SENATE, No. 4712
STATE OF NEW JERSEY
222nd LEGISLATURE
INTRODUCED OCTOBER 1, 2026
Sponsored by:
Senator SHIRLEY K. TURNER
District 15 (Hunterdon and Mercer)
SYNOPSIS
Imposes 10 percent tax on computer processing for certain artificial intelligence systems and dedicates revenue to "AI Workforce Impact Transition Fund."
CURRENT VERSION OF TEXT
As introduced.
An Act imposing a tax on AI computer processing, dedicating revenues to the support of individuals displaced from their jobs due to artificial intelligence, and supplementing Titles 34 and 54 of the Revised Statutes.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. As used in sections 1 through 3 of P.L. , c. (C. ) (pending before the Legislature as this bill):
"AI computer processing" means the performance of computer processing services for use in AI system services by a qualified AI business.
"AI computer processor" means a person, including a contracted processor or controlled processor, performing AI computer processing.
"AI system development" means the development, training, and refinement of an AI system, including, but not limited to, the design and training of an AI system that is, or is intended to be, commercially available and intended, in whole or in part, for business uses within the State.
"AI system operation" means the operation, maintenance, or modification of an AI system that is commercially available and intended, in whole or in part, for business uses within the State.
"AI system services" means services related to AI system development or AI system operation.
"Artificial intelligence system" or "AI system" means any machine-based system that processes inputs using algorithms, statistical models, or neural networks to generate outputs such as predictions, recommendations, decisions, or content that materially influence or replace human judgment in performing a job function. "AI system" includes machine learning systems, large language models, generative artificial intelligence tools, robotic process automation systems, and automated decision-making platforms. "AI system" does not include general-purpose software, standard database management systems, or basic rule-based automation that does not incorporate learning or adaptive capabilities.
"Contracted processor" means an AI computer processor, other than a controlled processor, that performs AI computer processing for use by a qualified AI business in exchange for the payment of consideration.
"Controlled processor" means an AI computer processor owned and operated by a qualified AI business, including any affiliate or subsidiary thereof, which AI computer processor performs AI computer processing for use by the qualified AI business.
"Director" means the Director of the Division of Taxation.
"Division" means the Division of Taxation in the Department of the Treasury.
"Person" means an individual, business, or other entity.
"Qualified AI business" means a person engaged in AI system services.
"Token" is a specific unit of computer processing calculated independently by each service provider, which unit is uniquely identifiable to the type of computer processing generated and which unit may: be identified as query processing, model-processing, input-output processing, or another technical classification; generate a specific billing based on computer processing services; and be measured in floating-point operations per second.
2. a. (1) There is imposed a tax in the amount of 10 percent of the value generated by AI computer processing performed: by any AI computer processor that is located in the State; or for use by a qualified AI business engaged in AI system services. The tax imposed pursuant to this section shall be paid by the AI computer processor that performs the AI computer processing.
(2) For the purposes of determining the tax imposed pursuant to this section, the value generated by AI computer processing shall be equal to the market value of the tokens required to perform the AI computer processing, as calculated using the following methods:
(a) if the AI computer processing is performed by a contracted processor, the value generated by AI computer processing shall equal the number of tokens required to perform the AI computer processing, multiplied by the billing rate per token charged by the AI computer processor; or
(b) if the AI computer processing is performed by a controlled processor, the value generated by AI computer processing shall be calculated pursuant to a method of calculation approved by the division for the respective AI computer processor.
(3) Notwithstanding any provision of this subsection to the contrary, when AI computer processing is performed by an AI computer processor located outside the State for a qualified AI business, the amount of tax otherwise imposed pursuant to this section shall be apportioned on the basis of the percentage of the value generated by AI computer processing for the qualified AI business that is attributable to AI system services used for or intended for business uses within the State.
b. (1) The Director of the Division of Taxation shall collect and administer the tax imposed pursuant to this section. In carrying out the provisions of this section, the director shall have all powers and authority granted in P.L.1966, c.30 (C.54:32B-1 et seq.). The tax shall be reported and paid to the director on a quarterly basis in a manner prescribed by the director.
(2) As applicable, each person responsible for calculation and payment of the tax imposed, collected, or required to be paid, collected, or remitted under this section shall have the same right in respect to collecting the tax from that person's customer or in respect to non-payment of the tax by the customer as if the tax were a part of the purchase price of the AI computer processing and payable at the same time; provided, however, that the director shall be joined as a party in any action or proceeding brought to collect the tax.
