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Assembly committee advances bill to allow New Jersey deduction for long‑held small‑business stock gains
Summary
The Assembly committee voted to release A4455 with committee amendments; the bill would let qualifying taxpayers deduct capital gains from sales of New Jersey qualified small business stock held at least five years, using a sliding maximum tied to payroll location and basis limits.
The Assembly committee on (date) released A4455, a bill that would allow New Jersey taxpayers to deduct capital gains from the sale or exchange of qualified small business stock held for at least five years, after committee amendments narrowed and clarified the definition of qualifying businesses and the allowable deduction schedule.
The measure, presented by Assemblyman Solomon Freiman and backed in testimony by Aaron Price, CEO of TechUnited New Jersey, would allow an individual taxpayer with gains from one or more dispositions of New Jersey qualified small business stock to claim a deduction equal to the greater of a specified dollar amount or a multiple of the aggregate adjusted basis of the qualified stock under a diminishing sliding scale. Under the bill as amended, the maximum deduction would be the greater of $10,000,000 or 10 times the aggregate adjusted basis of the qualified stock. The amendment also changed a payroll test from an 80% in‑state payroll requirement to a threshold requiring at least 10% of the corporation’s payroll be attributable to employment located in New Jersey.
The bill’s eligibility rules would require the taxpayer to have held the stock for five years. Committee amendments add a schedule specifying maximum allowable deduction amounts, provide that married individuals filing separately would be limited to 50% of the dollar value or aggregate adjusted basis amount, and allow the deduction only for taxable years beginning on or after the bill’s effective date. The amendments also expanded the scope of assets treated as used in the active conduct of a qualified trader business and applied the deduction prospectively and retroactively where specified in the amendment language.
Supporters said the measure would align New Jersey with the federal treatment of so‑called QSBS incentives and with practice in most other states, aiming to make the state more competitive for startups and venture investment. Aaron Price of TechUnited New Jersey told the committee: “This is the kind of serial entrepreneurship that leads to more jobs, to more tax revenue. If it’s happening here, it’s — if it’s not happening here, it is happening somewhere else.” He and other witnesses argued that conformity with federal policy would reduce a perceived penalty against founders and investors who remain or start firms in New Jersey.
Committee members asked technical questions about how the bill treats C corporations versus pass‑through entities, how the $50 million asset cap is calculated, and whether receivables count as cash for purposes of the asset threshold. Freiman and witnesses clarified that the measure is aimed at C corporations and that the $50 million cap applies to cash on hand (and that investable dollars are excluded), but they also said they would follow up on the precise treatment of receivables.
After discussion, the committee voted to release the bill with committee amendments.
Votes at a glance: the committee called roll on A4455 as amended; members recorded on the roll call as casting affirmative votes include Assemblyman Bergen, Assemblywoman Fantasia, Assemblyman Sawicki, Assemblywoman Matsukutis, Assemblywoman Simmons, Assemblywoman Peter Paul, Assemblywoman Morales, Assemblywoman Katz, Assemblywoman Karabinchak and Chairman Spearman. The bill was favorably released with committee amendments.
The bill now goes to the next committee or the Assembly floor for further consideration.
