New Jersey Gov. Phil Murphy (D) signed a bill Monday to give small businesses and partnerships a way to blunt the impact of the federal cap on state and local tax deductions.
The measure (S-3246/A-4807) gives S corporations, limited liability corporations, and other business partnerships the option of paying state income tax directly at the entity level, as a business tax—rather than at the partner level, as personal income tax. Sponsors of the measure have said it is “IRS-proof.”
- The IRS has taken aim at state efforts to skirt the tax law’s $10,000 SALT deduction cap, and has issued final rules (T.D. 9864) blocking state-created charitable funds meant to offer a workaround.
- Thousands of New Jersey small businesses will be able to again deduct their state income taxes, which will potentially save them hundreds of millions of dollars and “ultimately strengthen our economy and give New Jersey a much-needed competitive boost in the region,” Michele N. Siekerka, president of the New Jersey Business and Industry Association, said in a statement Monday.
- Murphy signed the measure into law without offering comment.