New Jersey-2022-A3510-Introduced

An Act indexing for inflation various gross income tax thresholds and qualifications, amending various parts of the statutory law.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. N.J.S.54A:2-4 is amended to read as follows:

54A:2-4. Minimum taxable income. Notwithstanding any other provisions of this act, a taxpayer shall not be subject to tax under this act if:

a. The taxpayer is filing as an unmarried individual, an estate or trust, with a gross income of

(1) $3,000 or less for taxable years beginning before January 1, 1994,

(2) $7,500 or less for taxable years beginning on or after January 1, 1994 but before January 1, 1999, and

(3) $10,000 or less for taxable years beginning on or after January 1, 1999;

b. The taxpayer is determining tax pursuant to subsection a. of N.J.S.54A:2-1, or is a married couple filing a joint return, with a gross income of

(1) $3,000 or less for taxable years beginning before January 1, 1994,

(2) $7,500 or less for taxable years beginning on or after January 1, 1994 but before January 1, 1999,

(3) $10,000 or less for taxable years beginning on or after January 1, 1999 but before January 1, 2000,

(4) $15,000 or less for taxable years beginning on or after January 1, 2000 but before January 1, 2001, and

(5) $20,000 or less for taxable years beginning on or after January 1, 2001; or

c. The taxpayer is a married person filing separately with a gross income of

(1) $1,500 or less for taxable years beginning before January 1, 1994,

(2) $3,750 or less for taxable years beginning on or after January 1, 1994 but before January 1, 1999,

(3) $5,000 or less for taxable years beginning on or after January 1, 1999 but before January 1, 2000,

(4) $7,500 or less for taxable years beginning on or after January 1, 2000 but before January 1, 2001, and

(5) $10,000 or less for taxable years beginning on or after January 1, 2001.

In the case of a nonresident, gross income shall mean gross income which such nonresident would have reported if he had been a resident.

Beginning with taxable year 2022, the director shall annually adjust the gross income threshold provided for in this section to account for an increase in the cost of living. The accounting of the increase in the cost of living shall be determined by using the percentage that the Chained Consumer Price Index for All Urban Consumers (C-CPI-U) published by the United States Department of Labor as of the close of the 12-month period ending on August 31 of the calendar year prior to the calendar year in which the taxable year begins, exceeds that index as of the close of the 12-month period ending on August 31 of the preceding calendar year. Notwithstanding the gross income threshold provided for in this section, each taxpayer shall use the adjusted gross income threshold as adjusted by the director for the applicable taxable year. The director shall round the adjusted gross income threshold to the closest multiple of $5.

(cf: P.L.1999, c.260, s.1)

2. Section 3 of P.L.2021, c128 (C.54A:3-12) is amended to read as follows:

3. A taxpayer with gross income of $200,000 or less shall be allowed a deduction, not to exceed $10,000, from the taxpayer's gross income for the taxable year in the amount of the taxpayer's contribution for the taxable year to an account established pursuant to the "New Jersey Better Educational Savings Trust Program," (N.J.S.18A:71B-35 et seq.).

Beginning with taxable year 2022, the director shall annually adjust the gross income qualification provided for in this section to account for an increase in the cost of living. The accounting of the increase in the cost of living shall be determined by using the percentage that the Chained Consumer Price Index for All Urban Consumers (C-CPI-U) published by the United States Department of Labor as of the close of the 12-month period ending on August 31 of the calendar year prior to the calendar year in which the taxable year begins, exceeds that index as of the close of the 12-month period ending on August 31 of the preceding calendar year. Notwithstanding the gross income qualification provided for in this section, each taxpayer shall use the adjusted gross income qualification as adjusted by the director for the applicable taxable year. The director shall round the adjusted gross qualification to the closest multiple of $5.

(cf: P.L.2021, c.128, s.3)

3. Section 4 of P.L.2021, c128 (C.54A:3-13) is amended to read as follows:

4. A taxpayer with gross income of $200,000 or less shall be allowed a deduction, not to exceed $2,500, from the taxpayer's gross income for the taxable year in the amount of principal and interest payments paid on a student loan under the New Jersey College Loans to Assist State Students Loan Program established pursuant to N.J.S.18A:71C-21.

(cf: P.L.2021, c.128, s.4)

4. Section 5 of P.L.2021, c128 (C.54A:3-14) is amended to read as follows:

5. a. A taxpayer with gross income of $200,000 or less shall be allowed a deduction, not to exceed $10,000, from the taxpayer's gross income for the taxable year in the amount the taxpayer paid to an in-State institution of higher education during the taxable year for tuition costs related to the taxpayer's enrollment or attendance at the institution of higher education or related to the enrollment or attendance of a spouse or dependent of the taxpayer at the institution.

b. As used in this section, "tuition costs" means the charges imposed by an in-State institution of higher education that are designated by the institution as the tuition costs required for the enrollment or attendance of the taxpayer or a spouse or dependent of the taxpayer at the institution.

