On June 30, 2026, New Jersey Governor Mikie Sherrill signed the state budget bills into law, which impact both corporate and individual taxpayers.

Tax changes in the budget bills include:

• Capping, temporarily, the net operating loss deduction (NOLD) for corporation business tax (CBT) taxpayers
• Limiting the alternative business calculation adjustment for individual taxpayers
• Imposing a fee on certain employers that employ individuals receiving health benefits coverage through Medicaid
• Imposing an annual registration fee on certain data brokers and data collectors
• Modifying the income tax cap of the Stay NJ property tax credit program
• Increasing the childcare tax credit

Outside the budget bills, the legislature also passed Senate Bill No. 4390 (SB 4390), which if approved by the governor, would reduce tax credits available to data centers under the Next New Jersey Program.

New corporate net operating loss deduction cap

Assembly Bill No. 5322 (AB 5322) imposes a temporary $1 million cap on the utilization of corporate NOLDs for privilege periods ending on or after July 31, 2026, but before July 31, 2030. The new cap does not affect public utilities. For corporate taxpayers with a privilege period of less than 12 months, the $1 million cap is prorated based on the number of months in the short tax year.

If the temporary cap prevents a taxpayer from claiming a portion of any NOLD, the taxpayer may carry forward and apply the unused deduction to future privilege periods subject to further limitations. Specifically, for a privilege period ending on or after July 31, 2030, but before July 31, 2032, a taxpayer with a disallowed NOLD may claim the amount of the NOL deduction unused due to the cap; the deduction, however, may not reduce the taxpayer's allocated entire net income by more than 75% for the privilege period. Taxpayers with a reduced or disallowed NOLD because of these caps may carry over any remaining unused NOLD for an additional six privilege periods immediately following the privilege period in which the NOLD would have otherwise expired.

Interest and penalties will not be assessed for the underpayment of estimated taxes for installments due and payable after December 31, 2025, and before January 1, 2027, if the underpayment results from the NOLD cap.

AB 5322 took effect immediately and applies to any privilege period ending on or after July 31, 2026.

Alternative business calculation adjustment allowed under the gross income tax

Retroactively applicable to tax years beginning on or after January 1, 2026, Assembly Bill No. 5323 (AB 5323) imposes limitations on the alternative business calculation adjustment available to individual taxpayers under N.J.S.A. 54A:3-9. The adjustment is reduced from 50% to 25% for taxpayers with gross income over $500,000 and the adjustment is eliminated for taxpayers with gross income over $1,000,000.

Under prior law, the alternative business calculation adjustment allowed eligible taxpayers to deduct 50% of their "business increment" from their taxable income. A business increment is the difference between a taxpayer's regular business income (without netting income and losses across categories of income) and alternative business income (offsetting income in one category against losses in another category). The categories of income considered are (i) net profits from business; (ii) net gains or net income from rents, royalties, patents and copyrights; (iii) distributive share of partnership income; and (iv) net pro rata share of S corporation income.

Beginning with tax year 2026, the deduction allowed under the adjustment is limited as follows:

• Gross income of $500,000 or less — eligible taxpayers may deduct 50% of business increment from taxable income
• Gross income over $500,000 but less than $1,000,000 — eligible taxpayers may deduct 25% of business increment from taxable income
• Gross income of $1,000,000 or more — eligible taxpayers are not allowed a deduction

This bill is estimated to increase state revenues by $120 million per year.

Child tax credit increase

Senate Bill No. 4531 (SB 4531)/Assembly Bill No. 5329 (AB 5329) temporarily increases the child tax credit (N.J.S.A. 54A:4-17.1) by 25%. For tax years before 2026 and after 2028, the credit ranges from $200 to $1,000 depending on a New Jersey resident's taxable income. Under SB 4531/AB 5329, and for tax years 2026, 2027 and 2028, the credit ranges from $250 to $1,250. The following table shows the credit available:

Data broker and data collector registration fee

Assembly Bill No. 5328 (AB 5328) requires the establishment of a public registry of data brokers and data collectors doing business in New Jersey. Data brokers and data collectors that process the personal data of New Jersey consumers must register annually and pay a registration fee to the Division of Consumer Affairs.

