S1285

An Act increasing the gross income tax rate on income exceeding $1,000,000 and dedicating revenue from the tax rate increase for direct real property tax relief for taxpayers, amending N.J.S.54A:2-1 and N.J.S.54A:9-25 and supplementing Title 54A of the New Jersey Statutes.

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

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

54A:2-1. Imposition of tax. There is hereby imposed a tax for each taxable year (which shall be the same as the taxable year for federal income tax purposes) on the New Jersey gross income as herein defined of every individual, estate or trust (other than a charitable trust or a trust forming part of a pension or profit-sharing plan), subject to the deductions, limitations and modifications hereinafter provided, determined in accordance with the following tables with respect to taxpayers' taxable income:

a. For married individuals filing a joint return and individuals filing as head of household or as surviving spouse for federal income tax purposes:

(1) for taxable years beginning on or after January 1, 1991 but before January 1, 1994:

If the taxable income is: The tax is:

Not over $20,000.00.......... 2% of taxable income

Over $20,000.00 but not

over $50,000.00............. $400.00 plus 2.5% of the

excess over $20,000.00

Over $50,000.00 but not

over $70,000.00.............. $1,150.00 plus 3.5% of the

excess over $50,000.00

Over $70,000.00 but not

over $80,000.00.............. $1,850.00 plus 5.0% of the

excess over $70,000.00

Over $80,000.00 but not

over $150,000.00............. $2,350.00 plus 6.5% of the

excess over $80,000.00

Over $150,000.00............... $6,900.00 plus 7.0% of the

excess over $150,000.00

(2) for taxable years beginning on or after January 1, 1994 but before January 1, 1995:

If the taxable income is: The tax is:

Not over $20,000.00.............. 1.900% of taxable income

Over $20,000.00 but not

over $50,000.00................ $380.00 plus 2.375% of the

excess over $20,000.00

Over $50,000.00 but not

over $70,000.00.............. $1,092.50 plus 3.325% of the

excess over $50,000.00

Over $70,000.00 but not

over $80,000.00.............. $1,757.50 plus 4.750% of the

excess over $70,000.00

Over $80,000.00 but not

over $150,000.00............. $2,232.50 plus 6.175% of the

excess over $80,000.00

Over $150,000.00 ............. $6,555.00 plus 6.650% of the

excess over $150,000.00

(3) for taxable years beginning on or after January 1, 1995 but before January 1, 1996:

If the taxable income is: The tax is:

Not over $20,000.00............. 1.700% of taxable income

Over $20,000.00 but not

over $50,000.00................ $340.00 plus 2.125% of the

excess over $20,000.00

Over $50,000.00 but not

over $70,000.00.............. $977.50 plus 2.975% of the

excess over $50,000.00

Over $70,000.00 but not

over $80,000.00.............. $1,572.50 plus 4.250% of the

excess over $70,000.00

Over $80,000.00 but not

over $150,000.00............. $1,997.50 plus 6.013% of the

excess over $80,000.00

Over $150,000.00 ............. $6,206.60 plus 6.580% of the

excess over $150,000.00

(4) for taxable years beginning on or after January 1, 1996 but before January 1, 2004:

If the taxable income is: The tax is:

Not over $20,000.00............ 1.400% of taxable income

Over $20,000.00 but not

over $50,000.00................ $280.00 plus 1.750% of the

excess over $20,000.00

Over $50,000.00 but not

over $70,000.00.............. $805.00 plus 2.450% of the

excess over $50,000.00

Over $70,000.00 but not

over $80,000.00.............. $1,295.50 plus 3.500% of the

excess over $70,000.00

Over $80,000.00 but not

over $150,000.00............. $1,645.00 plus 5.525% of the

excess over $80,000.00

Over $150,000.00 ............. $5,512.50 plus 6.370% of the

excess over $150,000.00

(5) for taxable years beginning on or after January 1, 2004 but before January 1, 2018:

If the taxable income is: The tax is:

Not over $20,000.00 ........... 1.400% of taxable income

Over $20,000.00 but not

over $50,000.00 ................ $280.00 plus 1.750% of the

excess over $20,000.00

Over $50,000.00 but not

over $70,000.00 ............. $805.00 plus 2.450% of the

excess over $50,000.00

Over $70,000.00 but not

over $80,000.00 ............. $1,295.50 plus 3.500% of the

excess over $70,000.00

Over $80,000.00 but not

over $150,000.00 ............ $1,645.00 plus 5.525% of the

excess over $80,000.00

Over $150,000.00 but not

over $500,000.00 ............ $5,512.50 plus 6.370% of the

excess over $150,000.00

Over $500,000.00 ............ $27,807.50 plus 8.970% of the

excess over $500,000.00

(6) for taxable years beginning on or after January 1, 2018 but before January 1, 2020:

