Bill Text: NJ A172 | 2010-2011 | Regular Session | Introduced
Bill Title: Allows certain self-employed business owners to deduct their own pension plan contributions from gross income under the gross income tax.
Spectrum: Partisan Bill (Republican 2-0)
Status: (Introduced - Dead) 2010-01-12 - Introduced, Referred to Assembly Commerce and Economic Development Committee [A172 Detail]
Download: New_Jersey-2010-A172-Introduced.html
STATE OF NEW JERSEY
214th LEGISLATURE
PRE-FILED FOR INTRODUCTION IN THE 2010 SESSION
Sponsored by:
Assemblyman GARY R. CHIUSANO
District 24 (Sussex, Hunterdon and Morris)
Assemblywoman ALISON LITTELL MCHOSE
District 24 (Sussex, Hunterdon and Morris)
SYNOPSIS
Allows certain self-employed business owners to deduct their own pension plan contributions from gross income under the gross income tax.
CURRENT VERSION OF TEXT
Introduced Pending Technical Review by Legislative Counsel
An Act allowing certain business owners to deduct certain pension plan contributions from gross income under the gross income tax, supplementing Title 54A of the New Jersey Statutes.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. A taxpayer who is a "self-employed individual" within the meaning of clause (B) of paragraph (1) of subsection (c) of section 401 of the federal Internal Revenue Code of 1986, 26 U.S.C.s.401, shall be allowed to deduct from the taxpayer's gross income for the taxable year an amount equal to the amount of pension and profit sharing plan contributions for the taxpayer that the taxpayer is allowed as a deduction for the tax year for federal tax purposes pursuant to section 404 of the federal Internal Revenue Code of 1986, 26 U.S.C.s.404; provided however, that no amount allowed as an exclusion pursuant to section 2 of P.L.1983, c.571 (C.54A:6-21) shall also be allowed as a deduction pursuant to this section.
2. This act shall take effect immediately and apply to taxable years beginning on or after the January 1 next following enactment.
STATEMENT
This bill allows people who own their own businesses to deduct the contributions they make for their own retirement from income taxable under the New Jersey gross income tax.
Currently, a corporation can take a business expense deduction for the amount of the pension plan contributions it makes for its employees for federal and New Jersey corporate tax purposes. The owner-managers of a corporation and the employees of the corporation may exclude the value of the pension plan contributions from their income under the federal personal income tax and the New Jersey gross income tax until the pension is later paid.
For many years the "self-employed" (sole proprietors, partners of partnerships, and members of limited liability companies) found that their employees could participate in tax-qualified pension plans but that they themselves could not. Since 1962, however, the federal Self-Employed Individuals Retirement Act has encouraged these small business owners to provide themselves with pensions by allowing the self-employed to establish and participate in "Keogh" plans (named after the sponsor of the initial federal law) similar to those for corporate employees and on a similar tax basis.
However, no business expense deduction has been allowed under the New Jersey gross income tax for the Keogh plan contributions for the retirement of the owners of these small businesses.
This bill will set deduction rules for sole proprietors, partners and the members of limited liability companies at parity with the rules that apply to incorporated businesses, allowing the self-employed to deduct the same pension contribution amounts they provide themselves from their New Jersey taxable gross income as they may deduct from their federal taxable income.
