New Jersey Governor Mikie Sherrill’s proposed $60.7 billion budget for fiscal year 2027 features record property tax relief, no new taxes on individuals, and a plan to begin closing the state’s $3 billion structural deficit. To help achieve that, the proposal also includes three business tax measures expected to generate approximately $750 million for the state annually.
As the Legislature reviews the budget ahead of the July 1 fiscal year start, businesses operating in New Jersey should understand what has been proposed and how it could affect their tax position.
1. Limits on the Alternative Business Calculation Deduction
The budget proposes changes to the Alternative Business Calculation (ABC) Adjustment, which allows certain pass-through business owners to net business income and losses across categories and carry forward unused business losses against future business income for NJ Gross Income Tax purposes.
Under the proposal:
- The ABC adjustment would be reduced to 25% for taxpayers with gross income between $500,000 and $1 million.
- The adjustment would be eliminated entirely for taxpayers with gross income above $1 million.
According to the New Jersey Business & Industry Association (NJBIA), out of roughly 240,000 taxpayers who currently claim the adjustment, about 10,000 would see an increase in tax liability as a result of the change. Affected S corporation, partnership and LLC owners may find it helpful to evaluate cash distribution strategies, estimated tax payments, and owner-level tax exposure for the current and future filing periods.
2. Temporary Cap on Net Operating Loss (NOL) Deductions
The proposal would impose a $1 million cap on NOL deductions under the Corporation Business Tax, applicable to both current NOLs and Prior Net Operating Losses (PNOLs), for tax years 2026 through 2028.
For businesses carrying significant prior-year losses, the cap could accelerate cash tax payments and compress the timeline for utilizing deferred tax assets. Businesses with longer loss utilization horizons should reassess the timing and value of projected tax benefits during the three-year window, including any effect on financial statement reporting.
3. Employer Healthcare Assistance Contribution
The budget introduces a graduated assessment on employers with 50 or more employees enrolled in NJ FamilyCare (Medicaid), ranging from $325 to $725 per covered employee. Employers that meet the threshold may review workforce composition and benefits enrollment data and factor the potential cost into payroll and benefits budgeting.
Other Provisions to Note
The broader budget includes several additional items relevant to businesses, individuals, and families:
- $4.2 billion in direct property tax relief, including through ANCHOR, Stay NJ, and Senior Freeze programs
- Stay NJ adjustments, lowering income eligibility from $500,000 to $250,000 and reducing the maximum benefit from $6,500 to $4,000
- Full pension funding, which represents roughly 12% of the total spend
- $12.4 billion in K-12 formula aid, an increase of $372.1 million
- More than $1 billion in NJ Transit support, partially funded through the Corporate Transit Fee
- Continuation of individual tax credits, including the Child Tax Credit and Earned Income Tax Credit
What Businesses Should Be Evaluating Now
The New Jersey 2027 budget proposal will move through legislative committee hearings before the Governor approves or vetoes it by June 30. Provisions may be revised, scaled back or removed during that process, making it important to plan across multiple scenarios, with flexibility in mind.
Businesses may now find it helpful to model the impact on cash flow and effective tax rates and align planning decisions with broader financial operational strategy. Engaging an advisor at this stage can help translate these provisions into actionable, informed planning.
For more information, the 600-page, detailed budget can be found here, and the 100-page “Budget in Brief” here.
How Grassi’s Tax Advisors Can Help
Grassi’s tax advisors are proactively monitoring New Jersey’s FY 2027 budget and its potential impact on businesses, individuals and families across the state. For more information or for help understanding how these provisions may affect your planning and strategy, reach out to a Grassi advisor today.
Q: When did New Jersey release its FY 2027 budget proposal?
A: Governor Sherrill delivered the budget address on March 10, 2026. The detailed budget book was published online on March 25.
Q: How does New Jersey’s FY 2027 budget affect businesses?
A: The proposal includes three revenue measures targeting businesses: changes to the ABC Adjustment for pass-through owners, a temporary cap on NOL deductions, and a new healthcare contribution for certain employers.
Q: What can my business do now to prepare?
A: Model multiple scenarios, assess the impact on cash flow and tax rates, and work with an advisor to build flexibility into planning before the final budget is signed by June 30.
Q: How can Grassi help?
A: Grassi’s tax advisors are monitoring the FY 2027 budget for New Jersey and helping businesses evaluate exposure. Reach out to a Grassi advisor to start the conversation.
