New Jersey’s latest budget proposal has renewed debate over so-called “corporate tax loopholes.” In her March 2026 budget address, Mikie Sherrill proposed generating hundreds of millions in additional revenue by tightening certain corporate tax provisions rather than broadly increasing tax rates. The proposal focuses primarily on adjustments to the state’s Corporation Business Tax (CBT) system, which taxes corporate income apportioned to New Jersey.
How the New Jersey Corporation Business Tax System Currently Works
The CBT currently includes numerous deductions and calculation methods designed to align with federal tax rules and avoid double taxation. Over the past decade, New Jersey has implemented significant reforms, including combined reporting for related corporate entities, revised treatment of international income such as Global Intangible Low-Taxed Income, and updated nexus and sourcing standards. These changes were intended to prevent corporations from shifting profits outside the state while maintaining consistency with federal tax concepts.
What Lawmakers Mean by “Corporate Tax Loopholes”
“Corporate tax loopholes” generally refer to provisions that allow corporations to significantly reduce taxable income through deductions or structural planning.
The current proposal primarily targets two areas.
First, it would limit the amount of net operating losses (NOLs) that corporations may deduct each year, reducing the ability to offset current profits with prior losses.
Second, it would restrict the Alternative Business Calculation deduction, which some lawmakers contend has allowed larger corporations to reduce tax liability, even though the provision was designed to benefit smaller businesses.
The Policy Debate: Revenue vs. Business Competitiveness
Supporters contend that tightening deductions promotes tax fairness and ensures that large corporations pay a baseline level of tax while helping fund public programs without raising individual income taxes.
Critics counter that additional limitations could increase the effective tax burden on businesses and potentially make New Jersey less competitive compared to neighboring states.
What New Jersey Businesses Should Watch
It is important to note these provisions are part of a budget proposal rather than enacted law. As such, the proposals must pass through the state legislature before becoming effective.
Businesses operating in New Jersey should monitor potential changes closely, particularly if their tax planning relies on historic losses or specialized CBT calculation methods. As always, companies should consult tax counsel to evaluate how evolving state tax rules may affect their corporate tax exposure.
Michael Salad is an attorney in Cooper Levenson’s Business & Tax practice group. He concentrates his practice on estate and asset protection planning, probate and trust administration, special needs planning, business transactions, mergers and acquisitions and tax matters. Michael holds an LL.M. in Estate Planning and Elder Law. Michael is licensed to practice law in Florida, New Jersey, New York, Pennsylvania, Maryland, Connecticut, Georgia, Massachusetts, Alabama, Arizona, Virginia and the District of Columbia. Michael may be reached at (954) 889-1850 or via e-mail at msalad@cooperlevenson.com.
The content of this post should not be construed as legal advice. You should consult a lawyer concerning your particular situation and any specific legal question you may have.