(cf: P.L.2021, c.128, s.5)

5. Section 2 of P.L.2017, c.67 (C.54A:4-15) is amended to read as follows:

2. a. A qualified family caregiver shall be allowed a qualified veteran care credit against the tax otherwise due for the taxable year under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., in an amount equal to 100 percent of the federal veteran disability compensation of a qualified armed service member for which the qualified family caregiver renders care or $675, whichever is less.

b. If two or more qualified family caregivers qualify for the qualified veteran care credit for the same qualified armed service member, the amount of the credit allowed shall be allocated in proportion to each qualified family caregiver's share of total care expenses provided for the taxable year.

c. If the qualified veteran care credit allowed pursuant to this section, together with any other payments, credits, deductions, and adjustments allowed by law, reduces a qualified family caregiver's tax liability otherwise due for the taxable year under N.J.S.54A:1-1 et seq. to zero, the amount of the credit remaining shall be paid to the taxpayer as a refund of an overpayment of tax in accordance with N.J.S.54A:9-7; provided however, that subsection (f) of that section, concerning the allowance of interest, shall not apply.

d. A qualified family caregiver who is not subject to tax in accordance with N.J.S.54A:2-4 for a taxable year may apply for a qualified veteran care credit using an application to be made available by the director. The due date for a qualified veteran care credit application shall coincide with the due date for annual gross income tax returns.

e. As used in this section:

"Qualified armed service member" means an individual who has a disability arising out of service in the active military or naval service of the United States in any war or conflict on or after September 11, 2001, has been honorably discharged or released under conditions other than dishonorable, meets the requirements for total disability ratings for compensation based upon unemployability of the individual as determined by the United States Department of Veterans Affairs, and has resided with the qualified family caregiver in this State for not less than six months of the taxable year.

"Qualified family caregiver" means an individual resident of this State with gross income for the taxable year not in excess of $100,000 if filing jointly, as a head of household, or as a surviving spouse, or not in excess of $50,000 if filing separately or unmarried, who provides care and support to a qualifying armed service member to whom the caregiver is a relative.

Beginning with taxable year 2022, the director shall annually adjust the gross income qualifications provided for in this definition to account for an increase in the cost of living. The accounting of the increase in the cost of living shall be determined by using the percentage that the Chained Consumer Price Index for All Urban Consumers (C-CPI-U) published by the United States Department of Labor as of the close of the 12-month period ending on August 31 of the calendar year prior to the calendar year in which the taxable year begins, exceeds that index as of the close of the 12-month period ending on August 31 of the preceding calendar year. Notwithstanding the gross income qualifications provided for in this definition, each taxpayer shall use the adjusted gross income qualifications as adjusted by the director for the applicable taxable year. The director shall round the adjusted gross income qualifications to the closest multiple of $5.

"Relative" means an individual related by consanguinity within the third degree by law or blood.

(cf: P.L.2017, c.67, s.2)

6. Section 5 of P.L.2018, c.45 (C.54A:4-17) is amended to read as follows:

5. a. A resident taxpayer with New Jersey taxable income of $150,000 or less who is allowed a credit for expenses for household and dependent care services for federal income tax purposes pursuant to section 21 of the Internal Revenue Code (26 U.S.C. s.21) shall be allowed a credit against the tax otherwise due pursuant to the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq. The credit shall be in an amount equal to a percentage of the credit allowed the taxpayer for federal income tax purposes for the taxable year, according to the following schedule:

NJ taxable income is: Amount of NJ credit is:

Not over $30,000 50% of federal credit

over $30,000 but not over $60,000 40% of federal credit

over $60,000 but not over $90,000 30% of federal credit

over $90,000 but not over $120,000 20% of federal credit

over $120,000 but not over $150,000 10% of federal credit.

The $150,000 income limit set forth in this subsection shall apply to taxpayers of any filing status. Beginning with taxable year 2022, the director shall annually adjust the income ranges and limitation provided for in this subsection to account for an increase in the cost of living. The accounting of the increase in the cost of living shall be determined by using the percentage that the Chained Consumer Price Index for All Urban Consumers (C-CPI-U) published by the United States Department of Labor as of the close of the 12-month period ending on August 31 of the calendar year prior to the calendar year in which the taxable year begins, exceeds that index as of the close of the 12-month period ending on August 31 of the preceding calendar year. Notwithstanding the income ranges and limit provided for in this subsection, each taxpayer shall use the adjusted income ranges and limit as adjusted by the director for the applicable taxable year. The director shall round the adjusted income ranges and limit to the closest multiple of $5.

b. If the amount of the credit allowed pursuant to this section exceeds the amount of gross income tax otherwise due pursuant to the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., the amount of excess shall be treated as a refundable overpayment.

c. Married couples shall file a joint return in order to claim the credit provided by this section. A taxpayer eligible to receive a credit pursuant to paragraph (3) or (4) of subsection (e) of section 21 of the federal Internal Revenue Code (26 U.S.C. s.21) shall be eligible for the credit provided by this section, provided the taxpayer satisfies the income limit set forth in subsection a. of this section.

d. In the case of a part-year resident claimant, the amount of the credit allowed pursuant to this section shall be pro-rated, based upon that proportion which the total number of months of the claimant's residency in the taxable year bears to 12 in that period. For this purpose, 15 days or more shall constitute a month.

