Lawmakers propose tax breaks to save New Jersey diners

Two New Jersey lawmakers have proposed a bill that would extend new tax breaks to New Jersey diners in a bid to counter post-pandemic slowdowns and inflation.

The bill, dubbed the “Saving Our Diners and Protecting Our Past Act,” would exempt qualifying diners from New Jersey’s sales tax and create new tax credits for the state’s historic diners and other restaurants. It is sponsored by Sen. Paul Moriarty (D-Gloucester) and Assemblyman Lou Greenwald (D-Camden).

“They’re kind of the history and culture of many of our communities and kind of a symbol of our state, and I thought we could do something to maybe help them, preserve them, and keep them from closing,” Moriarty said.

The sponsors said diners — something of a cultural hallmark in New Jersey — need the assistance amid rising costs and shifting consumer patterns that have pushed some establishments that have operated for decades to close. Those closures include, among several others, the 58-year-old Cherry Hill Diner, the 38-year-old Townsquare Diner, and the 85-year-old Miss America Diner.

“This does two things: It preserves an institution that New Jersey is known for as part of our historical culture, and it also addresses an issue of affordability, not just for those small business owners, but for their patrons,” said Greenwald, the Assembly’s majority leader.

Even diners that remain operational face challenges, the two men said.

Some that used to operate 24/7 have slimmed their schedules or cut menu offerings, Moriarty said, and others dropped dinner service altogether to help make ends meet.

“There’s one right down the street from where my office is that used to be open seven days a week and have long hours,” Moriarty said. “Now they’re open six days a week, and they’re only open until two in the afternoon.”

The legislation would allow qualifying diners and restaurants that have been operating continuously for at least 25 years — not counting pandemic shutdown interruptions — to apply to be added to an annual registry of historic eateries.

Presence on that registry would exempt them from sales tax levies on sales of food and beverages consumed on site for a year, and they could renew that exemption by reapplying to the registry annually.

Restaurants and diners on the registry could also obtain two non-refundable tax credits worth up to $25,000 each.

Those credits, which would be applied to gross income tax and corporate business tax bills, would equal 10% of an eatery’s spending on ingredients used for meals or drinks, to a cap of $25,000.

To be eligible for the tax breaks, diners and restaurants must be small businesses under federal law. Restaurants can only obtain the exemptions and tax credits if they are family-owned.

The bill is not expected to pass during the current legislative session, which ends in mid-January, Moriarty said. That means diners and restaurants would have to wait until at least Jan. 1, 2027, to take advantage of the bill’s exemption and credits, if it becomes law.

It’s not clear how much the exemption and tax credits will cost the state in foregone revenue. The nonpartisan Office of Legislative Services has not yet completed a fiscal note to estimate its costs. Greenwald suggested the tax breaks would not overstrain state coffers.

“This is not going to break the bank. I think if you look at what it can generate by the rejuvenation of people going to these landmarks, as well as maybe new and young restaurant owners who want to come in and take over some of these businesses, I think it can create a stimulus of the economy,” he said.

Moriarty said he expects hundreds of diners and restaurants to qualify for a spot on the registry and its tax benefits, though it’s not clear how many of them would qualify for the full value of the tax credits by spending at least $250,000 on ingredients.

Businesses on the registry that cannot use the full value of their tax credits in a given year because they would reduce their tax liability below zero or statutory minimums, in the case of the corporate business tax, can apply them to taxes billed in up to seven future years.

They could also trade or sell those tax credits to other firms, which could apply them to income tax bills in up to three future years, or six future years for corporate tax bills.