On March 10, Governor Mikie Sherrill unveiled her budget proposal for New Jersey’s 2027 fiscal year, which begins July 1. The $60.7 billion spending plan—a 1.6% increase over the current budget—includes significant tax changes, property tax relief adjustments, and a $1.7 billion structural deficit that could impact businesses across the state.
For New Jersey business owners, this budget proposal carries important implications for tax planning, operational costs, and strategic decision-making over the coming fiscal year. Understanding these changes now allows you to prepare and adjust your financial strategies accordingly.
At HBK CPAs & Consultants, we’ve reviewed the proposal to help our New Jersey clients navigate what these changes could mean for their businesses. Here’s what you need to know.
Corporate Tax Changes: New Limits on NOL Deductions
One of the most significant business tax provisions is the proposed $1 million cap on the corporate tax deduction for net operating losses (NOLs) and prior net operating losses (PNOLs). This change would primarily affect larger corporations that have historically carried forward substantial losses to offset taxable income.
What this means for your business: If your company has accumulated NOLs exceeding $1 million, you’ll need to reassess your tax projections and consider alternative strategies for managing your effective tax rate. This cap could accelerate tax liabilities for companies emerging from periods of loss or those with significant carryforwards.
Alternative Business Calculation Amendments
The budget proposes changes to the alternative business calculation that would affect pass-through entities:
Businesses with gross income between $500,000 and $1 million: The deduction would be reduced to 25%
Businesses with gross income above $1 million: The deduction would be eliminated entirely
What this means for your business: If you operate a pass-through entity such as an S-corporation, partnership, or LLC, these changes could significantly increase your New Jersey tax liability. Business owners in this income range should model the impact on their after-tax income and consider whether structural changes or timing strategies might help manage the transition.
New Healthcare-Related Fee for Large Employers
The proposal includes a new per-employee fee on employers with more than 50 employees enrolled in NJ FamilyCare (New Jersey’s Medicaid program). While specific fee amounts weren’t detailed in the initial announcement, this represents a new cost category for qualifying employers.
What this means for your business: If you employ more than 50 workers who are enrolled in NJ FamilyCare, budget for this additional per-employee expense. This may also influence decisions about employee benefits packages and compensation structures.
Property Tax Relief Adjustments
The budget modifies the Stay NJ program.
Stay NJ income threshold: Reduced from $500,000 to $250,000
Stay NJ maximum benefit: Capped at $4,000
These adjustments to property tax relief programs reflect the state’s effort to target benefits more narrowly while managing the overall budget deficit.
The Structural Deficit Question
The $1.7 billion structural deficit represents a significant challenge. A structural deficit means the state’s recurring expenses exceed its recurring revenues—a situation that typically requires either revenue increases or spending cuts in future years.
What this means for your business: While this year’s proposal includes specific tax changes, the structural deficit suggests potential for additional revenue measures in future budget cycles. Business owners should stay attuned to legislative developments and maintain flexibility in their long-term tax planning.
Other Business-Friendly Provisions
The budget also includes several provisions designed to support business operations:
Reduced filing fees for corporations and nonprofits
Additional staffing for the New Jersey Business Action Center
Continued funding for the Main Street Recovery Fund
Additional NJDEP staff to expedite permitting
Creation of a permitting dashboard for transparency
These administrative improvements could ease compliance burdens and accelerate project timelines for businesses navigating state regulatory processes.
Timeline and Next Steps
The proposed budget must be approved by both the Assembly and the Senate and signed into law by June 30. During the legislative process, provisions may be modified, removed, or added based on negotiations between the Governor and legislative leaders.
What you should do now: Don’t wait until the budget is finalized to assess its impact. Work with your tax advisors to model scenarios based on the proposed changes, particularly if your business would be affected by the NOL cap or alternative business calculation amendments.
If you have questions about how these proposed changes might affect your business, our team at HBK is here to help you analyze the implications and develop strategies to minimize adverse impacts. Contact us to discuss your specific situation and ensure you’re prepared for whatever provisions ultimately become law.
Understanding and planning for tax changes before they take effect gives you the greatest flexibility to respond strategically rather than reactively.
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