(cf: P.L.2021, c.308, s.1)

7. N.J.S.54A:6-10 is amended to read as follows:

54A:6-10. Pensions and annuities.

a. Gross income shall not include that part of any amount received as an annuity under an annuity, endowment, or life insurance contract which bears the same ratio to such amount as the investment in the contract as of the annuity starting date bears to the expected return under the contract as of such date. Where (1) part of the consideration for an annuity, endowment, or life insurance contract is contributed by the employer, and (2) during the three-year period beginning on the date on which an amount is first received under the contract as an annuity, the aggregate amount receivable by the employee under the terms of the contract is equal to or greater than the consideration for the contract contributed by the employee, then all amounts received as an annuity under the contract shall be excluded from gross income until there has been so excluded an amount equal to the consideration for the contract contributed by the employee.

b. (1) In addition to that part of any amount received as an annuity which is excludable from gross income as herein provided, gross income shall not include payments:

for taxable years beginning before January 1, 2000, of up to $10,000 for a married couple filing jointly, $5,000 for a married person filing separately, or $7,500 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;

for the taxable year beginning on or after January 1, 2000, but before January 1, 2001, of up to $12,500 for a married couple filing jointly, $6,250 for a married person filing separately, or $9,375 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;

for the taxable year beginning on or after January 1, 2001, but before January 1, 2002, of up to $15,000 for a married couple filing jointly, $7,500 for a married person filing separately, or $11,250 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;

for the taxable year beginning on or after January 1, 2002, but before January 1, 2003, of up to $17,500 for a married couple filing jointly, $8,750 for a married person filing separately, or $13,125 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;

for taxable years beginning on or after January 1, 2003, but before January 1, 2017 of up to $20,000 for a married couple filing jointly, $10,000 for a married person filing separately, or $15,000 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;

for taxable years beginning on or after January 1, 2017, but before January 1, 2018, of up to $40,000 for a married couple filing jointly, $20,000 for a married person filing separately, or $30,000 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;

for taxable years beginning on or after January 1, 2018, but before January 1, 2019, of up to $60,000 for a married couple filing jointly, $30,000 for a married person filing separately, or $45,000 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;

for taxable years beginning on or after January 1, 2019, but before January 1, 2020, of up to $80,000 for a married couple filing jointly, $40,000 for a married person filing separately, or $60,000 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;

for taxable years beginning on or after January 1, 2020, of up to $100,000 for a married couple filing jointly, $50,000 for a married person filing separately, or $75,000 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;

for taxable years beginning on or after January 1, 2021, for a taxpayer with gross income in excess of $100,000, but not more than $125,000, 50 percent of payments for a married couple filing jointly, 25 percent of payments for a married couple filing separately, or 37.5 percent of payments for an individual filing as a single taxpayer or individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;

for taxable years beginning on or after January 1, 2021, for a taxpayer with gross income in excess of $125,000, but not more than $150,000, 25 percent of payments for a married couple filing jointly, 12.5 percent of payments for a married couple filing separately, or 18.75 percent of payments for an individual filing as a single taxpayer or individual determining tax pursuant to subsection a. of N.J.S.54A:2-1,

which are received as an annuity, endowment or life insurance contract, or payments of any such amounts which are received as pension, disability, or retirement benefits, under any public or private plan, whether the consideration therefor is contributed by the employee or employer or both, by any person who is 62 years of age or older or who, by virtue of disability, is or would be eligible to receive payments under the federal Social Security Act.

(2) For taxable years beginning on or after January 1, 2005, but before January 1, 2021, the exclusion provided by this subsection shall only be allowed if the taxpayer has gross income for the taxable year of not more than $100,000.

For taxable years beginning on or after January 1, 2021, the exclusion provided by this subsection shall only be allowed if the taxpayer has gross income for the taxable year of not more than $150,000.

(3) Beginning with taxable year 2022, the director shall annually adjust the gross income ranges provided in paragraph (1) and the gross income limit provided in paragraph (2) to account for an increase in the cost of living. The accounting of the increase in the cost of living shall be determined by using the percentage that the Chained Consumer Price Index for All Urban Consumers (C-CPI-U) published by the United States Department of Labor as of the close of the 12-month period ending on August 31 of the calendar year prior to the calendar year in which the taxable year begins, exceeds that index as of the close of the 12-month period ending on August 31 of the preceding calendar year. Notwithstanding the gross income ranges provided in paragraph (1) and the gross income limit provided for in paragraph (2), each taxpayer shall use the adjusted gross income ranges and limit as adjusted by the director for the applicable taxable year. The director shall round the adjusted gross income ranges and limit to the closest multiple of $5.

c. Gross income shall not include any amount received under any public or private plan by reason of a permanent and total disability.

d. Gross income shall not include distributions from an employees' trust described in section 401(a) of the Internal Revenue Code of 1986, as amended (hereinafter referred to as "the Code"), which is exempt from tax under section 501(a) of the Code if the distribution, except the portion representing the employees' contributions, is rolled over in accordance with section 402(a)(5) or section 403(a)(4) of the Code. The distribution shall be paid in one or more installments which constitute a lump-sum distribution within the meaning of section 402(e)(4)(A) (determined without reference to subsection (e)(4)(B)), or be on account of a termination of a plan of which the trust is a part or, in the case of a profit-sharing or stock bonus plan, a complete discontinuance of contributions under such plan.