If the taxable income is: The tax is:

Not over $20,000.00 ........... 1.400% of taxable income

Over $20,000.00 but not

over $50,000.00 ................ $280.00 plus 1.750% of the

excess over $20,000.00

Over $50,000.00 but not

over $70,000.00 ............. $805.00 plus 2.450% of the

excess over $50,000.00

Over $70,000.00 but not

over $80,000.00 ............. $1,295.50 plus 3.500% of the

excess over $70,000.00

Over $80,000.00 but not

over $150,000.00 ............ $1,645.00 plus 5.525% of the

excess over $80,000.00

Over $150,000.00 but not

over $500,000.00 ............ $5,512.50 plus 6.370% of the

excess over $150,000.00

Over $500,000.00 but not

over $5,000,000.00 .......... $27,807.50 plus 8.970% of the

excess over $500,000.00

Over $5,000,000.00 ……… $431,457.50 plus 10.75% of the

excess over $5,000,000.00

(7) for taxable years beginning on or after January 1, 2020:

If the taxable income is: The tax is:

Not over $20,000.00 ........... 1.400% of taxable income

Over $20,000.00 but not

over $50,000.00 ................ $280.00 plus 1.750% of the

excess over $20,000.00

Over $50,000.00 but not

over $70,000.00 ............. $805.00 plus 2.450% of the

excess over $50,000.00

Over $70,000.00 but not

over $80,000.00 ............. $1,295.50 plus 3.500% of the

excess over $70,000.00

Over $80,000.00 but not

over $150,000.00 ............ $1,645.00 plus 5.525% of the

excess over $80,000.00

Over $150,000.00 but not

over $500,000.00 ............ $5,512.50 plus 6.370% of the

excess over $150,000.00

Over $500,000.00 but not

over $5,000,000.00 .......... $27,807.50 plus 8.970% of the

excess over $500,000.00

Over $1,000,000.00 ……… $72,657.50 plus 10.75% of the

excess over $1,000,000.00

b. For married individuals filing separately, unmarried individuals other than individuals filing as head of household or as a surviving spouse for federal income tax purposes, and estates and trusts:

(1) for taxable years beginning on or after January 1, 1991 but before January 1, 1994:

If the taxable income is: The tax is:

Not over $20,000.00............ 2% of taxable income

Over $20,000.00 but not

over $35,000.00................ $400.00 plus 2.5% of the

excess over $20,000.00

Over $35,000.00 but not

over $40,000.00................ $775.00 plus 5.0% of the

excess over $35,000.00

Over $40,000.00 but not

over $75,000.00.............. $1,025.00 plus 6.5% of the

excess over $40,000.00

Over $75,000.00................ $3,300.00 plus 7.0% of the

excess over $75,000.00

(2) for taxable years beginning on or after January 1, 1994 but before January 1, 1995:

If the taxable income is: The tax is:

Not over $20,000.00...... 1.900% of taxable income

Over $20,000.00 but not

over $35,000.00......... $380.00 plus 2.375% of the

excess over $20,000.00

Over $35,000.00 but not

over $40,000.00................ $736.25 plus 4.750% of the

excess over $35,000.00

Over $40,000.00 but not

over $75,000.00.............. $973.75 plus 6.175% of the

excess over $40,000.00

Over $75,000.00............... $3,135.00 plus 6.650% of the

excess over $75,000.00

(3) for taxable years beginning on or after January 1, 1995 but before January 1, 1996:

If the taxable income is: The tax is:

Not over $20,000.00......... 1.700% of taxable income

Over $20,000.00 but not

over $35,000.00................ $340.00 plus 2.125% of the

excess over $20,000.00

Over $35,000.00 but not

over $40,000.00................ $658.75 plus 4.250% of the

excess over $35,000.00

Over $40,000.00 but not

over $75,000.00.............. $871.25 plus 6.013% of the

excess over $40,000.00

Over $75,000.00............... $2,975.80 plus 6.580% of the

excess over $75,000.00

(4) for taxable years beginning on or after January 1, 1996 but before January 1, 2004:

If the taxable income is: The tax is:

