This bill introduces a temporary cap of $1 million on net operating loss deductions that taxpayers can claim under the corporation business tax for privilege periods ending between July 31, 2026, and July 31, 2030. It defines "net operating loss deduction" to include various forms of loss carryovers. Taxpayers who are unable to utilize their full deduction due to this cap will be allowed to carry forward the unused portion to future privilege periods, specifically allowing them to claim the remaining deduction for periods ending between July 31, 2030, and July 31, 2032, with a limitation that it cannot reduce their allocated entire net income by more than 75 percent. Additionally, taxpayers can carry over unused deductions for six privilege periods following the period in which the deduction would have expired.

The bill also ensures that the limitations on net operating loss deductions do not affect the surrender or acquisition of corporation business tax benefit certificates and provides that no interest or penalties will be assessed for underpayments of estimated tax resulting from these limitations, as long as the payments are due between December 31, 2025, and January 1, 2027. This legislation aligns with the Governor's Fiscal Year 2027 budget recommendations and is projected to generate approximately $485 million in additional revenue for the State General Fund, impacting around 600 taxpayers, which is less than one percent of all corporation business tax filers in New Jersey.