(cf: P.L.2021, c.129, s.1)

8. Section 3 of P.L.1977, c.273 (C.54A:6-15) is amended to read as follows:

3. Other retirement income. a. (1) Gross income shall not include income:

for taxable years beginning on or after January 1, 2003, but before January 1, 2017, gross income shall not include income of up to $20,000 for a married couple filing jointly, $10,000 for a married person filing separately, or $15,000 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;

for taxable years beginning on or after January 1, 2017 but before January 1, 2018, gross income shall not include income of up to $40,000 for a married couple filing jointly, $20,000 for a married person filing separately, or $30,000 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;

for taxable years beginning on or after January 1, 2018, but before January 1, 2019, gross income shall not include income of up to $60,000 for a married couple filing jointly, $30,000 for a married person filing separately, or $45,000 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;

for taxable years beginning on or after January 1, 2019, but before January 1, 2020, gross income shall not include income of up to $80,000 for a married couple filing jointly, $40,000 for a married person filing separately, or $60,000 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;

for taxable years beginning on or after January 1, 2020, gross income shall not include income of up to $100,000 for a married couple filing jointly, $50,000 for a married person filing separately, or $75,000 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;

for taxable years beginning on or after January 1, 2021, for a taxpayer with gross income in excess of $100,000, but not more than $125,000, 50 percent of income for a married couple filing jointly, 25 percent of income for a married couple filing separately, or 37.5 percent of income for an individual filing as a single taxpayer or individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;

for taxable years beginning on or after January 1, 2021, for a taxpayer with income in excess of $125,000, but not more than $150,000, 25 percent of gross income for a married couple filing jointly, 12.5 percent of income for a married couple filing separately, or 18.75 percent of income for an individual filing as a single taxpayer or individual determining tax pursuant to subsection a. of N.J.S.54A:2-1,

when received in any tax year by a person aged 62 years or older who received no income in excess of $3,000 from one or more of the sources enumerated in subsections a., b., k. and p. of N.J.S.54A:5-1.

(3) The total exclusion under this subsection and that allowable under N.J.S.54A:6-10 shall not exceed the amounts of the exclusions set forth in this subsection.

(4) Beginning with taxable year 2022, the director shall annually adjust the gross income ranges provided in paragraph (1) and the gross income limit provided in paragraph (2) to account for an increase in the cost of living. The accounting of the increase in the cost of living shall be determined by using the percentage that the Chained Consumer Price Index for All Urban Consumers (C-CPI-U) published by the United States Department of Labor as of the close of the 12-month period ending on August 31 of the calendar year prior to the calendar year in which the taxable year begins, exceeds that index as of the close of the 12-month period ending on August 31 of the preceding calendar year. Notwithstanding the gross income ranges provided in paragraph (1) and the gross income limit provided for in paragraph (2), each taxpayer shall use the adjusted gross income ranges and limit as adjusted by the director for the applicable taxable year. The director shall round the adjusted gross income ranges and limit to the closest multiple of $5.

b. In addition to the exclusion provided under N.J.S.54A:6-10 and subsection a. of this section, gross income shall not include income of up to $6,000 for a married couple filing jointly or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1, or $3,000 for a single person or a married person filing separately, who is not covered under N.J.S.54A:6-2 or N.J.S.54A:6-3, but who would be eligible in any year to receive payments under either section if he or she were covered thereby.

(cf: P.L.2021, c.129, s.2)

9. N.J.S.54A:8-3.1 is amended to read as follows:

54A:8-3.1. Persons required to file. a. On or before the filing date prescribed in section 1 of this chapter (N.J.S.54A:8-1), an income tax return shall be made and filed by or for:

(1) A taxpayer filing as an unmarried individual, an estate or trust, with a gross income

(a) in excess of $3,000 for taxable years beginning before January 1, 1994,

(b) in excess of $7,500 for taxable years beginning on or after January 1, 1994 but before January 1, 1999, and

(2) A taxpayer determining tax pursuant to subsection a. of N.J.S.54A:2-1 having gross income, or a married couple filing a joint return having joint gross income

(a) in excess of $3,000 for taxable years beginning before January 1, 1994,

(b) in excess of $7,500 for taxable years beginning on or after January 1, 1994 but before January 1, 1999,

(d) in excess of $15,000 for taxable years beginning on or after January 1, 2000 but before January 1, 2001, and

(e) in excess of $20,000 for taxable years beginning on or after January 1, 2001; or

(3) A taxpayer who is a married person filing separately with gross income of

(a) in excess of $1,500 for taxable years beginning before January 1, 1994,

(b) in excess of $3,750 for taxable years beginning on or after January 1, 1994 but before January 1, 1999,

(d) in excess of $7,500 for taxable years beginning on or after January 1, 2000 but before January 1, 2001, and

(e) in excess of $10,000 for taxable years beginning on or after January 1, 2001.

