number of
unemployed persons in the municipality according to data provided by the New
Jersey Department of Labor and Workforce Development, and 50 percent weight to
the gross taxable sales in the municipality subject to reduced sales tax
pursuant to section 21 of P.L.1983, c.303 (C.52:27H-80), as determined by the
State Treasurer.� The data used in the formula, developed under this section,
shall be the most recent data that has been made available by the Department of
Community Affairs, the Department of Labor and Workforce Development, and the
State Treasurer.� When funds are received by a qualifying municipality pursuant
to this subsection, the funds shall be placed in a new trust or, for a
qualifying municipality that has a trust for an enterprise zone on the
effective date of P.L.2021, c.197, in the existing trust.� The Division of
Local Government Services in the Department of Community Affairs shall
promulgate regulations, policies, or procedures as necessary to implement the
provisions of this section.

���� (3) Beginning in State Fiscal
Year 2022, $2,500,000 shall be appropriated annually from the account in the
authority's name for the administration of the Urban Enterprise Zone program,
and for providing grants, investments, loans, or other guaranties related to
qualified assistance fund expenses.� This amount shall be adjusted annually by
the percentage change in the 12-month Consumer Price Index from June 30 to July
1.

���� (4)�� The State Treasurer
shall promulgate the rules and regulations necessary to govern the
administration of the fund for the purposes of this section, which shall
include, but not be limited to, regulations requiring the establishment of
separate bank accounts for funds credited to the enterprise zone account of
each municipality from the enterprise zone assistance fund, commonly known as
"first generation funds," and funds generated from the repayments of
loans to individuals and businesses from the enterprise zone account of each
municipality and the proceeds from the sale of properties and equipment
acquired through the enterprise zone program, commonly known as "second
generation funds," and the review, compilation, and monitoring of second
generation fund quarterly reports submitted by each enterprise zone.

���� Any individual, including an
individual who is not directly employed by a municipality, with the authority
to administer, allocate or approve the use of zone assistance funds is subject
to the "Local Government Ethics Law," P.L.1991, c.29 (C.40A:9-22.1 et
seq.), unless the individual is a State employee or a special State officer.

���� b.��� The enterprise zone
assistance fund shall be used for the purpose of assisting qualifying
municipalities in which enterprise zones are designated in undertaking economic
development projects in designated enterprise zones by funding qualified
assistance fund expenses.� However, a municipality shall not appropriate or
expend: more than 25 percent of the amount annually credited to its enterprise
zone assistance fund for public safety purposes, as described in paragraph (4)
of subsection m. of section 3 of P.L.1983, c.303 (C.52:27H-62); or more than
[
10
]

15

percent of the amount annually credited to its enterprise zone assistance fund
for administrative expenses.

���� c.���� The governing body of a
qualifying municipality in which an enterprise zone is designated and the zone
development corporation created or designated by the municipality for that
enterprise zone may, by resolution jointly adopted after public hearing, propose
to undertake an economic development project in the enterprise zone, and to
fund that project from moneys deposited in the enterprise zone assistance fund
and credited to the account maintained by the State Treasurer for the
enterprise zone.

���� The proposal so adopted shall
set forth a plan for the project and shall include:

���� (1)�� A description of the
proposed project;

���� (2)�� An estimate of the total
project costs, and an estimate of the amounts of funding necessary annually
from the enterprise zone account;

���� (3)�� A statement of any other
revenue sources to be used to finance the project;

���� (4)�� A statement of the time
necessary to complete the project;

���� (5)�� A statement of the
manner in which the proposed project furthers the municipality's policy and
intentions for addressing economic development in the enterprise zone as set
forth in the zone development plan approved by the authority; and

���� (6)�� A description of the
financial and programmatic controls and reporting mechanisms to be used to
guarantee that the funds will be spent in accordance with the plan and that the
project will accomplish its purpose.

���� As used in this section,
"project" means an activity that satisfies the requirements of a
qualified assistance fund expense, as that term is defined in subsection m. of
section 3 of P.L.1983, c.303 (C.52:27H-62), and which will lead to the creation
of new jobs and increased economic activity within the zone.

���� d.��� (Deleted by amendment,
P.L.2021, c.197)

���� e.���� (Deleted by amendment,
P.L.2021, c.197)

���� f.���� (Deleted by amendment,
P.L.2021, c.197)

���� g.��� (Deleted by amendment,
P.L.2021, c.197)

���� h.��� At the end of a State
fiscal year, if a municipality has not encumbered a portion of its allocation,
such amount may be carried forward to the next State fiscal year and the State
fiscal year thereafter.� If at the end of the third State fiscal year any of
those unencumbered funds remain, then the funds shall be transferred to the UEZ
Authority's account in the enterprise zone assistance fund.