Not over $20,000.00............ 1.400% of taxable income

Over $20,000.00 but not

over $35,000.00................ $280.00 plus 1.750% of the

excess over $20,000.00

Over $35,000.00 but not

over $40,000.00................ $542.50 plus 3.500% of the

excess over $35,000.00

Over $40,000.00 but not

over $75,000.00.............. $717.50 plus 5.525% of the

excess over $40,000.00

Over $75,000.00............... $2,651.25 plus 6.370% of the

excess over $75,000.00

(5) for taxable years beginning on or after January 1, 2004 but before January 1, 2018

If the taxable income is: The tax is:

Not over $20,000.00 ............ 1.400% of taxable income

Over $20,000.00 but not

over $35,000.00 ............... $280.00 plus 1.750% of the

excess over $20,000.00

Over $35,000.00 but not

over $40,000.00 ............... $542.50 plus 3.500% of the

excess over $35,000.00

Over $40,000.00 but not

over $75,000.00 ............. $717.50 plus 5.525% of the

excess over $40,000.00

Over $75,000.00 but not

over $500,000.00 ............. $2,651.25 plus 6.370% of the

excess over $75,000.00

Over $500,000.00 ............... $29,723.75 plus 8.970% of the

excess over $500,000.00

(6) for taxable years beginning on or after January 1, 2018 but before January 1, 2020:

If the taxable income is: The tax is:

Not over $20,000.00 ............ 1.400% of taxable income

Over $20,000.00 but not

over $35,000.00 ............... $280.00 plus 1.750% of the

excess over $20,000.00

Over $35,000.00 but not

over $40,000.00 ............... $542.50 plus 3.500% of the

excess over $35,000.00

Over $40,000.00 but not

over $75,000.00 ............. $717.50 plus 5.525% of the

excess over $40,000.00

Over $75,000.00 but not

over $500,000.00 ............. $2,651.25 plus 6.370% of the

excess over $75,000.00

Over $500,000.00 but not

over $5,000,000.00 ............. $29,723.75 plus 8.970% of the

excess over $500,000.00

Over $5,000,000.00 ……… $433,373.75 plus 10.75% of the

excess over $5,000,000.00

(7) for taxable years beginning on or after January 1, 2020:

If the taxable income is: The tax is:

Not over $20,000.00 ............ 1.400% of taxable income

Over $20,000.00 but not

over $35,000.00 ............... $280.00 plus 1.750% of the

excess over $20,000.00

Over $35,000.00 but not

over $40,000.00 ............... $542.50 plus 3.500% of the

excess over $35,000.00

Over $40,000.00 but not

over $75,000.00 ............. $717.50 plus 5.525% of the

excess over $40,000.00

Over $75,000.00 but not

over $500,000.00 ............. $2,651.25 plus 6.370% of the

excess over $75,000.00

Over $500,000.00 but not

over $1,000,000.00 ............. $29,723.75 plus 8.970% of the

excess over $500,000.00

Over $1,000,000.00 ……… $74,573.75 plus 10.75% of the

excess over $1,000,000.00

c. For the purposes of this section, an individual who would be eligible to file as a head of household for federal income tax purposes but for the fact that such taxpayer is a nonresident alien, shall determine tax pursuant to subsection a. of this section.

d. For the purposes of this section, for taxable year 2018, withholding by every employer from salaries, wages and other remuneration paid by an employer for services rendered described in subsections a. and b. of this section, in excess of $5,000,000 during that taxable year, shall be at the rate of 15.6% as soon as practicable but no later than September 1, 2018. The Director of the Division of Taxation is authorized to do all things necessary to implement the withholding tax prescribed by this section for taxable year 2018.

e. No additions to tax or penalty shall be imposed under N.J.S.54A:9-6 for insufficient payment of estimated tax that may otherwise be due on salaries, wages and other remuneration received before September 1, 2018, on which there is a rate of tax imposed pursuant to subsections a. and b. of this section.

f. An employer maintaining an office or transacting business within this State and making payment of any salaries, wages and remuneration subject to New Jersey gross income tax or making payment of any remuneration for employment subject to contribution under the New Jersey "unemployment compensation law," pursuant to R.S.43:21-1 et seq., that is subject to New Jersey gross income tax shall not be subject to interest, penalties or other costs that may otherwise be imposed for insufficient withholding of salaries, wages and other remuneration made before September 1, 2018, that is directly attributable to the enactment of the taxable income tables and tax rates in subsections a. and b. of this section.