b. If the income tax liability of [husband and wife] married individuals is determined on a separate return for federal income tax purposes, they shall each also file a separate return for New Jersey income tax purposes and their income tax liabilities under this act shall be separate.

c. If the income tax liabilities of [husband and wife] married individuals, both residents, are determined on a joint return for federal income tax purposes, they shall also file a joint return for New Jersey income tax purposes and their tax liabilities under this act shall be joint and several.

d. If either [husband or wife] married individual is a resident and the other is a nonresident, they shall file separate tax returns under this act on such single or separate forms as may be required by the director in which event their tax liabilities shall be separate unless both elect to determine their joint taxable income as if both were residents, in which event their liabilities shall be joint and several.

e. The return for any deceased individual shall be made and filed by his fiduciary or other person charged with his property.

f. The return for an individual who is unable to make a return by reason of minority or other disability shall be made and filed by his fiduciary or other person charged with the care of his person or property (other than a receiver in possession of only a part of his property), or by his duly authorized agent.

g. Any tax under this act, and any increase, interest or penalty thereon, shall, from the time it is due and payable, be a personal debt of the person liable to pay the same, to the State of New Jersey.

h. If both [husband and wife] married individuals are nonresidents but only one spouse earns, receives or acquires income from sources within this State, they shall file separate forms as may be required by the director and their tax liabilities shall be separate, unless both elect to determine their joint taxable income in accord with N.J.S.54A:5-7 and their liabilities under this act shall be joint and several.

(cf: P.L.1999, c.260, s.2)

10. N.J.S.54A:9-6 is amended to read as follows:

54A:9-6. Additions to tax and civil penalties. (a) Failure to file tax return. In case of failure to file a tax return under this act on or before the prescribed date (determined with regard to any extension of time for filing), unless it is shown that such failure is due to reasonable cause and not due to willful neglect, there shall be added to the amount required to be shown as tax on such return such amount as is required under the State Tax Uniform Procedure Law, R.S.54:48-1 et seq. For this purpose, the amount of tax required to be shown on the return shall be reduced by the amount of any part of the tax which is paid on or before the date prescribed for payment of the tax and by the amount of any credit against the tax which may be claimed upon the return.

(b) Deficiency due to negligence. If any part of a deficiency is due to negligence or intentional disregard of this act or rules or regulations hereunder (but without intent to defraud), there shall be added to the tax an amount equal to 10% of the deficiency.

(c) Failure to file declaration or underpayment of estimated tax. If any taxpayer fails to file a declaration of estimated tax or fails to pay all or any part of an installment of estimated tax, the taxpayer shall be deemed to have made an underpayment of estimated tax except as provided pursuant to subsection (d) of this section. There shall be added to the tax for the taxable year an amount at the rate as is required under the State Tax Uniform Procedure Law, R.S.54:48-1 et seq., upon the amount of the underpayment for the period of the underpayment but not beyond the 15th day of the fourth month following the close of the taxable year. The amount of underpayment shall be the excess of the lesser of: (1) the amount of the installment which would be required to be paid if the estimated tax were equal to 80% of the tax (two-thirds of the tax for farmers referred to in subsection (e) of section 54A:8-4) shown on the return for the taxable year (or if no return was filed, of the tax for such year), or (2) 100% of the tax shown on the tax return of the taxpayer for the preceding taxable year; over the amount, if any, of the installment paid on or before the last day prescribed for such payment. No underpayment shall be deemed to exist with respect to a declaration or installment otherwise due on or after the taxpayer's death.

(d) Exception to addition for underpayment of estimated tax. The addition to tax under subsection (c) with respect to any underpayment of any installment shall not be imposed if the total amount of all payments of estimated tax and all payments of tax made pursuant to subsection a. of section 12 of P.L.2002, c.40 (C.54:10A-15.11) and credited to the taxpayer pursuant to subsection b. of section 12 of P.L.2002, c.40 made on or before the last date prescribed for the payment of such installment equals or exceeds whichever of the following set forth in paragraphs (1) and (2) and subject to paragraph (3) is the lesser--

(1) The amount which would have been required to be paid on or before such date if the estimated tax were whichever of the following is the least--

(A) An amount equal to 100% of the tax shown on the return of the taxpayer for the preceding taxable year, except as provided pursuant to paragraph (3) of this subsection, if a return showing a liability for tax was filed by the taxpayer for the preceding taxable year and such preceding year was a taxable year of 12 months, or

(B) An amount equal to 100% of the tax computed, except as provided pursuant to paragraph (3) of this subsection, at the rates applicable to the taxable year, on the basis of the taxpayer's status with respect to the taxpayer's personal exemptions for the taxable year, but otherwise on the basis of the facts shown on the taxpayer's return for, and the law applicable to, the preceding taxable year, or

(C) An amount equal to 80% of the tax for the taxable year (two-thirds of the tax for farmers referred to in subsection (e) of section 54A:8-4) computed by placing on an annualized basis the income for the months in the taxable year ending before the month in which the installment is required to be paid (or, in the case of a trust or estate, the income for the months ending before the date one month before the month in which the installment is required). For purposes of this subparagraph, the income shall be placed on an annualized basis by--