���� i.���� At the end of a State
fiscal year, if a municipality has not expended or otherwise committed a
portion of its encumbered funds, then such amount may be carried forward to the
next three succeeding State fiscal years.� If at the end of the third State fiscal
year any unexpended funds remain, then the funds shall be transferred to the
UEZ Authority's account in the enterprise zone assistance fund.

���� j.���� At the end of a State
fiscal year, the Department of Community Affairs shall review an enterprise
zone's expenditures of funds received from the zone assistance fund.� If the
department finds that an enterprise zone expended such funds in a manner inconsistent
with the provisions of P.L.1983, c.303 (C.52:27H-60 et seq.) and P.L.2021,
c.197, then the enterprise zone shall repay such funds to the department
through the forfeiture of future zone assistance fund disbursements.� The
department shall withhold future funding from the enterprise zone until the
enterprise zone enters into and complies with a corrective action plan
developed by the department.

���� k.��� If in a State fiscal
year the amount allocated to the enterprise zone assistance fund is less than
the amount required to be allocated to fulfill the purposes of this section
pursuant to section 11 of P.L.2021, c.197 (C.52:27H-98) and paragraph (1) of subsection
a. of this section, the Legislature shall appropriate to the enterprise zone
assistance fund the amount that was not allocated in such State fiscal year in
a succeeding State fiscal year along with the funds required to be allocated in
that State fiscal year.

(cf: P.L.2023, c.282, s.2)

���� 3.� (New section)� a.�
Notwithstanding the provisions of section 17 of P.L.1966, c.30 (C.54:32B-17) or
any other law to the contrary, the director shall permit any person that is
required to collect or pay tax under P.L.1966, c.30 (C.54:32B-1 et seq.), and
which operates a qualified business, as designated pursuant to section 3 of
P.L.1983, c.303 (C.52:27H-62), to make and file a return for the remittance of
sales and use tax on a quarterly basis.� The return shall show all receipts
from sales and also the aggregate value of tangible personal property,
specified digital products and services sold by the person within the State,
including sales occurring inside and outside of an enterprise zone, the use of
which is subject to tax under P.L.1966, c.30 (C.54:32B-1 et seq.), and the
amount of taxes required to be collected with respect to such sales and use.

���� b.��� The return of a
qualified business shall be submitted to the director on or before the 20th day
following the quarter covered by the return.� If the due date falls on a
weekend or holiday, the return shall be due on the following business day.

���� 4. This act shall take effect
immediately, except that sections 1 and 3 shall apply to retail sales
occurring, and sales and use tax returns filed, on or after the first day of
the second month next following the date of enactment.

STATEMENT

���� This bill modifies certain
requirements concerning the administration of the sales and use tax in urban
enterprise zones (UEZ) and increases the percentage of funds that a qualified
municipality receiving funding from the enterprise zone assistance fund would
be allowed to use for administrative expenses.

���� Under the current law, a 50
percent exemption from the sales and use tax is allowed for taxable sales made
by a qualified business operating within a UEZ, as designated under the �New
Jersey Urban Enterprise Zones Act.�� However, the exemption applies only to
sales transactions that physically occur within a UEZ.� A qualified business is
allowed to deliver merchandise to the purchaser at a location outside a UEZ,
provided that the sale was physically made within the UEZ.

���� The bill expands the
applicability of the 50 percent sales and use tax exemption to include
transactions made by mail order, telephone, internet, or similar transaction.�
Specifically, the bill provides that these transactions would be subject to the
50 percent exemption, provided that the transaction is made by a qualified
business that maintains a physical place of business within a UEZ, at which
location items are regularly exhibited and offered for retail sale, and the
place of business is not utilized primarily for the purpose of catalogue, mail
order, or internet sales.� The exemption would also apply when the qualified
business delivers merchandise to the purchaser at a location outside a UEZ, so
long as the sales transaction otherwise qualifies for the exemption.�

���� Additionally, the bill
provides that a qualified business operating within a UEZ would be allowed to
file quarterly returns for the remittance of sales and use tax to the State.�
Under the bill, the return is required to be submitted on or before the 20th
day following the quarter covered by the return, and the return is required to
include the amount of all sales and use tax collected within the State,
including the amounts collected from transactions occurring both inside and
outside of a UEZ.� Currently, sellers that collect more than $30,000 in sales
and use tax in the preceding calendar year are required to file a return
monthly, while sellers that collect less than $30,000 in sales and use tax are
permitted to file a return quarterly.

���� Lastly, under current law, a
portion of the sales and use tax revenues generated within each UEZ are
deposited into an enterprise zone assistance fund and used to assist the
municipalities in which the UEZ is located in undertaking economic development
projects.� Current law provides that a municipality may use no more than 10
percent of these funds for administrative expenses.� Instead, the bill provides
that a municipality would be allowed to use no more than 15 percent of the
funding credited to its enterprise assistance fund for administrative expenses.