Special to TAPintoSPF. This story was written and produced by NJ Spotlight. It is being republished under a special NJ News Commons content-sharing agreement related to COVID-19 coverage. To read more, visit njspotlight.com.
The economic fallout from the pandemic has already caused hundreds of thousands of layoffs and boosted jobless claims by more than half a million.
State lawmakers overwhelmingly passed bills on Monday that are designed to cushion the impact of the coronavirus pandemic for small businesses by providing tax credits and payment deferrals to encourage them to retain employees during the severe economic downturn.
“We want to help keep workers on the payrolls and give businesses the assistance to withstand the economic consequences,” said Senate President Stephen Sweeney (D-Gloucester). “A financial lifeline will help prevent the collapse of business entities and make sure business infrastructure is in place to support the recovery process after the current crisis has been contained.”
The Senate also approved measures that would allow the governor to restrict rent increases on retail businesses, permit mortgage forbearance for impacted residential property owners and tenants during a state of emergency, and remove a requirement for businesses to pay severance for employees terminated in mass layoffs because of the crisis.
On Monday afternoon, the Assembly unanimously approved an identical version of the tax-deferral bill, which was expected to be quickly signed by Gov. Phil Murphy. It was due to vote on 17 other COVID-related bills.
“We believe New Jersey tax filers need more time to file and pay their taxes,” said Eliana Pintor Marin, who chairs the Assembly Budget Committee. “This bill would ensure that taxpayers only have one deadline for filing and paying both federal and state to avoid confusion for residents.”
The actions came as Murphy and the governors of six other Northeastern states announced the formation of a working group charged with reopening homes and businesses while preventing a resurgence of the pandemic.
Tax credit, deferral bills
In the Senate, the tax credit bill (S-2348) would allow businesses experiencing economic hardship as a result of the COVID-19 outbreak to take a credit against their New Jersey corporation business tax or their gross income tax liability for wages paid to eligible employees. The credits would be available to businesses that are eligible to claim an employee retention credit that recently established by the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act.
The state’s tax credit for employers would be equal to 20% of the federal credit for each employee, with a maximum of $1,000 per employee.
The tax deferral bill (S-2347) would allow small businesses to defer payments for taxes on sales, motor fuels, petroleum products and income, as well as contributions for workers’ compensation, unemployment, temporary disability and family leave. The deferrals would provide businesses with access to cash to continue to meet payroll, and purchase goods and services.
The bill would require all deferred payments to be paid to the state after the emergency over a two-year period, with 50% submitted no later than June 30, 2021, and the remaining 50% no later than June 30, 2022. The program would be run by the Economic Development Authority.
Sen. Anthony Bucco (R-Morris), a co-sponsor of the tax-deferral bill, said it would help small businesses weather the massive economic storm that has caused hundreds of thousands of layoffs and boosted jobless claims by more than half a million in the last three weeks.
“This legislation will provide a little extra financial support to help small businesses to keep their employees on payroll. That’s extremely important right now, especially when so many New Jerseyans are having trouble getting through to the state’s overwhelmed unemployment benefits system,” Bucco said.
Senate votes remotely for first time
The upper house passed the bills unanimously or with very large majorities in favor during a remote voting session — the Senate’s first — when senators participated by voice only because of social distancing rules. The business-related measures were part of a raft of more than 20 bills and resolutions designed to provide pandemic relief.
The New Jersey Business and Industry Association (NJBIA) said some of the bills were not perfect, but it welcomed the Legislature’s recognition that small business needs help from the state in the current crisis.
“New Jersey needs to be prepared to bounce back from this unprecedented time. Ensuring that our businesses have the necessary resources to stay afloat as we endure this crisis together will ultimately be an essential step in our recovery,” the association said.
NJBIA was one of about 50 business groups that recently urged the Legislature and Murphy to help business through the economic crisis. Among its long list of recommendations was that the state support the creation of a federal fund to provide direct grants to businesses suffering from COVID-19-related losses.
A Business and Employee Continuity and Recovery Fund would be a form of insurance for businesses who have found in the current crisis that their business-interruption policies don’t cover pandemics, and it would significantly ease the burden on insurers, according to Bob Considine, a spokesman for the association.
The idea was endorsed on Monday by the Senate, which approved a resolution calling on the federal government to create a federal fund to help businesses recover. Without it, the current scale of business disruption “will result in rampant unemployment, long-term damage to financial markets, and irreparable harm to communities across the country,” the resolution said.
Jay Feinman, a law professor at Rutgers Camden, compared such a fund to that created by the Terrorism Risk Insurance Act of 2002 in which the federal government provided reinsurance for the industry that would otherwise have been unable to insure acts of terrorism in the wake of 9/11.
“There are suggestions that we could do the same thing for some future pandemic,” said Feinman, who is co-director of the Rutgers Center for Risk and Responsibility.
Insurers may not cover viral, bacterial epidemics
After the SARS epidemic of 2002, many insurers excluded viral or bacterial contamination, and even those that didn’t required claimants to show property damage.
“So the insurance industry anticipated this type of thing but business owners, like most people, don’t have a detailed knowledge of what’s in their policies,” he said.
In the COVID-19 crisis, the insurance industry should not be accused of trying to avoid payouts because it recognized the risks of a pandemic, and specifically excluded them from its policies, Feinman said.
For businesses who are now surprised to find that they cannot claim for business interruption in the COVID-19 crisis, the question is now whether they and their agents will pay more attention to the detail of their policies in future, he said.
“Most businesses don’t read their policies,” he said. “They rely on whoever sells it to them but probably very few if any thought about this kind of risk. You think of fire, you think of flood, you think of ordinary accidents, not something like this. I think it’s going to make us think a little bit more carefully about how insurance gets marketed.”
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