Bill Summary – FastDemocracy

LEGISLATIVE FISCAL ESTIMATE
                             [Second Reprint]
                                SENATE, No. 3275
                             STATE OF NEW JERSEY
                               221st LEGISLATURE
                                         DATED: JULY 22, 2024
                                              SUMMARY
    Synopsis:                   Revises various provisions of film and digital media content
                                production tax credit program.
    Type of Impact:             Annual State revenue decrease to the General Fund and Property Tax
                                Relief Fund.
    Agencies Affected:          New Jersey Economic Development Authority. Department of the
                                Treasury.
                                  Office of Legislative Services Estimate
    Fiscal Impact                                        FY 2025 through FY 2039
    Direct State Revenue Loss                                   Indeterminate
    The Office of Legislative Services (OLS) determines that the bill will have an indeterminate
     impact on State revenues. While expanding the film and digital media content production tax
     credit program to include certain wages paid to nonresident employees as qualified expenses
     will likely decrease revenues, other changes such as reallocating unused tax credits from other
     programs to the film tax credit program and modifying certain eligibility criteria may increase
     or decrease revenue losses depending on taxpayer behavior. The amount of the State revenue
     loss is indeterminate and will depend on the number of taxpayers claiming the enhanced tax
     credits and the proportion of their qualified expenses attributable to compensation paid to
     employees not subject to New Jersey gross income tax due to reciprocity agreements with other
     states.
    The magnitude of the revenue impact will depend on several factors, including the number of
     taxpayers claiming the enhanced tax credits, the proportion of their qualified expenses
     attributable to compensation paid to employees not subject to New Jersey gross income tax
     due to reciprocity agreements, the amount of unused tax credits from other incentive programs
     that are reallocated to the film tax credit program, and the extent to which taxpayers modify
     their activities in response to the bill's provisions.
    By allowing wages paid to certain out-of-state residents, such as Pennsylvania residents
     employed in New Jersey, to be included as qualified expenses, the bill will likely increase the
      Office of Legislative Services                                Legislative Budget and Finance Office
           State House Annex                                                Phone (609) 847-3105
              P.O. Box 068                                                   Fax (609) 777-2442
      Trenton, New Jersey 08625                                              www.njleg.state.nj.us
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   total amount of tax credits awarded to taxpayers that employ these individuals in the production
   of films or digital media content in the State.
                                    BILL DESCRIPTION
     This bill amends certain provisions of law governing the Film and Digital Media Tax Credit
Program to expand the scope of qualified film production expenses and qualified digital media
content production expenses to include wages and salaries paid to nonresident employees who are
not subject to New Jersey gross income tax due to a reciprocity agreement with another state, such
as Pennsylvania. The bill provides that these expenses would include payments made by a
taxpayer to a loan out company for services performed in New Jersey by individuals who are
employed by the loan out company and whose wages and salaries are subject to withholding but
not subject to tax under the New Jersey Gross Income Tax Act due to the provisions of a tax
reciprocity agreement with another state. Additionally, the bill amends the definition of “full-time
or full-time equivalent employee” under the tax credit program to include otherwise eligible
individuals whose wages and salaries are not subject to tax under the New Jersey Gross Income
Tax Act due to the provisions of a tax reciprocity agreement with another state.
     The bill also makes several other changes to the Film and Digital Media Tax Credit Program.
It allows unused tax credits from the Aspire and Emerge programs to be made available for the
provision of film tax credits to a broader range of taxpayers, subject to certain limitations. The
bill modifies eligibility requirements for reality shows and the calculation of digital media content
production expenses. It allows certain digital media content production expenses incurred for
postproduction services to qualify for enhanced tax credit percentages.
                                     FISCAL ANALYSIS
EXECUTIVE BRANCH
   None received.
OFFICE OF LEGISLATIVE SERVICES
    The OLS concludes that the bill will have an indeterminate impact on State revenues.
Expanding the tax credit program to allow wages paid to certain nonresident employees,
particularly Pennsylvania residents, to be included as qualified film and digital media content
production expenses will likely increase the total amount of expenses that are eligible for tax
credits. This change would result in larger tax credit amounts being awarded, leading to greater
revenue losses, holding all other factors constant. The OLS notes that, under the bill, unused tax
credits from the Aspire and Emerge programs are to be made available for taxpayers receiving
credits under the film tax credit program, subject to certain limitations. The bill also makes various
modifications to the definitions and eligibility criteria under the film tax credit program, which
could affect taxpayer behavior and the types of expenses that qualify. Depending on how taxpayers
respond, these changes may serve to increase or decrease the amount of credits awarded.
Therefore, the net effect of the bill on State revenues is uncertain, as it will depend on the
interactions between the expansion of eligible expenses, the reallocation of unused credits from
other programs, and taxpayer response to the modified program requirements. More information
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would be needed on the potential credit amounts involved and taxpayer behavior to quantify the
revenue impact with greater certainty.
  Section:     Revenue, Finance, and Appropriations
  Analyst:     Patrick Walsh
               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.).
Statutes affected: 
Introduced: 54:10A-5.39, 54A:4-12
Advance Law: 34:1B-362, 54:10A-5.39, 54A:4-12
Pamphlet Law: 34:1B-362, 54:10A-5.39, 54A:4-12