Modifies eligibility for alternative business calculation adjustment allowed under gross income tax.

S4537 FISCAL NOTE

FISCAL NOTE

SENATE, No. 4537

STATE OF NEW JERSEY

222nd LEGISLATURE

DATED: JULY 2, 2026

SUMMARY

Synopsis:

Modifies eligibility for alternative business calculation
adjustment allowed under gross income tax.

Type of Impact:

Annual revenue gain to the Property Tax Relief Fund

Agency Affected:

Department of the Treasury

Executive
Estimate

Fiscal Impact

Fiscal Year 2027�

Annual State Revenue Gain

$120.0 million

Office of
Legislative Services Estimate

Fiscal Impact

FY 2027�

FY 2028

FY 2029

Annual State Revenue Gain

$128.6 million

$132.4 million

$136.4 million

�

The Office of Legislative Services (OLS)
generally agrees

with the Executive estimate that restricting the alternative business
calculation adjustment under the gross income tax will increase FY 2027 State
revenue collections by about $120.0 million.� The OLS only projects a
moderately larger impact in FY 2027 and extends its forecast to two additional
fiscal years.

BILL DESCRIPTION

����� The bill will limit the alternative business
calculation adjustment under the gross income tax beginning with tax year 2026.�

����� The adjustment currently permits all gross income
taxpayers with certain categories of business income to use 50 percent of the losses
in one category of business income to offset their taxable income from another.
�Unused deduction amounts may be carried forward for up to 20 years.�

����� The bill will limit eligibility to taxpayers with
gross incomes not exceeding $1 million, reduce the deduction to 25 percent for
taxpayers with gross incomes over $500,000 but no more than $1.0 million, and
maintain the deduction as is for taxpayers with gross incomes not exceeding
$500,000.�

FISCAL ANALYSIS

EXECUTIVE BRANCH

����� The Department of the Treasury estimates that this
bill will increase State revenues by $120.0 million in FY 2027.

OFFICE OF LEGISLATIVE SERVICES

����� The OLS generally agrees with the Executive�s revenue
projection that the bill will increase State revenue collections by about
$120.0 million in FY 2027 but estimates a moderately larger impact.��
Specifically, the OLS forecasts that the bill will raise State revenues by
$128.6 million in FY 2027, $132.4 million in FY 2028, and $136.4 million in FY
2029.�

����� The OLS bases its estimate on data provided by the
Department of the Treasury, which indicate that the tax year 2024 State revenue
loss from the Alternative Business Calculation Adjustment totaled $192.6
million with 245,000 tax return filers using the adjustment.� The data also
show that had the bill been in effect in tax year 2024, nearly 55,000 tax
return filers would have been negatively affected.� Of that total, roughly half
would have been excluded from the deduction altogether, while the other half
would have qualified only for a reduced deduction percentage.�

Section:

Legislative Budget and Finance Office

Analyst:

Oscar Mendez

Revenue and Economic Policy Analyst

Approved:

Thomas Koenig

Legislative Budget and Finance Officer

This fiscal note has been prepared pursuant to P.L.1980,
c.67 (C.52:13B-6 et seq.).