Recent Developments in New Jersey Tax Law, July 2006

On July 8, 2006 NJ Governor Corzine signed into law 14 bills related to the 2007 fiscal year. Appropriations Act L. 2006, A4706, effective 07/08/2006, adds a 4% surcharge on corporation business tax for years ending in fiscal 2007, 2008 and 2009, and increases minimum tax under the corporation business tax. The law also added a 1% tax on the purchase of commercial property valued at more than $1M. L. 2006, A4701, effective 08/01/2006. The tax is 1% on the total value, not just the value in excess of $1M. C.46:15-7.2 8.a.(b) The tax also applies to a “…transfer for consideration in excess of $1,000,000 of a controlling interest in an entity which possesses…a controlling interest in classified real property…” C.54:15C-1 3.a.(1). What if you sell the same $5M warehouse to a family trust in exchange for an installment note? This is a common estate planning technique referred to as a note sale to an intentionally defective grantor trust (“IDIGIT”). Might this common estate planning transaction now be subjected to a 1% tax? Under the new laws, it might be.