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New Jersey Governor Vetoes COVID-19 Business Tax Relief

Posted on Nov. 12, 2021

New Jersey's governor has vetoed a bipartisan bill that would have allowed small businesses to defer the payment and remittance of some employment and business-related taxes during the pandemic, out of concern that the “proposed program sets a troubling precedent.”

In a November 8 veto message, Gov. Phil Murphy (D) commended the sponsors of S. 2347 for “their efforts to identify creative measures to sustain our small business community during this extraordinarily challenging time.” But he said that while well-intended, the legislation is an imprudent means of helping small businesses that are struggling because of the COVID-19 pandemic.

S. 2347 was sponsored by Senate President Stephen Sweeney (D) and a bipartisan group of legislators. It passed both chambers of the State Legislature with overwhelming support in June.

“Our small businesses are not only the storefront shops that anchor Main Street, but are also the engines of our state’s economy, responsible for creating jobs and spurring economic growth,” Murphy said.

The bill proposed creating a new program to be administered by the New Jersey Economic Development Authority called the employment and business-related tax deferral assistance program. The program would have allowed the authority to enter into agreements with qualifying small businesses to defer the payment and remittance of some employment- and business-related taxes, including income taxes, sales and use taxes, petroleum products gross receipts taxes, and motor fuel taxes. To qualify, the businesses would have to have no more than 10 full-time employees and be experiencing economic hardship because of the pandemic.

The governor expressed concern about the practices endorsed by the legislation, which would have allowed small businesses “to retain taxes and contributions paid by its employees and customers who trust that these taxes and contributions will be paid to the state treasury on their behalf in a timely manner.”

“Importantly, this is money that does not belong to, and never belonged to, the business,” Murphy said.

The governor also said the bill “would distract the [Economic Development Authority] from its core focus of expeditiously distributing capital and providing other forms of assistance to businesses in need.”

Murphy also conditionally vetoed a bill (A. 4002) that would expand a tax deduction for “promotional gaming credits” to include revenue from sports wagering.

The governor suggested changes that would make the deduction available only to non-internet sports pool operations with the hope that it will attract new visitors to Atlantic City. If the Legislature accepts Murphy's proposed amendments to the measure, the bill can be enacted with his signature.

A. 4002 was sponsored by Assembly members Ralph Caputo (D), Ronald Dancer (R), and Carol Murphy (D), and Sens. Vin Gopal (D) and Paul Sarlo (D). It also passed both legislative chambers with overwhelming support.

The governor said that while the bill is intended to make the tax break available to racetracks as well as casinos, he’s concerned that it would apply to the online sports betting industry, which has flourished during the pandemic. 

Racetracks aren't eligible for the deduction because they aren't subject to the state's 8 percent casino gross revenue tax, and the bill is designed to "allow racetracks to take advantage of the [promotional gaming credits] deduction by applying the deduction to the taxes on sports wagering revenue that are paid by both casinos and racetracks for retail operations," Murphy said in his message to legislators detailing his proposed changes to A. 4002.

“New Jersey’s historic racetracks are a key economic engine, supporting local economies and attracting tourists and fans from around the world. Under the bill, racetracks that operate a sportsbook would have access to the same benefits as their casino counterparts. The tax benefits afforded by this legislation would hopefully incentivize casinos and racetracks to offer promotions that will attract patrons to Atlantic City, the state’s racetracks, and surrounding communities,” the governor continued.

“However, I am concerned that the bill’s parallel tax break for online sports wagering undermines the bill’s laudable goal of ushering in a resurgence of visitors to Atlantic City and our racetracks,” Murphy said. “While operational closures resulting from the . . . pandemic harmed the state’s tourism economy generally and the brick-and-mortar casino and racing industries in particular, online casino gambling and online sports wagering operations have thrived.”

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