(i) Multiplying by 12 (or, in the case of a taxable year of less than 12 months, the number of months in the taxable year) the income for the months in the taxable year ending before the month in which the installment is required to be paid (or, in the case of a trust or estate, the income for the months ending before the date one month before the month in which the installment is required),

(ii) Dividing the resulting amount by the number of months in the taxable year ending before the month in which such installment date falls (or, in the case of a trust or estate, the number of months ending before the date one month before the month in which such installment date falls), and

(iii) Deducting from such amount the deductions for personal exemptions allowable for the taxable year (such personal exemptions being determined as of the last date prescribed for payment of the installment); or

(2) An amount equal to 90% of the tax computed, at the rates applicable to the taxable year, on the basis of the actual income for the months in the taxable year ending before the month in which the installment is required to be paid.

(3) If the taxable gross income shown on the return of the taxpayer for the preceding taxable year exceeds $150,000 ($75,000 in the case of a married individual within the meaning of section 7703 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.7703, filing separately for the taxable year for which the amount of the installment is being determined) subparagraphs (A) and (B) of paragraph (1) of this subsection shall be applied by substituting "110%" for "100%". Beginning with taxable year 2022, the director shall annually adjust the gross income threshold provided for in this paragraph to account for an increase in the cost of living. The accounting of the increase in the cost of living shall be determined by using the percentage that the Chained Consumer Price Index for All Urban Consumers (C-CPI-U) published by the United States Department of Labor as of the close of the 12-month period ending on August 31 of the calendar year prior to the calendar year in which the taxable year begins, exceeds that index as of the close of the 12-month period ending on August 31 of the preceding calendar year. The director shall round the adjusted gross income threshold to the closest multiple of $5. For purposes of this paragraph, "taxable gross income" means gross income after any allowable deductions under chapter 3 or 3A of the "New Jersey Gross Income Tax Act" (C.54A:3-1 et seq. or 54A:3A-1 et seq.); or, in the case of a trust or estate, gross income after any allowable deductions or exemptions, income commissions and amounts distributed or credited to beneficiaries; and "gross income" for a nonresident means gross income calculated as if such nonresident were a resident.

(e) Deficiency due to fraud. If any part of a deficiency is due to fraud, there shall be added to the tax an amount equal to 50% of the deficiency. This amount shall be in lieu of any other addition to tax imposed by subsection (a) or (b).

(f) Nonwillful failure to pay withholding tax. If any employer, without intent to evade or defeat any tax imposed by this act or the payment thereof, shall fail to make a return and pay a tax withheld by him at the time required by or under the provisions of section 54A:7-4, such employer shall be liable for such tax and shall pay the same together with interest thereon and the addition to tax provided in subsection (a), and such interest and addition to tax shall not be charged to or collected from the employee by the employer. The director shall have the same rights and powers for the collection of such tax, interest and addition to tax against such employer as are now prescribed by this act for the collection of tax against an individual taxpayer.

(g) Willful failure to collect and pay over tax. Any person required to collect, truthfully account for, and pay over the tax imposed by this act who willfully fails to collect such tax or truthfully account for and pay over such tax or willfully attempts in any manner to evade or defeat the tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over. No addition to tax under subsection (b) or (c) shall be imposed for any offense to which this subsection applies.

(h) Failure to file certain information returns. In case of each failure to file a statement of a payment to another person, required under authority of subsection (c) of section 54A:8-6 (relating to information at source, including the duplicate statement of tax withheld on wages) on the date prescribed therefor (determined with regard to any extension of time for filing), unless it is shown that such failure is due to reasonable cause and not to willful neglect, there shall, upon notice and demand by the director and in the same manner as tax, be paid by the person so failing to file the statement, a penalty of $2.00 for each statement not so filed, but the total amount imposed on the delinquent person for all such failures during any calendar year shall not exceed $2,000.00.

(i) Additional penalty. Any person who with fraudulent intent shall fail to pay, or to deduct or withhold and pay, any tax, or to make, render, sign or certify any return or declaration of estimated tax or to supply any information within the time required by or under this act, shall be liable to a penalty of not more than $5,000.00, in addition to any other amounts required under this act, to be imposed, assessed and collected by the director. The director shall have the power, in his discretion, to waive, reduce or compromise any penalty under this subsection.

(j) Additions treated as tax. The additions to tax and penalties provided by this section shall be paid upon notice and demand and shall be assessed, collected and paid in the same manner as taxes and any reference in this act to income tax or tax imposed by this act, shall be deemed also to refer to the additions to tax and penalties provided by this section. For purposes of section 54A:9-2, this subsection shall not apply to:

(1) Any addition to tax under subsection (a) except as to that portion attributable to a deficiency;

(2) Any addition to tax under subsection (e); and

(3) Any additional penalty under subsection (i).

(k) Determination of deficiency. For purposes of subsections (b) and (c), the amount shown as the tax by the taxpayer upon his return shall be taken into account in determining the amount of the deficiency only if such return was filed on or before the last day prescribed for the filing of such return, determined with regard to any extension of time for such filing.