(3) For the purposes of this subsection, "person responsible for the calculation and payment of the tax" includes: a person, including a partnership, or corporation; an officer, director, stockholder, or employee of a corporation; or a member or employee of a partnership, who as such officer, director, stockholder, employee, or member is under the duty to pay, collect, or remit the tax imposed in this section.
c. The tax imposed pursuant to this section shall be governed by the provisions of the State Uniform Tax Procedure Law, R.S.54:48-1 et seq.
d. Any amounts collected pursuant to this section shall be deposited into the fund established pursuant to section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill).
3. a. An AI computer processor subject to tax pursuant to section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall retain records of all AI computer processing performed by the AI computer processor. The records shall be retained in such form and manner as the division may require, which records shall be submitted to the division at such intervals as the division may require and upon the division's request. The records shall include, but need not be limited to:
(1) the scope and nature of AI computer processing performed, including information verifying the AI system services for which the AI computer processing was used, and the qualified AI business for which the AI computer processing was performed;
(2) the total volume of AI computer processing performed by the AI computer processor in its capacity as a controlled processor and in its capacity as a contracted processor, respectively;
(3) the total value generated by AI computer processing, performed by the AI computer processor in its capacity as a controlled processor and in its capacity as a contracted processor, respectively, including the method of calculation;
(4) the amount of AI computer processing performed in this State and the value generated by AI computer processing for a qualified AI business that is attributable to AI system services used for or intended for business uses within the State; and
(5) any other information required by the division.
b. A qualified AI business shall retain records of all AI computer processing performed by an AI computer processor for use by the qualified AI business engaged in AI system services. The records shall be retained in such form and manner as the division may require, which records shall be submitted to the division at such intervals as the division may require and upon the division's request. The records shall include, but need not be limited to:
(1) the scope and nature of AI computer processing consumed, including information verifying the AI system services for which the AI computer processing was used, and the AI computer processor that performed the AI computer processing;
(2) the total volume of AI computer processing used by the qualified AI business, including the total volume performed by a controlled processor and a contracted processor, respectively;
(3) the total value generated by AI computer processing used by the qualified AI business, including, but not limited to, receipts documenting the consideration paid to any contracted processor for the performance of AI computer processing;
(4) the value generated by AI computer processing used by the qualified AI business that is attributable to AI system services used for or intended for business uses within the State; and
(5) any other information required by the division.
4. a. As used in this section:
"AI system development" means the development, training, and refinement of an AI system, including, but not limited to, the design and training of an AI system that is, or is intended to be, commercially available and intended, in whole or in part, for business uses within the State.
"AI system operation" means the operation, maintenance, or modification of an AI system that is commercially available and intended, in whole or in part, for business uses within the State.
"AI system services" means services related to AI system development or AI system operation.
"Artificial intelligence system" or "AI system" means any machine-based system that processes inputs using algorithms, statistical models, or neural networks to generate outputs such as predictions, recommendations, decisions, or content that materially influence or replace human judgment in performing a job function. "AI system" includes machine learning systems, large language models, generative artificial intelligence tools, robotic process automation systems, and automated decision-making platforms. "AI system" does not include general-purpose software, standard database management systems, or basic rule-based automation that does not incorporate learning or adaptive capabilities.
"Commission" means the State Employment and Training Commission established pursuant to section 5 of P.L.1989, c.293 (C.34:15C-2).
"Commissioner" means the Commissioner of the Department of Labor and Workforce Development.
"Department" means the Department of Labor and Workforce Development.
"Displaced worker" means an individual whose employment is terminated or whose job is expected to become obsolete within 12 months due to the current or expected operation of an AI system or the performance of AI system services therefor.
