Bill Text: NJ S3052 | 2018-2019 | Regular Session | Introduced
Bill Title: Establishes Charitable Giving Account Program and exempts certain employee contributions to charitable and not-for-profit organizations from gross income tax.
Spectrum: Partisan Bill (Republican 3-0)
Status: (Introduced - Dead) 2018-10-15 - Introduced in the Senate, Referred to Senate Budget and Appropriations Committee [S3052 Detail]
Download: New_Jersey-2018-S3052-Introduced.html
Sponsored by:
Senator THOMAS H. KEAN, JR.
District 21 (Morris, Somerset and Union)
Senator STEVEN V. OROHO
District 24 (Morris, Sussex and Warren)
SYNOPSIS
Establishes Charitable Giving Account Program and exempts certain employee contributions to charitable and not-for-profit organizations from gross income tax.
CURRENT VERSION OF TEXT
As introduced.
An Act establishing the Charitable Giving Account Program, supplementing Title 54A of the New Jersey Statutes, and amending P.L.2007, c.62 and P.L.1996, c.8.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. (New section) As used in P.L. , c. (C. ) (pending before the Legislature as this bill):
"Division" means the Division of Pension and Benefits in the Department of the Treasury.
"Maximum contribution limit" means, for salary reduction agreements beginning before January 1, 2020, $5,000, and, for each year thereafter, "maximum contribution limit" means the amount equal to $5,000 multiplied by the cost-of-living adjustment determined pursuant to paragraph (3) of subsection (f) of section 1 of the federal Internal Revenue Code (26 U.S.C. s.1).
"Qualified donation" means a donation from a charitable giving account, made and applied during the year in which a salary reduction agreement provided for in section 3 of P.L. , c. (C. ) (pending before the Legislature as this bill) is in effect, to be used solely as a contribution or gift to or for the use of a charitable organization that is registered pursuant to the "Charitable Registration and Investigation Act," P.L.1994, c.16 (C.45:17A-18 et seq.), or an organization that is exempt from the registration requirements of that act pursuant to section 9 of P.L.1994, c.16 (C.45:17A-26), and that maintains an office, employs persons, and provides services in the State.
2. (New section) a. The division shall establish a "Charitable Giving Account Program." The division shall be responsible for program services and to ensure that funds can be readily deposited and withdrawn from charitable giving accounts established pursuant to section 3 of P.L. , c. (C. ) (pending before the Legislature as this bill).
b. To effectuate the program, the division may:
(1) enter into, or permit employers to enter into, agreements with third party providers to administer and operate the program;
(2) enforce program reporting and compliance requirements;
(3) issue regulations, rules, or guidelines that prescribe the manner by which funds may be withdrawn from charitable giving accounts and used as charitable donations; and
(4) provide for the annual auditing of a random sample of accounts, or any specific account for which misuse of money deposited into the account is suspected. In the event an audit identifies substantial misuse of money in an account, the director of the division shall immediately freeze the account and forward the audit findings to the Office of the Attorney General.
c. For the purpose of providing notice to private employers of the opportunity to participate in the Charitable Giving Account Program, the Director of the Division of Taxation in the Department of the Treasury shall:
(1) post conspicuous notice of the program on the website for the Division of Revenue and Enterprise Services in the Department of the Treasury;
(2) include notices of the program in tax return, annual report pursuant to N.J.S.14A:4-5, or both, material that is annually mailed to private employers by the Department of the Treasury; and
(3) take such other measures as the director deems appropriate to advise private employers of the availability of the program.
3. (New section) a. An employer may participate in the Charitable Giving Account Program, subject to rules and regulations issued by the director of the division; provided, however, that an employer that is duly required pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill), or any other law or regulation, shall participate in the program.
b. An employer that participates in the Charitable Giving Account Program may enter into a salary reduction agreement with each employee that elects to participate in the Charitable Giving Account Program. Pursuant thereto, the employee shall agree to take a reduction in salary with respect to amounts earned during the term of the agreement. In return, the employer shall withhold such amounts from the employee's compensation, through payroll deductions or otherwise, in equal installments for the term of the agreement. The sum of such installments shall equal the salary reduction amount specified in the agreement; provided, however, that the total amount of annual withholding shall not exceed the maximum contribution limit applicable to the year in which the agreement is in effect.
The employer shall deposit the amounts withheld pursuant to the salary reduction agreement into the employee's charitable giving account established pursuant to this section. An agreement shall be valid for one year, except that the agreement may be annually renewed, or modified and renewed, during an open enrollment period, as prescribed by rules and regulations issued by the director of the division.
c. An employee of an employer that participates in the Charitable Giving Account Program may maintain a charitable giving account, pursuant to rules and regulations issued by the director of the division. Except as otherwise provided by P.L. , c. (C. ) (pending before the Legislature as this bill), money deposited by an employer into a charitable giving account shall be used exclusively by the employee to make qualified donations during the term of the salary reduction agreement.