(l) Person defined. For purposes of subsections (f), (g), (h) and (i), the term person or employer includes an individual, corporation or partnership or an officer or employee of any corporation (including a dissolved corporation) or a member or employee of any partnership, who as such officer, employee, or member is under a duty to perform the act in respect of which the violation occurs.

(cf: P.L.2005, c.288, s.3)

11. Section 3 of P.L.2020, c.94 (C.54A:9-30) is amended to read as follows:

3. a. Beginning with taxable year 2020, and subject to appropriation by the Legislature, a qualified taxpayer shall be eligible for a tax rebate based on the requirements set forth in this section.

b. The rebate shall be the lesser of $500 or an amount equal to the amount of tax paid after credits for the taxable year pursuant to the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq. In the case of a qualified taxpayer who is a part-year resident during the taxable year, the amount of the rebate shall be pro-rated, based upon the total number of months of the taxpayer's residency during the taxable year.

c. The director shall issue rebates to qualified taxpayers between July 1 and July 31 of the subsequent taxable year, provided however, in the case of a qualified taxpayer who is granted an extension of time for filing a return, the director may issue the rebate between July 1 and December 31 of the subsequent taxable year.

d. The director is authorized to issue rules and regulations as necessary to implement this section.

e. The director may recover rebates issued in error or as a result of misrepresentation in the same manner as a deficiency with respect to a payment of a State tax in accordance with the State Uniform Tax Procedure Law, R.S.54:48-1 et seq.

f. Any rebate issued pursuant to this section shall not be considered gross income for purposes of the New Jersey Gross Income Tax Act.

g. As used in this section:

"Qualified taxpayer" means an individual who has timely filed a resident return, is a resident of this State during the taxable year, and who had during the taxable year: (1) at least one qualifying child; (2) gross income not exceeding $150,000 for married individuals filing a joint return and an individual filing as a head of household or as a surviving spouse, or $75,000 for married individuals filing separately and an individual filing as a single taxpayer; and (3) a gross income tax liability greater than zero.

"Qualifying child" means the same as defined in section 152 of the Internal Revenue Code (26 U.S.C. s.152), where claimed as a dependent on a resident return under the New Jersey Gross Income Tax Act.

(cf: P.L.2020, c.94, s.3)

12. Section 3 of P.L.2019, c.320 (C.54A:12-3) is amended to read as follows:

3. a. A pass-through entity with at least one member who is liable pursuant to the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., for tax on that member's share of distributive proceeds of the pass-through entity in a taxable year may elect to be liable for, and pay, a pass-through business alternative income tax in the taxable year.

b. Each pass-through entity that makes an election for a taxable year pursuant to this section shall annually report to each of its members, for the taxable year, the member's share of distributive proceeds.

(1) The election to pay tax at the entity level is available if consent is made by each member of the electing entity who is a member at the time the election is filed or by any officer, manager, or member of the electing entity who is authorized, under law or the entity's organizational documents, to make the election and who represents to having such authorization under penalties of perjury. This election shall be made annually on or before the due date of the entity's return as established by the director and on forms prescribed by the director. This election shall not be made retroactively. If the members decide to revoke an election, that revocation shall occur on or before the due date of the entity's return.

(2) The tax imposed on a pass-through entity pursuant to this section shall be determined in accordance with the following table with respect to the sum of each member's share of distributive proceeds attributable to the pass-through entity for the taxable year.

For taxable years beginning on or after January 1, 2020:

If the sum of each member's

share of distributive proceeds

attributable to the pass-through

entity is: The tax is:

Not over $250,000.00.......... 5.675% of the sum of distributive proceeds

Over $250,000.00 but not

over $1,000,000.00...... $14,187.50 plus 6.52% of the

excess over $250,000.00

Over $1,000,000.00...... $63,087.50 plus 10.9% of the

excess over $1,000,000.00.

Beginning with taxable year 2022, the director shall annually prescribe the taxable income bracket amounts and tax amount per taxable income bracket to account for an increase in the cost of living. The accounting of the increase in the cost of living shall be determined by using the percentage that the Chained Consumer Price Index for All Urban Consumers (C-CPI-U) published by the United States Department of Labor as of the close of the 12-month period ending on August 31 of the calendar year prior to the calendar year in which the taxable year begins, exceeds that index as of the close of the 12-month period ending on August 31 of the preceding calendar year. Notwithstanding the taxable income bracket amounts and tax amount per taxable income bracket provided in the tax tables in this subsection, each taxpayer shall use the adjusted taxable income bracket amounts and tax amount per taxable income bracket as adjusted by the director for the applicable taxable year. The director shall round the adjusted taxable income bracket amounts to the next highest multiple of $5.

c. The amount of pass-through business alternative income tax due from a pass-through entity in a taxable year shall be exclusive of any amount of tax due and paid by the pass-through entity pursuant to the "Corporation Business Tax Act (1945)," P.L.1945, c.162 (C.54:10A-1 et seq.), during any privilege period, except as otherwise provided in P.L.2019, c.320 (C.54A:12-1 et al.).

