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Federated fights back against NJ tax legislation

Cincinnati — A heated exchange took place between Federated Department Stores and the governor of New Jersey yesterday, as the department store retailer strongly opposed new state tax legislation that it said would double its corporate taxes in that state.

Federated said that under the new law its corporate state tax would jump $5.7 million and would result in cutting jobs and possibly stores in that state. Federated, which paid $4.4 million in such taxes last year, employs 10,000 people and operates 32 Macy's and five Bloomingdale's locations in New Jersey, as well as extensive logistics facilities.

"To put this in perspective, a New Jersey corporate income tax liability of $10 million a year would consume approximately 17 percent of our New Jersey net profits," Zimmerman wrote in a letter to Gov. James McGreevey, "transforming New Jersey from one of the most desirable states in which we do business to one of the least desirable states."

McGreevey fired back that Federated has tried for years to lower its taxes by claiming losses, which were disavowed by the state Supreme Court.

"Adhere to the law," McGreevey directed Federated. "Conduct ethical obligations, and this state will be your strongest advocate. But particularly disingenuous is when Federated continues to litigate against the state of New Jersey and would violate universally accepted accounting practices."

The new legislation will lead to layoffs and store closings, Zimmerman said. It anticipates laying off between 50 to 60 union employees at one of its distribution centers in New Jersey, and each store and facility in the state is undergoing review to determine which should continue operations. Federated will also limit hiring employees to "must-fill" positions and will drastically pare down the number of seasonal employees.

In addition, Zimmerman noted, the company will cancel or postpone non-essential New Jersey projects, such as store remodels, as well as consider relocating several new store locations to alternate sites outside of New Jersey.

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