"Fund" means the AI Workforce Impact Transition Fund established pursuant to subsection b. of this section.
b. A dedicated, non-lapsing "AI Workforce Impact Transition Fund," to be managed and invested by the State Treasurer, is hereby established by the Department of Labor and Workforce Development. The monies in the fund shall be dedicated for the support of displaced workers transitioning to an alternate career, including, but not limited to: the selection of an alternate career; and the provision of or assistance in accessing career training. The department shall publish information about the support available pursuant to this section, including how an individual may access that support, on the department's Internet website.
c. The fund shall be credited with:
(1) all monies received pursuant to subsection d. of section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill);
(2) any return on the investment of monies deposited in the fund; and
(3) any other funds made available to the department for the purposes outlined in subsection b. of this section, including but not limited to, appropriations by the Legislature, federal grants, and donations from private persons.
d. The commissioner is authorized to expend monies from the AI Workforce Impact Transition Fund, subject to appropriation by the Legislature, for the following purposes:
(1) the provision of training services for the support of displaced workers transitioning to an alternate career, including, but not limited to, the selection of an alternate career and the provision of, or assistance in accessing, career training;
(2) the provision of grants to qualified organizations for the design, planning, and implementation of training programs and services in support of displaced workers;
(3) the provision of student support services and dual enrollment programs in public high schools;
(4) reasonable administrative costs incurred by the department, which shall not exceed 10 percent of the revenues deposited into the fund during any fiscal year, except for additional start-up administrative expenses approved by the Director of the Office of Management and Budget during the first year of activity for the training services; and
(5) reasonable costs as incurred by the commission, which shall not exceed 0.5 percent of the revenues deposited into the fund during any fiscal year, as required by the commission to design criteria and conduct an annual evaluation of the training services provided through the fund.
e. The State Employment and Training Commission shall annually evaluate the training services provided through the AI Workforce Impact Transition Fund and shall provide a report to the commissioner upon completion.
f. Within six months of the conclusion of each fiscal year, the commissioner shall submit, to the Governor and, pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), to the Legislature, a written report that includes, but is not limited to: the total revenues deposited into the fund from each source; the total amounts expended from the fund for each authorized purpose; grants provided, including the amount and, if applicable, the names of recipient organizations; the number of workers supported pursuant to this section; the total number of workers who have become reemployed; administrative spending; relevant State Employment and Training Commission evaluation data; and any other information which the commissioner determines is pertinent to the evaluation of the training services provided through the AI Workforce Impact Transition Fund.
5. a. The Division of Taxation shall adopt, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), any rules and regulations necessary to implement sections 1 through 3 of P.L. , c. (C. ) (pending before the Legislature as this bill). The rules and regulations adopted pursuant to this subsection shall include, but shall not be limited to:
(1) standards for the calculation of value generated by AI computer processing; and
(2) requirements for documentation and reporting pursuant to section 3 of P.L. , c. (C. ) (pending before the Legislature as this bill).
b. The Department of Labor and Workforce Development shall adopt, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), any rules and regulations necessary to implement section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill). The rules and regulations adopted pursuant to this subsection shall include, but shall not be limited to:
(1) standards for determining that an individual is a displaced worker; and
(2) the nature and duration of support available to displaced workers.
6. This act shall take
effect on the January 1 next following the date of enactment, provided that the
Division of Taxation and Department of Labor and Workforce Development may take
such anticipatory action as necessary.
STATEMENT
This bill imposes on AI computer processors a tax of 10 percent on the value generated by AI computer processing. The bill dedicates revenues to the support of displaced workers transitioning to an alternate career due to artificial intelligence.
Under the bill, an AI computer processor is required to pay the 10 percent tax on the value generated by AI computer processing. An "AI computer processor" is an entity, including a contracted processor or controlled processor, performing AI computer processing. "Contracted processor" means an AI computer processor, other than a controlled processor, that performs AI computer processing for use by a qualified AI business in exchange for the payment of consideration. "Controlled processor" means an AI computer processor owned and operated by a qualified AI business, including any affiliate or subsidiary thereof, which AI computer processor performs AI computer processing for use by the qualified AI business.
The bill defines "AI computer processing" as the performance of computer processing services for use in AI system services by a qualified AI business. "Qualified AI business" generally means a person engaged in AI system services. "AI system services" means AI system development or AI system operation for an AI system that is, or is intended to be, commercially available and intended, in whole or in part, for business uses in this State.
"AI system" is defined to mean any machine-based system that processes inputs using algorithms, statistical models, or neural networks to generate outputs such as predictions, recommendations, decisions, or content that materially influence or replace human judgment in performing a job function.