(1) A pass-through entity which elects to pay the pass-through business entity income tax shall be included in a combined group, as defined in subsection (z) of section 4 of P.L.1945, c.162 (C.54:10A-4), and file a New Jersey combined return pursuant to the Corporation Business Tax Act, P.L.1945, c.162 (C.54:10A-1 et seq.). A pass-through entity which elects to pay the pass-through business entity income tax shall be excluded from a combined group, as defined in subsection (z) of section 4 of P.L.1945, c.162 (C.54:10A-4), and from filing a New Jersey combined return pursuant to the Corporation Business Tax Act, P.L.1945, c.162 (C.54:10A-1 et seq.) if the pass-through entity meets the following: (a) all of the members of the pass-through entity are taxpayers otherwise liable for the tax under the "New Jersey Gross Income Tax Act," N.J.S.A.54A:1-1 et seq., and (b) no business entity taxed as a corporation under the Corporation Business Tax Act, P.L.1945, c.162 (C.54:10A-1 et seq.), has a direct, indirect, beneficial, or constructive ownership or control of the pass-through entity.

(2) Nothing shall prevent a group of pass-through entities under common ownership by an individual, estate, or trust, or a group of related individuals, estates, or trusts, from filing a composite or consolidated pass-through business entity income tax return. In determining whether the pass-through entities are under common ownership, the individual, estate, or trust, or a group of related individuals, estates, or trusts, must own more than 50 percent of the direct or indirect voting control of each pass-through entity; provided, however, section 318 of the federal Internal Revenue Code, 26 U.S.C. s.318, shall apply for determining voting control.

d. Pass-through entities whose members have made the business alternative income tax election shall file an entity tax return and make payments on or before the 15th day of the third month following the close of each entity's taxable year for federal income tax purposes. A pass-through entity shall make estimated entity tax payments on or before the 15th day of each of the fourth month, sixth month, and ninth month of the taxable year and on or before the 15th day of the first month succeeding the close of the taxable year.

e. A pass-through entity that overpays tax in one taxable year shall be allowed to apply the overpayment of tax to the subsequent taxable year's estimated entity tax payments.

(cf: P.L.2021, c.419, s.2)

13. This act shall take effect immediately.

STATEMENT

This bill indexes for inflation various gross income thresholds and qualifications under the New Jersey gross income tax.

Under the gross income tax, many provisions are structured so that the provisions apply only to those with particular amounts of income. This bill adjusts those provisions so that income levels are annually adjusted for inflation using the Chained Consumer Price Index for All Urban Consumers (C-CPI-U), as published by the U.S. Bureau of Labor Statistics.

In particular, the bill adjusts for inflation:

- the minimum taxable income threshold to be subject to the gross income tax, and the minimum taxable income threshold to file a gross income tax return. The minimum taxable income threshold for both is currently $10,000 for individuals who are single or married filing separately and $20,000 for married filing jointly. Those amounts will be adjusted annually for inflation beginning with tax year 2022.

- the income limitation on the three deductions allowed pursuant to the "New Jersey College Affordability Act." Each deduction is currently limited to those with gross income of $200,000 or less. That amount will be adjusted annually for inflation beginning with tax year 2022.

- the income limitation on the credit allowed pursuant to the "Wounded Warrior Caregivers Relief Act." That credit is currently limited to those with gross income not exceeding $50,000 or $100,000 if filing jointly. Those amounts will be adjusted annually for inflation beginning with tax year 2022.

- the income limitation on the credit for expenses for household and dependent care services. That credit is equal to a percentage that the taxpayer is allowed under the federal income tax, but is reduced and phased out as the taxpayer's income increases to $150,000. The phase out will be adjusted annually for inflation beginning with tax year 2022.

- the income limitations on the pension exclusion and other retirement income exclusion. Those exclusions are reduced and phased out as the taxpayer's income increases to $150,000. The phase out for each deduction will be adjusted annually for inflation beginning with tax year 2022.

- for those required to make estimated income tax payments, the income threshold for additional estimated payments to avoid incurring underpayment penalties. Because of the complexity of exactly estimating tax payments, an alternative amount of payment is allowed to be paid without incurring penalties for underpayment of estimated tax. If a taxpayer makes payments equal to 100 percent of the taxpayer's tax liability for the previous year, or 110 percent for taxpayers with taxable income for the preceding taxable year exceeding $75,000 or $150,000 for those filing jointly, then the taxpayer will not incur penalties for underpayment of estimated tax. The income criteria for the 110 percent payment requirement will be adjusted annually for inflation beginning with tax year 2022.

- the income limitation on the rebate allowed for those with a dependent child. That rebate is currently limited to those with gross income not exceeding $75,000 or $150,000 if filing jointly. Those amounts will be adjusted annually for inflation beginning with tax year 2022.

- the income tax brackets and tax amounts per bracket under the optional pass-through business alternative income tax. These income tax brackets and tax amounts per bracket are currently structured to approximate tax liability under the gross income tax. The income tax brackets and tax amounts per bracket will be adjusted annually for inflation beginning with tax year 2022 to conform with the changes to the gross income tax brackets and tax amounts per bracket proposed in Senate Bill No. 676 of the 2022-2023 session.