SENATE, No. 2345

STATE OF NEW JERSEY

214th LEGISLATURE

 

INTRODUCED OCTOBER 14, 2010

 


 

Sponsored by:

Senator  STEPHEN M. SWEENEY

District 3 (Salem, Cumberland and Gloucester)

Senator  FRED H. MADDEN, JR.

District 4 (Camden and Gloucester)

Senator  LINDA R. GREENSTEIN

District 14 (Mercer and Middlesex)

Assemblywoman  CELESTE M. RILEY

District 3 (Salem, Cumberland and Gloucester)

Assemblyman  JOHN J. BURZICHELLI

District 3 (Salem, Cumberland and Gloucester)

Assemblyman  GORDON M. JOHNSON

District 37 (Bergen)

Assemblyman  PAUL D. MORIARTY

District 4 (Camden and Gloucester)

 

Co-Sponsored by:

Senators Beach, Gordon, Whelan, Assemblyman Fuentes, Assemblywoman Rodriguez, Assemblyman Caputo, Assemblywomen Jasey, Tucker, Watson Coleman, Assemblymen Conaway, Schaer, Greenwald, Assemblywoman Pou, Assemblymen Wisniewski, Chivukula, Giblin, Assemblywomen Quigley, Lampitt, Assemblymen Coughlin, Diegnan, DeAngelo and Benson

 

 

 

SYNOPSIS

     Expands gross income tax exclusion for pensions, annuities and other retirement income for certain taxpayers.

 

CURRENT VERSION OF TEXT

     As introduced.

  


An Act expanding the gross income tax exclusion for certain pensions, annuities and retirement income, amending N.J.S.54A:6-10 and P.L.1977, c.273.

 

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

 

     1.    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.

     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, 2011, 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, 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, but for taxable years beginning on or after January 1, 2005, but before January 1, 2011, only if the taxpayer has gross income for the taxable year of not more than $100,000; and

     for taxable years beginning on or after January 1, 2011, 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, but only if the taxpayer has gross income for the taxable year of less than $110,000, as limited by subsection b. of this section.

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

     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.

     b.    For purposes of the exclusion provided to taxpayers with less than $110,000 of gross income for taxable years beginning on or after January 1, 2011 pursuant to subsection a. of this section, the amount of payments that may be excluded shall be reduced by the percentage calculated by dividing the amount of the taxpayer’s gross income for the taxable year that is in excess of $100,000, but less than $110,000, by $10,000.

(cf: P.L.2005, c.130, s.1)

 

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

     3.    Other retirement income. a. Gross income shall not include income:

     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, 2011, 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, 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, but for taxable years beginning on or after January 1, 2005, but before January 1, 2011, only if the taxpayer has gross income for the taxable year of not more than $100,000, provided, however, that 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; and

     for taxable years beginning on or after January 1, 2011, 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, 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, but only if the taxpayer has gross income for the taxable year of not more than $100,000, provided, however, that a taxpayer’s maximum exclusion allowed under this subsection shall be reduced by the amount of the exclusion allowed pursuant to N.J.S.54A:6-10.

     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.2005, c.130, s.2)

 

     3.    This act shall take effect immediately.

 

 

STATEMENT

 

     This bill expands the exclusion under the gross income tax for pensions, annuities and certain other retirement income for qualified taxpayers.  At present, qualified taxpayers that are at least 62 years of age, or by virtue of disability would be eligible to receive social security payments, and have $100,000 or less of gross income may exclude $20,000, $15,000 or $10,000 of various pension, annuity and retirement benefit income, depending on their tax filing status (i.e. joint, single and separate).

     This bill expands the exclusion by removing the $20,000, $15,000 and $10,000 exclusion caps, and provides full exclusions for qualified taxpayers with gross income less than $100,000.  The bill also provides limited exclusions for qualified taxpayers with income exceeding $100,000 but less than $110,000 as a method of phasing out eligibility.  The limited exclusion for qualified taxpayers with gross income exceeding $100,000 but less than $110,000 reduces the exclusion amount in proportion to the amount of the taxpayer’s gross income that is above $100,000.