"The registration fee schedule [is] as follows for a data broker that possesses, or a data collector that collects and sells or 12 licenses to a data broker, the personal data of:

• 100,000 consumers or fewer in the State — $5,000
• More than 100,000 and fewer than 500,000 consumers in the State — $10,000
• More than 500,000 and fewer than one million consumers in the State — $100,000
• More than one million and fewer than 1.5 million consumers in the State — $500,000
• More than 1.5 million and fewer than 2.5 million consumers in the State — $750,000
• More than 2.5 million and fewer than 4.5 million consumers in the State — $1,000,000
• More than 4.5 million consumers in the State — $1,500,000"

It appears the law will require a technical correction to clarify which fee would apply to a broker that has data on exactly 500,000, 1 million, 1.5 million, 2.5 million or 4.5 million consumers.

Brokers that fail to timely register and pay the annual fee will be subject to a $2,500 penalty per day of noncompliance.

Other tax-related budget bills

Fees on employers with employees utilizing state Medicaid

Assembly Bill No. 5324 (AB 5324), effective June 30, 2026, establishes fees for certain employers that employ individuals who receive health benefit coverage through the State Medicaid program. The fee, which will be imposed on an employer, is determined based on the number of employees, and dependents of employees, who receive health benefits coverage through the State Medicaid program as of December 31 of the applicable year as follows:

An employer is not liable for the fee for any employee, or dependent of the employee, with a developmental disability, an intellectual disability or a permanent physical disability.

Beginning on July 1, 2027, AB 5324 excludes an employer's lack of coverage for the following persons from the requirements of its provisions: (1) an employee who has been employed by the employer for less than 90 days; (2) an employee who works part-time, on a per diem basis, or who is a temporary employee; or (3) a seasonal employee.

An employer who fails to pay the fee for each impacted employee or dependent will be subject to a penalty not to exceed $500 per day for each day the fee remains unpaid.

Stay NJ property tax credit program

The Stay NJ program offers property tax benefits to homeowners aged 65 and older by reimbursing applicants for 50% of their property tax bills, up to a maximum of $13,000, with a benefit cap of $6,500 for 2025. The Stay NJ benefit is calculated and distributed after New Jersey's Senior Freeze and ANCHOR benefits are calculated. A taxpayer's modified taxable income must be below $500,000 and they must have occupied the home for the full 12 months of the applicable tax year.

Assembly Bill No. 5327 (AB 5327) reduces the program's modified income cap from $500,000 to $200,000. Qualifying taxpayers will receive benefits totaling 50% of their property tax bill, up to certain thresholds determined by their modified taxable income, as described below:

• Modified taxable income of $100,000 or less would receive the maximum benefit of up to $6,500 on a tax-year basis
• Modified taxable income greater than $100,000 but less than $150,000 may receive up to $5,000 on a tax-year basis
• Modified taxable income of $150,000 or more and up to $200,000 may receive up to $4,000 on a tax-year basis

The modified taxable income eligibility threshold is capped at $200,000.

The limitations on the Stay NJ program apply semi-retroactively to include the fiscal year ending June 30, 2026.

Data center tax incentives

Senate Bill 4390 — the "End Data Center Tax Credits Act" — would reduce the annual amount of tax credits available to data centers under the Next New Jersey program from $500 million to $250 million. If enacted, SB 4390 would take effect immediately. (The legislature also approved two non-tax data center related bills that would require data centers to submit semi-annual water and energy usage reports (SB 3379) and would require electric public utilities to create special rules that would protect non-data center customers from increased costs (AB 796).)

Implications

Corporate taxpayers with New Jersey NOL carryforwards may want to consider evaluating the effect of the temporary $1 million deduction cap on projected cash tax liabilities, estimated tax payments and NOL realizability. While the legislation preserves the ability to carry forward disallowed NOLDs and extends the carryforward period, taxpayers may face a delay in realizing the benefit of existing NOLs. The impact of this new legislation should be considered in conjunction with New Jersey's 80% of income limitation for any NOLs generated for privilege periods ending on or after July 31, 2023. Taxpayers should refer to Technical Bulletins 94(R) and 95(R) for additional detail regarding New Jersey NOLs.

Individual taxpayers subject to the gross income tax may want to consider reassessing their alternative business tax adjustment calculations for 2026 taxes. Middle and low-income senior citizens could see higher Stay NJ program benefits, while high-income earners could be phased out.