On June 30, 2026, New Jersey enacted Assembly Bill 5322/Senate Bill 4536 as part of its fiscal year 2027 state budget, impacting numerous individual and corporate taxpayers.
NOL Deduction Cap
For tax years ending on or after July 31, 2026, but before July 31, 2030, New Jersey will impose a temporary $1 million cap on the aggregate amount of net operating loss (“NOL”) deductions claimed by a taxpayer under the Corporation Business Tax Act. Taxpayers will be able to claim the unused losses for periods ending on or after July 31, 2030, but before July 31, 2032. The deduction is limited to 75% of the taxpayer’s allocated entire net income for the privilege period.
Treatment of Disallowed NOL Deductions
Any disallowed NOLs due to the $1 million cap or the 75% limitation can be carried forward for six additional privilege periods immediately following the privilege period during which the NOL deduction would have expired.
Penalty and Interest Relief
The law includes penalty and interest relief due to the $1 million cap of NOLs for underpayments of estimated tax installments. This relief applies to installments due after December 31, 2025, but before January 1, 2027, and to late payments of tax for tax years beginning in 2025.
Gross Income Tax Adjustment
Limitations have been imposed on the alternative business calculation adjustment and are retroactively applicable to tax years beginning on or after January 1, 2026:
- Taxpayers earning more than $1 million will no longer be entitled to the deduction.
- Taxpayers earning between $500,000 and $1 million may deduct 25% of their “business increment” from their taxable income, reduced from 50% under prior law.
- Taxpayers who have gross income of $500,000 or less may deduct 50% of their business increment from taxable income.
Connect with your Grassi advisor to discuss how the New Jersey Budget Bill may affect your business.
This article is provided for general informational purposes only and does not constitute tax, legal or accounting advice.
