State Accepting Tax-Credit Applications from Companies Employing People with Disabilities

John Reitmeyer | January 23, 2020 | Budget
Program written into law last year as part of wage-increase initiative to ensure no workers with disabilities would lose jobs because of higher minimum wage
Credit: Edwin J. Torres/ Governor’s Office
Gov. Phil Murphy announces “Jobs NJ: Developing Talent to Grow Business in the Garden State” on Jan. 15, 2019.

The state’s $10 million annual tax-credit program for businesses that employ low-wage workers with disabilities is now accepting applications.

The initiative was created by lawmakers last year to address concerns that the state’s ramp-up to a $15 minimum wage could reduce job opportunities for workers with disabilities. It’s overseen by the Department of Labor and Workforce Development; applications can be filed for the 2019 tax year, the first year in which a mandatory wage increase occurred under the new law.

While the tax credits were established under the same law enacted by Gov. Phil Murphy that targets a $15 minimum wage by 2024, the program is being highlighted this year as part of a broader “Jobs NJ” initiative unveiled last week. Its goals include improving employment opportunities for specific groups, including people with disabilities.

“Every hardworking New Jerseyan working full-time deserves a fair, livable wage,” Murphy said in a statement promoting the availability of the new tax credits.

“With this new program, we are committed to providing individuals with disabilities the opportunity to fully participate in our society and economy while ensuring the viability of businesses in New Jersey,” he added.

Thinking beyond the minimum wage

Murphy, a first-term Democrat, signed the minimum-wage law last February after it was easily passed by the Democratic-controlled Legislature. That delivered on a major campaign promise for the governor, who often characterized the need to increase the minimum wage as part of a broader effort to make the state economy more equitable.

The first big increase in the minimum hourly rate under the new law was on July 1, 2019, when the minimum wage rose from $8.85 for most workers to $10. The law also calls for a series of $1 annual increases through 2024 to bring the wage up to $15, which was a key goal established by progressive groups across the country. The first of those increases took effect earlier this month, pushing the minimum wage up to $11 for 2020. (Before the law’s enactment, increases in the statewide minimum wage would occur automatically based on year-over-year changes in the annual rate of inflation.)

But not all low-wage workers are on the same ramp-up schedule due to the way the 2019 wage law was written. For example, a group of workers that includes farm laborers, seasonal workers and employees of businesses with five employees or fewer saw their minimum hourly rate increase more modestly on Jan. 1, from $8.85 to $10.30. In addition, the minimum wage increased from $2.63 to $3.13 for so-called tipped workers like waiters, waitresses and bartenders who rely on contributions from customers to bolster their pay.

Another section of the 2019 wage law established the new program that is providing tax credits to businesses that employ workers who have significant impairments during the minimum-wage ramp-up. Sponsors at the time said the tax credits would help address concerns about how the rising minimum wage could impact job prospects for those with significant disabilities, including fears those workers could be the first to lose jobs as wages rise.

Accepting applications

The Department of Labor and Workforce Development announced earlier this month that the first applications for the new tax credits are now available to offset costs applicable to tax year 2019.

“While it is critical for workers to be able to earn a living wage, we must also continue to support our business community, especially those who provide employment for hard-to-place workers,” Labor Commissioner Robert Asaro-Angelo said in the announcement.

The 2019 law defined qualified employees as any “whose work capacity is significantly impaired by age or physical or mental deficiency or injury and who, based on a determination by the State, is found eligible for personal assistance services or prescribed drugs because without such services or drugs the individual would be unable to perform the essential functions of the employment position that the individual holds.”

Businesses employing such workers can receive credits covering both the costs of their higher hourly pay under the wage law and any associated payroll-tax obligations, according to the law. There is no set amount for a credit, since that will depend on a number of factors, including how many qualified workers each business employs.

There are also no limits on what size or types of businesses can apply for the credits and no cap on how much an individual business can receive, but the program is limited to paying out a maximum of $10 million in credits annually.  

Applications for the tax credits must be submitted to the Department of Labor and Workforce Development and, if approved, businesses will be provided with a “certificate of credit” to present to the Department of Treasury’s Division of Taxation, labor officials said.

The credits can be used to offset either state corporate or gross-income tax liabilities, depending on how a business is organized and pays its annual taxes, officials said.