ASSEMBLY APPROPRIATIONS COMMITTEE

 

STATEMENT TO

 

ASSEMBLY, No. 6071

 

with committee amendments

 

STATE OF NEW JERSEY

 

DATED:  NOVEMBER 15, 2021

 

      The Assembly Appropriations Committee reports favorably Assembly Bill No. 6071, with committee amendments.

     This bill revises the State’s child and dependent care tax credit, which is based on the federal credit and is for taxpayers who incur expenses for household services and the care of a child or dependent to enable the taxpayer to be employed.

     The bill revises the credit so that it will be refundable.  This means that a taxpayer could receive a cash refund if the credit amount is in excess of their gross income tax liability.  Under current law, the credit is nonrefundable, and therefore, if the credit is in excess of the taxpayer’s gross income tax liability then the taxpayer may not be able to claim the full tax credit amount.

     The bill also revises the income requirements for the credit so that taxpayers who have New Jersey taxable income of $150,000 or less for the tax year can claim the credit compared to $60,000 or less under current law.  In addition, the bill removes the current caps of $500 for employment-related expenses paid by the taxpayer for one child or dependent and $1,000 for employment-related expenses paid by the taxpayer for two or more children or dependents. 

     Finally, the bill revises the tax credit’s taxable income eligibility requirements as follows: not over $30,000 to receive a New Jersey tax credit equal to 50 percent of the federal credit; over $30,000 but not over $60,000 to receive 40 percent of the federal credit; over $60,000 but not over $90,000 to receive 30 percent of the federal credit; over $90,000 but not over $120,000 to receive 20 percent of the federal credit; and over $120,000 but not over $150,000 to receive 10 percent of the federal credit.

 

COMMITTEE AMENDMENTS:

      The committee amended the bill to remove a provision allowing the Director of the Division of Taxation to determine the order of the application of this credit relative to other credits on taxpayer forms.

FISCAL IMPACT:

      The Office of Legislative Services (OLS) notes the Executive originally proposed this expansion of the State’s child and dependent care tax credit as part of the FY 2022 Governor’s Budget.  The expansion of the program was originally anticipated to reduce revenues by an additional $17.2 million annually.  

      Based on changes to the federal credit, which affects the calculation of the State’s credit, the Executive now expects the expansion to reduce State revenues by $76.2 million for TY 2021.  For TY 2022 and each tax year thereafter, the anticipated revenue loss would be around the Executive’s original estimate of $17.2 million annually.

      The OLS agrees with the Executive’s estimates for the expansion of the State’s child and dependent care tax credit.