Current through Register Vol. 56, No. 18, September 16, 2024
(a) "Financial business
corporation" means a corporation that is, in fact, in substantial competition with
the business of national banks, and which also employs moneyed capital with the
object of making profit by its use as money through any of the following:
1. Discounting and negotiating promissory notes,
drafts, bills of exchange, and other evidences of debt;
2. Buying and selling exchange;
3. Making of or dealing in secured or unsecured
loans and discounts;
4. Dealing in
securities or shares of corporate stock by purchasing and selling such securities
and stock without recourse, solely upon the order and for the account of
customers;
5. Investing and reinvesting
in marketable obligations evidencing indebtedness of any person, copartnership,
association, or corporation in the form of bonds, notes, or debentures, commonly
known as investment securities; or
6.
Dealing in or underwriting obligations of the United States, any state or any
political subdivision thereof or of a corporate instrumentality of any of
them.
7. Certain leasing transactions
which approximate secured loans by meeting each of the following requirements:
i. Lessor must look primarily to the
creditworthiness of the lessee in order to recover its investment.
ii. Lessor may not rely on repetitious leasing of
the same property.
iii. The lease must
be a net lease.
iv. The lessor must
recover its full investment plus its cost of financing through the rental payments,
tax benefits, and the residual value of the property.
(b) For purposes of this section:
1. "Tax benefits" means those benefits derived
from depreciation and any investment tax credit related to the financed
property.
2. "Residual value of the
property" means the estimated value of the leased property at the end of the
original lease as determined at the time the lease is executed.
3. "Net lease" means a lease under which the
lessor will not, directly or indirectly, provide or be obligated to provide for:
i. The servicing, repair, or maintenance of the
leased property during the lease term.
ii. The purchasing of parts and accessories for
the leased property; however, the improvements and additions to the leased property
may be leased to the lessee upon its request.
iii. The loan of replacement or substitute
property while the leased property is being serviced.
iv. The purchasing of insurance for the lessee,
except where the lessee has failed in its contractual obligation to purchase or
maintain the required insurance.
v. The
renewal of any license or registration for the property unless such action by the
taxpayer is clearly necessary to protect its interest as an owner or financier of
the property.
(c)
A financial business corporation shall not include:
1. Any enterprise that is not a
corporation;
2. National
banks;
3. Production credit associations
organized under the Farm Credit Act of 1933 or the Farm Credit Act of 1971, Pub. L.
91-181 (12
U.S.C. §§
2091 et seq.);
4. Stock or mutual insurance companies authorized
to transact business in this State;
5.
Securities brokers or dealers, investment companies, or investment bankers not
employing moneyed capital with the object of making profit by its use as money or in
substantial competition with the business of national banks;
6. Real estate investment trusts;
7. Credit unions organized under the laws of this
State;
8. Savings banks organized under
the laws of this State;
9. Savings and
loan or building and loan associations organized under the laws of this
State;
10. Pawn brokers organized under
the laws of this State; and
11. State
banks and trust companies organized under the laws of this State.
(d) A financial business corporation
may not qualify as an investment company as that term is used in
N.J.A.C.
18:7-1.15.
(e) The business of national bank is defined, and
may be redefined from time to time, by the Congress of the United States at
12
U.S.C. §§
21 et seq. (The National
Banking Act).
1. "The business of national banks"
as used in
N.J.S.A. 54:10A-4(m)
and this section means the business of the bank
itself and does not include bank subsidiaries, holding companies, or
affiliates.
(f) A corporation
may qualify as a financial business corporation provided that 75 percent of its
gross income is derived from the activities enumerated in (a)1 through 7 above. For
purposes of making this computation, gross income shall be the sum of the amounts
reported on line 1 and lines 4 through 10 of Schedule A on Form BFC-1, adjusted as
follows:
1. "Gross income" for purposes of this
subsection and
N.J.A.C.
18:7-5.2(a)7 iii means the result
of adding the income amounts for gross receipts, or sales, dividends, interest,
gross rents, gross royalties, capital gain, net income, net gain, or loss from line
14(a), Part II, Federal Form 4797 and other income as adjusted for interest on
Federal, state, municipal, and other obligations not included in line 5 above and
the dividend exclusion;
2. Gross income
arrived at (f)1 above is the denominator;
3. The gross income included in (f)2 above
resulting from the activities set forth in (a)1 through 7 above is the numerator;
and
4. If the resulting percentage of
(f)2 and 3 above is 75 percent or more, such corporation is a financial business
corporation.
(g) A
corporation that qualifies as a financial business corporation must file the
applicable New Jersey corporation business tax return for the respective privilege
period and complete Schedule L apportioning the financial business conducted in New
Jersey, consistent with
N.J.S.A.
54:10A-38.
(h) For financial business corporations that are
members of a combined group, see N.J.A.C. 18:7-21 for more information on combined
groups and combined reporting.
