LEGISLATIVE FISCAL ESTIMATE

SENATE, No. 1697

STATE OF NEW JERSEY

218th LEGISLATURE

 

DATED: APRIL 16, 2018

 

 

SUMMARY

 

Synopsis:

Exempts fuel used for operation of certain school buses from petroleum products gross receipts tax and motor fuel tax; clarifies tax treatment of certain dyed fuel thereunder; clarifies determination of taxable estates of certain decedents.

Type of Impact:

Indeterminate loss of revenue to the Transportation Trust Fund Authority from State fuel tax exemptions. Potential annual savings to local school districts from reduced school bus contract costs.

Agencies Affected:

Department of the Treasury;

Department of Transportation; and

Local School Districts.

 

 

Office of Legislative Services Estimate

Fiscal Impact

FY2018 and Every Year Thereafter 

 

Annual State Revenue Loss

 

Indeterminate

 

Potential Local Cost Savings

 

Indeterminate

 

 

 

 

·         The Office of Legislative Services (OLS) finds that the petroleum products gross receipts tax (PPGRT) and motor fuel tax exemptions provided pursuant to this bill for fuel used for the operation of certain school buses will result in a recurring annual loss of State fuel tax revenues; however, savings realized by the private bus operators from the purchase of the newly tax-exempt fuel may be passed along to local school districts.

·         No fiscal impact is expected to result from the bill’s changes to the treatment of dyed fuel under the PPGRT.

·         The OLS notes that the fiscal impact of disallowing an estate from claiming the deduction for estate, inheritance, legacy, or succession taxes paid to other jurisdictions for purposes of determining a resident decedent’s taxable estate cannot be determined, due to insufficient information regarding the estates of those resident decedents dying on or after January 1, 2017.

BILL DESCRIPTION

 

      This bill exempts fuel used for the operation of certain school buses from the PPGRT and the motor fuel tax, clarifies the tax treatment of certain dyed fuel under the PPGRT and the motor fuel tax, clarifies the treatment of certain dyed fuel under the petroleum products gross receipts tax, and clarifies the determination of taxable estates of certain resident decedents for purposes of the estate tax.

 

 

FISCAL ANALYSIS

 

EXECUTIVE BRANCH

 

      None received.

 

 

OFFICE OF LEGISLATIVE SERVICES

 

      The OLS finds that the PPGRT and motor fuel tax exemptions provided pursuant to this bill for fuel used for the operation of certain school buses will result in a recurring annual loss of State fuel tax revenues; however, savings realized by the private bus operators from the purchase of the newly tax-exempt fuel may be passed along to local school districts.  No fiscal impact is expected to result from the bill’s changes to the treatment of dyed fuel under the PPGRT.

      The OLS notes that the fiscal impact of disallowing an estate from claiming the deduction for estate, inheritance, legacy, or succession taxes paid to other jurisdictions for purposes of determining a resident decedent’s taxable estate cannot be determined, due to insufficient information regarding the estates of those resident decedents dying on or after January 1, 2017. 

 

Fuel Used for Certain School Buses: 

      The New Jersey Department of Education provides on its website a contractor code list which include the school bus contractors in the State of New Jersey (http://www.nj.gov/education/finance/transportation/codes/ContractorCountyCode.pdf).  Despite the OLS having knowledge of the number of school bus contractors in the State, the OLS does not have access to additional data which would aid in projecting the magnitude of the bill’s impact on fuel tax revenues.  Specifically, the OLS does not have access to data regarding the number of active school bus contractors in the State, the number of school buses actively operated by these school bus contractors, and the mileage or fuel usage data for each contractor.  Thus, while the OLS notes that providing the fuel tax exemptions to school bus contractors would reduce the pool of taxpayers who pay the fuel taxes, the OLS is unable to estimate the amount of fuel tax revenues that will be forgone to the State as a result of the exemptions.

      The OLS further notes that under current law, consumers of fuel that are eligible for an exemption from the PPGRT and the motor fuel tax must pay the tax at the point of purchase and apply for a refund of the taxes paid by filing a claim with the Director of the Division of Taxation in the Department of the Treasury.  As part of the exemption claim, the application must include proof from the consumer that the tax has been paid and a refund has not been previously issued.  Since the exemption is provided in the form of a refund, situations may arise where a taxpayer may be unaware of the exemption or does not file the necessary documents for a refund.  Thus, the full impact of the bill may be discounted to the extent school bus contractors fail to correctly apply for a refund since the exemption occurs after the fuel taxes have already been paid.

 

Local School District Impact:

      Pursuant to N.J.S.A.18A:39-3 et seq., school districts are required to utilize a competitive bidding process to secure contracted school bus transportation.  The OLS notes that by exempting certain purchases of fuel made by private school bus operators, local school districts that contract for transportation services with private school bus operators may realize cost savings through a decrease in future contract costs if the savings realized by the private bus operators from the purchase of the newly tax-exempt fuel is passed along to the local school districts.

 

Treatment of Dyed Fuel under PPGRT:

      The bill includes an exemption for dyed fuels from the PPGRT except if those fuels are used in a motor vehicle for operation on a public highway.  Dyed fuels are primarily used in machines and equipment that do not operate on public roads and are not subject to the PPGRT.  Thus, the inclusion of dyed fuels as part of the bill does not create a new fiscal impact and instead clarifies the existing tax treatment of dyed fuels.

 

Estate Tax:

      The bill clarifies the determination of taxable estates of certain resident decedents for purposes of the estate tax.  Under the bill, the taxable estate of each resident decedent dying on or after January 1, 2017 is to be determined based upon the taxable estate of the decedent for federal estate tax purposes, but with disallowance of the deduction of any estate, inheritance, legacy, or succession taxes allowed for federal estate tax purposes.  The intent of the bill is to disallow an estate from claiming the deduction for estate, inheritance, legacy, or succession taxes paid to other jurisdictions twice, which is in conformance with the administration of the estate tax for resident decedents dying prior to January 1, 2017.  The fiscal impact of the bill, if any, is indeterminate, as the OLS does not have access to information regarding estate tax filings since January 1, 2017.

 

 

Section:

Revenue, Finance and Appropriations

Analyst:

Jordan M. DiGiovanni

Associate Fiscal Analyst

Approved:

Frank W. Haines III

Legislative Budget and Finance Officer

 

 

This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).