In reviving and narrowing a surtax on the state’s most profitable businesses, lawmakers have mostly reversed a cut to New Jersey’s open space programs that happened when an earlier surcharge sunset at the start of 2024. The so-called corporate transit fee — a 2.5% surcharge on businesses with more than $10 million in profits — is in fact a part of the state’s corporate businesses tax, which means some of the revenue it brings the state must go toward the preservation of open space, farmland, and historical sites.
“Land preservation is critical. Not only does it keep the character of a community somewhat balanced with development, but it also is important for us because land is the filter for our water,” said Ed Potosnak, executive director of the New Jersey League of Conservation Voters. “Land does a better job filtering our water than any engineer will say they can do at a much higher cost than preserving the land in the first place.”
Since July 2015, New Jersey’s constitution has required a portion of the state’s business tax collections to go to environmental purposes. The constitution requires 6% of the $1 billion the surcharge is forecast to collect in the current fiscal year be set aside for those purposes.
Funding Allocation
The overwhelming share of the dedicated funds, 78%, will flow into the Garden State Preservation Trust to fund farmland and historical preservation alongside the Green and Blue Acres programs. Those funds will continue to flow into the preservation programs even after a statutory provision dedicating the tax’s proceeds to NJ Transit takes effect next year.
Under Green Acres, the state purchases land or development rights from its residents for preservation purposes, while Blue Acres allows the state to buy flood-prone properties from residents to improve storm resilience and keep homeowners out of a flood insurance death spiral.
Potosnak said that program would help residents like his late father, who had a Wayne home that lay within a flood zone and was flooded repeatedly. “He was flooded out five times. Every single time, the flood insurance and other state funds, etc., helped him rebuild,” Potosnak said. “The Blue Acres program would take a property like that and make them an offer for fair market value and allow him to move to another property that wouldn’t be flooding.”
Relocation also aids the ailing National Flood Insurance Program, which faces steep rising costs significantly caused by repeated flooding at a fraction of the homes covered by its policies.
Of the remaining constitutionally dedicated funds, 12% are set aside for the remediation of hazardous waste, and the last 10% is split equally between water pollution monitoring and the removal of underground water tanks.
Though the new version of the surtax is expected to bring in more than $250 million in constitutionally dedicated conservation funds over the next five years, those collections have a finite shelf life. The surcharge is set to expire on Dec. 31, 2028.
While a previous and substantially similar corporate business surcharge levied on businesses with at least $1 million in profits was extended repeatedly before lawmakers allowed it to sunset, it’s not clear lawmakers will extend the more recent surcharge.
Business groups have chaffed over the revived tax, noting it makes New Jersey’s taxes on highly profitable businesses the highest in the nation and that the state’s regular corporate tax brackets already make it the fourth-highest-tax state for businesses.
Supporters of the surtax say they will push for its continued existence when the time comes. “Our advocacy to ensure that there are sufficient funds available will continue,” Potosnak said. “But it’ll be based on data. It’ll be based on looking at how well we’re progressing.”
