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Bill

S 3630

Imposes various taxes and fees on operators of private prisons to offset social costs of incarceration.

2026-2027 Regular Session Introduced by Raj Mukherji and 1 co-sponsor

Imposes 8% contract fee, $15 per inmate per day, and a 3% corporation surtax on private prison operators to fund legal services and community rehabilitation programs.

Introduced in the Senate, Referred to Senate Law and Public Safety Committee
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Bill Summary · S 3630

Bill Summary: S 3630 (New Jersey, 222nd Legislature)

Main purpose

Imposes new taxes and fees on operators of private prisons in New Jersey to offset social costs associated with incarceration. The revenues support legal services and community-based programs related to rehabilitation, food security, housing, and youth development.

Key provisions and changes

  • Section 2: Private Prison Contract Fee

    • Applies to private correctional facility operators that have contracts with public entities (federal, state, county, or municipal) for correctional services.
    • Fee amount: 8% of the consideration paid or contracted to be paid by the public entity to the private operator for correctional services.
    • Filing and payment: Operators must annually file a return for the preceding calendar year, include the contract, and remit the full fee due.
    • Enforcement: Penalties and interest apply for late filing or nonpayment.
    • Revenue destination: Funds credited to the Detention and Deportation Defense Initiative Support Fund (a special, nonlapsing General Fund account). Used to support legal services via accredited higher education institutions through the Detention and Deportation Defense Initiative or successor programs.

  • Section 3: Inmate-Based Monthly Fee

    • Fee basis: Number of inmates detained at the private facility.
    • Amount: $15 per inmate per day detained in a given month (effectively $450 per inmate per 30-day month if detained all days).
    • Filing and payment: Operators file a monthly return detailing inmate counts and detention days; remit the full amount due.
    • Enforcement: Penalties and interest for late filing or nonpayment.
    • Revenue destination: Funds credited to the Private Prison Societal Rehabilitation Support Fund (a special, nonlapsing General Fund account). Used to support community-based programs for food security, housing, recreation, job training, and youth mentorship.

  • Section 4: Private Prison Surtax (Corporation Business Tax)

    • Taxpayer scope: Corporations (excluding S corporations under certain NJ tax provisions) that operate private correctional facilities in New Jersey.
    • Surtax rate: 3% of the taxpayer’s allocated taxable net income for each privilege period in which they operate a private facility.
    • Payment and administration: Surtax payable per normal privilege period; administered under existing corporation business tax framework.
    • Credits: No general credits against the surtax, except for credits related to installment payments, extension-related payments, or prior overpayments.
    • Revenue destination: Gross surtax revenues credited to the Private Prison Societal Rehabilitation Support Fund, with a specified allocation:
    • 1% to programs at the State level
    • 1% to programs in the county where the facility is located
    • 1% to programs in the municipality where the facility is located

Affected entities

  • Private operators of correctional facilities in New Jersey that contract with public entities.
  • Public entities that contract private facilities (federal, state, county, or municipal).
  • Corporations operating private prisons (excluding certain S corporations under NJ tax rules).

Timing and effective date

  • Effective immediately upon enactment.
  • Applies to taxable years and privilege periods beginning on or after January of the year following enactment.

Administrative and oversight elements

  • The Director of the Division of Taxation within the Department of the Treasury administers the new fees and surtax, filing requirements, and penalties.
  • The bill authorizes the creation of new dedicated funds within the General Fund to receive these revenues and specifies annual appropriation needs to support targeted programs.
  • The bill directs the creation of regulatory rules under the Administrative Procedure Act to implement provisions.

Policy rationale (as described in the bill)

  • The KARIM Act (Knowledge, Accountability, and Rights in Incarceration Markets Act) seeks to offset social costs associated with incarceration by taxing private prison operators. Revenue is allocated to legal defense initiatives and community-based rehabilitation and support programs, with a focus on detention/deportation defense and societal reintegration.

Potential impacts to consider

  • Financial impact on private prison operators and potentially on contract pricing with public entities.
  • Increased cost of incarceration for private facilities, possibly influencing market dynamics or contractions in private prison capacity.
  • Allocation of funds to higher education-based legal services and community programs, which could affect access to legal representation for detainees and support services in communities hosting private facilities.
  • Administrative compliance burden for operators due to monthly and annual reporting requirements.
  • Revenue diversification for state programs tied to detention, deportation defense, food security, housing, and youth services.

If you’d like, I can provide a side-by-side comparison with current NJ tax and correctional facility funding mechanisms, or a potential fiscal impact projection based on hypothetical inmate counts and contract values.

Compiled from official sources — confirm details with the bill’s official record.

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