New Jersey Pawnbrokers Do Not Come Under the Definition of Financial Business Corporations

New Jersey Administrative Code

§ 18:7-1.16. Financial business corporation; definition

(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.A. 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 (a)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) 7iii 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 (a)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 a Corporation Business Tax Return for Banking and Financial Corporations, Form BFC-1 and complete Schedule L apportioning the financial business conducted in New Jersey consistent with N.J.S.A. 54:10A-38 (Section 38 of the Corporation Business Tax Act).


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