An employee who participates in the Charitable Giving Account Program may, at any time during the year the agreement is in effect, use amounts from the employee's charitable giving account for qualified donations. The director of the division shall prescribe the forms and requirements necessary to make a qualified donation.
d. At the discretion of a participating employer, for a salary reduction agreement that has been renewed or modified and renewed:
(1) the employee may carry forward a charitable giving account balance, not to exceed $500, to the next following year; or
(2) the employee may use funds in the account as charitable donations for the period up to 75 days after the end of the term of the agreement.
An agreement may be terminated prior to the conclusion of the agreement's term. Except as otherwise provided by this subsection, or any rules or regulations issued by the director of the division, any funds remaining in a charitable giving account at the time of the termination or conclusion of an agreement shall revert to the employer; provided, however, that the employer shall use such funds as qualified donations at the discretion of the employer.
e. If an employer or an employee does not participate in the Charitable Giving Account Program in any year, that employer or employee may participate in the program in any subsequent year.
4. Section 44 of P.L.2007, c.62 (C.18A:16-19.1) is amended to read as follows:
44. Notwithstanding the provisions of any other law to the contrary, a board of education, or an agency or instrumentality thereof, may establish as an employer a cafeteria plan for its employees pursuant to section 125 of the federal Internal Revenue Code, 26 U.S.C. s.125, [and] shall establish such a plan for medical or dental expenses not covered by a health benefits plan , and shall participate in the Charitable Giving Account Program pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill). The plan shall provide for a reduction in an employee's salary, through payroll deductions or otherwise, in exchange for payment by the employer of medical or dental expenses not covered by a health benefits plan, [and] may provide for a reduction in an employee's salary, through payroll deductions or otherwise, in exchange for payment by the employer of dependent care expenses as provided in section 129 of the code, 26 U.S.C. s.129, and such other benefits as are consistent with section 125 which are included under the plan , and may provide for a reduction in an employee's salary, through payroll deductions or otherwise, in exchange for payments by the employer to the employee's charitable giving account, as consistent with P.L. , c. (C. ) (pending before the Legislature as this bill). The amount of any reduction in an employee's salary for the purpose of contributing to the plan shall continue to be treated as regular compensation for all other purposes, including the calculation of pension contributions and the amount of any retirement allowance, but, to the extent permitted by the federal Internal Revenue Code, shall not be included in the computation of federal taxes withheld from the employee's salary.
(cf: P.L.2011, c.78, s.51)
5. Section 45 of P.L.2007, c.62 (C.40A:10-23.5) is amended to read as follows:
45. Notwithstanding the provisions of any other law to the contrary, a local unit of government, or an agency, board, commission, authority or instrumentality thereof, may establish as an employer a cafeteria plan for its employees pursuant to section 125 of the federal Internal Revenue Code, 26 U.S.C. s.125, [and] shall establish such a plan for medical or dental expenses not covered by a health benefits plan , and shall participate in the Charitable Giving Account Program pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill). The plan shall provide for a reduction in an employee's salary, through payroll deductions or otherwise, in exchange for payment by the employer of medical or dental expenses not covered by a health benefits plan, [and] may provide for a reduction in an employee's salary, through payroll deductions or otherwise, in exchange for payment by the employer of dependent care expenses as provided in section 129 of the code, 26 U.S.C. s.129, and such other benefits as are consistent with section 125 which are included under the plan , and may provide for a reduction in an employee's salary, through payroll deductions or otherwise, in exchange for payments by the employer to the employee's charitable giving account, as consistent with P.L. , c. (C. ) (pending before the Legislature as this bill). The amount of any reduction in an employee's salary for the purpose of contributing to the plan shall continue to be treated as regular compensation for all other purposes, including the calculation of pension contributions and the amount of any retirement allowance, but, to the extent permitted by the federal Internal Revenue Code, shall not be included in the computation of federal taxes withheld from the employee's salary.