Calculation of the Tax
An AI computer processor that performs AI computer processing is required to pay the tax imposed under the bill in the amount of 10 percent of the value generated by AI computer processing performed. The tax is imposed on any AI computer processor that is located in the State and any AI computer processor that performs AI computer processing for use by a qualified AI business engaged in AI system services.
For the purposes of determining the tax imposed under the bill, the value generated by AI computer processing equals the market value of the tokens required to perform the AI computer processing. A "token" is a specific unit of computer processing calculated independently by each service provider, which unit is uniquely identifiable to the type of computer processing generated. The tax is to be calculated using the applicable method outlined in the bill, depending upon whether the AI computer processing subject to tax was performed by a controlled processor or a contracted processor.
If the AI computer processing is performed by a contracted processor, the value generated by AI computer processing equals the number of tokens required to perform the AI computer processing, multiplied by the billing rate per token charged by the AI computer processor. If the AI computer processing is performed by a controlled processor, the value generated by AI computer processing is to be calculated pursuant to a method of calculation approved by the Division of Taxation (division) for the respective AI computer processor.
When AI computer processing is performed by an AI computer processor located outside the State for a qualified AI business, the amount of tax otherwise imposed is to be apportioned on the basis of the percentage of the value generated by AI computer processing for the qualified AI business that is attributable to AI system services used for or intended for business uses within the State.
Records of Taxable AI Computer Processing
The bill requires an AI computer processor and a qualified AI business each to retain records of AI computer processing, in such form and manner as the division may require, and to submit the records to the division at such intervals as the division requires or upon request.
An AI computer processor's records are to include, but not be limited to: (1) the scope and nature of AI computer processing performed, including information verifying the AI system services for which the AI computer processing was used, and the qualified AI business for which the AI computer processing was performed; (2) the total volume of AI computer processing performed by the AI computer processor in its capacity as a controlled processor and in its capacity as a contracted processor, respectively; (3) the total value generated by AI computer processing, performed by the AI computer processing in its capacity as a controlled processor and in its capacity as a contracted processor, respectively, including the method of calculation; (4) the amount of AI computer processing performed in this State and the value generated by AI computer processing for a qualified AI business that is attributable to AI system services used for or intended for business uses within the State; and (5) any other information the division requires.
A qualified AI business's records are to include, but not be limited to: (1) the scope and nature of AI computer processing consumed, including information verifying the AI system services for which the AI computer processing was used, and the AI computer processor that performed the AI computer processing; (2) the total volume of AI computer processing used by the qualified AI business, including the total volume performed by a controlled processor and a contracted processor, respectively; (3) the total value generated by AI computer processing used by the qualified AI business, including, but not limited to, receipts documenting the consideration paid to any contracted processor for the performance of AI computer processing; (4) the value generated by AI computer processing used by the qualified AI business that is attributable to AI system services used for or intended for business uses within the State; and (5) any other information required by the division.
AI Workforce Impact Transition Fund
The bill dedicates revenues from the tax to the "AI Workforce Impact Transition Fund," to be established in the Department of Labor and Workforce Development (department) under the bill. The monies in the fund are dedicated for: (1) training services in support of displaced workers transitioning to an alternate career, including, but not limited to, the selection of an alternate career; and the provision of, or assistance in accessing, career training; (2) grants to qualified organization for the design, planning, and implementation of training programs and services in support of displaced workers; and (3) funding student support services and dual enrollment programs in public high schools. The department is required to publish information online about the support available, including how an individual may access that support. The bill defines a "displaced worker" as an individual whose employment is terminated or whose job is expected to become obsolete within 12 months due to the current or expected operation of an AI system or the performance of AI system services therefor.
The bill restricts related administrative costs to 10 percent in any fiscal year but allows an exception for certain start-up expenses. The bill requires the State Employment and Training Commissioner (SETC) to design criteria and conduct an annual evaluation of the training services provided through the AI Workforce Impact Training Fund. The commissioner is required to publish an annual report to the Governor and the Legislature within six months of the conclusion of each fiscal year that includes: the total revenues deposited into the fund from each source; the total amounts expended from the fund for each authorized purpose; grants provided, including the amount and, if applicable, the names of recipient organizations; the number of workers supported; the total number of workers who have become reemployed; administrative spending; relevant State Employment and Training Commission evaluation data; and any other information which the commissioner determines is pertinent to the evaluation of the training services provided through the AI Workforce Impact Transition Fund.