This bill proposes to increase the safe harbor compensation amount under the business profits tax from $75,000 to $100,000. It also introduces a mechanism for biennial adjustments to this threshold, starting from tax years beginning on January 1, 2025. These adjustments will be based on the 2-year percentage change in the Consumer Price Index for All Urban Consumers, Northeast Region, as published by the Bureau of Labor Statistics, with the new amount rounded to the nearest $1,000. The act will apply to taxable periods ending on or after December 31, 2024, and will take effect 60 days after its passage.

The fiscal impact of the bill is indeterminable, as it is not clear if taxpayers will have additional compensation expenses above the current $75,000 limit. However, the Department of Revenue Administration has provided an estimate based on the assumption that the increase to $100,000 could result in a decrease in revenue for the General Fund and Education Trust Fund. The estimated decrease in tax liability for tax years ending on December 31, 2024, is from $8.8 million to $7.7 million. The bill does not require additional funding for implementation, and the Department of Revenue Administration expects to absorb any administrative costs within its operating budget.

Statutes affected:
Introduced: 77-A:4