(cf: P.L.2011, c.78, s.52)
6. Section 7 of P.L.1996, c.8 (C.52:14-15.1a) is amended to read as follows:
7. Notwithstanding the provisions of any other law to the contrary, the State Treasurer on behalf of the State, and the governing body of an independent State authority, board, commission, corporation, agency or organization may establish as an employer a cafeteria plan for its employees pursuant to section 125 of the federal Internal Revenue Code, 26 U.S.C. s.125, [and] shall establish such a plan for medical or dental expenses not covered by a health benefits plan , and shall participate in the Charitable Giving Account Program pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill). The plan shall provide for a reduction in an employee's salary, through payroll deductions or otherwise, in exchange for payment by the employer of medical or dental expenses not covered by a health benefits plan, [and] may provide for a reduction in an employee's salary, through payroll deductions or otherwise, in exchange for payment by the employer of dependent care expenses as provided in section 129 of the code, 26 U.S.C. s.129, and such other benefits as are consistent with section 125 which are included under the plan , and may provide for a reduction in an employee's salary, through payroll deductions or otherwise, in exchange for payments by the employer to the employee's charitable giving account, as consistent with P.L. , c. (C. ) (pending before the Legislature as this bill). The amount of any reduction in an employee's salary for the purpose of contributing to the plan shall continue to be treated as regular compensation for all other purposes, including the calculation of pension contributions and the amount of any retirement allowance, but, to the extent permitted by the federal Internal Revenue Code, shall not be included in the computation of federal taxes withheld from the employee's salary.
(cf: P.L.2011, c.78, s.53)
7. (New section) Gross income shall not include amounts contributed by an employer, on behalf and at the election of an employee, to a charitable giving account of an employee established pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill).
8. (New section) The Director of the Division of Pension and Benefits in the Department of the Treasury shall adopt, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), and immediately upon filing with the Office of Administrative Law, rules and regulations necessary to effectuate the purposes of P.L. , c. (C. ) (pending before the Legislature as this bill), which shall be effective for a period not to exceed 360 days following enactment of P.L. , c. (C. ) (pending before the Legislature as this bill) and may thereafter be amended, adopted, or readopted by the Director of the Division of Pension and Benefits in the Department of the Treasury in accordance with the requirements of P.L.1968, c.410.
9. This act shall take effect on the first day of the 10th month next following the date of enactment, except that the Director of the Division of Pension and Benefits in the Department of the Treasury may take anticipatory administrative action in advance as shall be necessary for the implementation of this act.
STATEMENT
This bill establishes the Charitable Giving Account Program, which permits employees of State and local public employers, and employees of other employers who elect to participate, the opportunity to divert earnings from each paycheck into a charitable giving account, the funds from which are to be used by the employee as charitable donations to qualifying charitable and not-for-profit organizations. Amounts diverted are not subject to State gross income tax.
The Charitable Giving Account Program is established in the Division of Pension and Benefits in the Department of the Treasury (the "division"). It is the division's responsibility to oversee the program. The division may: (1) enter into agreements with third party providers to administer and operate the program; (2) enforce program reporting and compliance requirements; (3) issue guidelines and rules governing how funds may be withdrawn from the accounts; and (4) provide for account auditing. The director of the division is empowered to issue rules and regulations governing: (1) employer and employee participation in the program; (2) the process for establishing accounts and enrollment; (3) salary reduction agreements, including renewal and modification; and (4) other measures necessary for establishing and operating the program.
State and local public employers are required to participate in the program; all other employers may afford employees the opportunity to participate. A participating employee must enter into a salary reduction agreement with his or her employer, pursuant to which the employee elects to take a set reduction in salary for the duration of one year (the "elective reduction"). The amount of the elective reduction is then deposited by the employer into the employee's charitable giving account, in equal installments throughout the year. The amount of the elective reduction is as follows: for salary reduction agreements commencing before January 1, 2020, the elective reduction cannot exceed $5,000; for each year thereafter, the elective reduction cannot exceed an amount equal to $5,000 multiplied by a federal inflation index, per paragraph (3) of subsection (f) of section 1 of the federal Internal Revenue Code. The salary reduction agreement is effective for one year and enrollment is made available during an open enrollment period. Annually thereafter, an employee can opt to renew, or modify and renew (for instance, increasing or decreasing the elective reduction amount) a salary reduction agreement each year thereafter. However, at the discretion of the employer, the employee may: (1) carry over in the account an amount up to $500 year-to-year; or (2) have a 75 day grace period, after the end of the agreement, to use the funds as charitable donations. The amount allocated to a charitable giving account is exempted from State gross income tax.
The charitable giving account permits the employee to use the funds in the account as charitable donations. The term "charitable donation" is defined to mean a charitable organization that is registered pursuant to the "Charitable Registration and Investigation Act," N.J.S.A.45:17A-18 et seq., or an organization that is exempt from the registration requirements of that act pursuant to N.J.S.A. 45:17A-26, and that maintains an office, employs persons, and provides services in the State.
Although the salary reduction agreement is for a term of one year, the agreement may be terminated prior to its date of conclusion (for instance, if the employee is no longer employed by the employer). Any unspent balance, however, reverts to the employer to use as charitable donations. Moreover, if an employer or an employee elects not to participate in the program in any given year, the employee or employer may elect to participate in any year thereafter.
Except as otherwise provided by the bill, it is the intent of the sponsor that the Charitable Giving Account Program be established and operated in a manner similar to the flexible spending accounts authorized under section 125 of the federal Internal Revenue Code.