(cf: P.L.2018, c.45, s.10)

2. (New section) a. Notwithstanding the provisions of the “Administrative Procedure Act,” P.L.1968, c.410 (C.52:14B-1 et seq.), to the contrary, the Director of the Division of Taxation may adopt, immediately upon filing with the Office of Administrative Law, such regulations as the director deems necessary to implement the amendments to N.J.S.54A:2-1 made by section 1 of P.L. , c. (C. ) (pending before the Legislature as this bill) as to taxable years beginning in 2020, which regulations shall be effective for a period not to exceed 180 days from the date of the filing. The regulations may thereafter be amended, adopted, or readopted by the director as the director deems necessary in accordance with the “Administrative Procedure Act,” P.L.1968, c.410 (C.52:14B-1 et seq.).

b. (1) For purposes of the amendments to N.J.S.54A:2-1 made by section 1 of P.L. , c. (pending before the Legislature as this bill), this subsection shall apply for taxable years beginning in 2020.

(2) No additions to tax or penalty shall be imposed upon a taxpayer pursuant to N.J.S.54A:9-6 for insufficient payment of increased estimated tax on taxable income received before October 1, 2020 for which the increased estimated tax due is attributable to the rate imposed on taxable income over $1,000,000 by the amendments to N.J.S.54A:2-1 made by section 1 of P.L. , c. (pending before the Legislature as this bill).

(3) No interest, penalties, or other costs shall be imposed upon an employer maintaining an office or transacting business within this State and making payment of any salaries, wages and remuneration subject to the “New Jersey Gross Income Tax Act,” N.J.S.54A:1-1 et seq., or making payment of any remuneration for employment subject to contribution under the New Jersey “unemployment compensation law,” pursuant to R.S.43:21-1 et seq., for insufficient withholding of salaries, wages, and other remuneration paid before October 1, 2020 that is attributable to an increase in the amount of tax due pursuant to the rate imposed on taxable income over $1,000,000 by the amendments to N.J.S.54A:2-1 made by section 1 of P.L. , c. (pending before the Legislature as this bill).

3. N.J.S.54A:9-25 is amended to read as follows:

54A:9-25. Taxes collected under the provisions of this act shall be deposited by the State Treasurer in a special account to be known as the Property Tax Relief Fund. There is established within the special fund a subaccount to be known as the Direct Taxpayer Property Tax Relief Fund into which shall be deposited by the State Treasurer the amount of tax revenue anticipated by the Governor to be derived from the tax rate change effectuated in the amendment made to N.J.S.54A:2-1 pursuant to section 1 of P.L. , c. (pending before the Legislature as this bill). Moneys in the Property Tax Relief Fund shall be annually appropriated, pursuant to formulas established from time to time by the Legislature, to the several counties, municipalities and school districts of this State exclusively for the purpose of providing property tax relief and for the purpose of reducing or offsetting property taxes, including the funding of the requirements of [P.L.1975, c. 212, and] the “School Funding Reform Act of 2008,” P.L.2007, c.260 (C.18A:7F-43 et seq.). Moneys in the Direct Taxpayer Property Tax Relief subaccount shall be annually appropriated for real property taxpayer relief allocable directly to taxpayers, including but not limited to homestead [exemptions] rebates and credits under [1976 Assembly Bill No. 1330] P.L.1990, c.61 (C.54:4-8.57 et al.), homestead property tax reimbursements under P.L.1997, c.348 (C.54:4-8.67 et al.), veterans' property tax deductions under P.L.1963, c.171 (C.54:4-8.10 et seq.), and senior and disabled citizens' property tax deductions under P.L.1963, c.172 (C.54:4-8.40 et seq.) as said acts may hereafter be amended or supplemented [and provided there]. Moneys remaining in the Direct Taxpayer Property Tax Relief subaccount after annual appropriations for these direct taxpayer relief programs shall be applied to offset the claims allowed during that fiscal year for property tax deductions and credits under the "Property Tax Deduction Act," P.L.1996, c.60 (C.54A:3A-15 et seq.). There may be deducted from the Property Tax Relief Fund the administrative costs of the collection hereof and in replacement of revenues resulting from the repeal of certain laws under this and companion legislation.

(cf: N.J.S.54A:9-25)

4. This act shall take effect immediately, and section 1 shall apply to taxable years beginning on or after January 1, 2020 and section 3 shall apply to State fiscal years beginning on or after July 1 next following the date of enactment.

STATEMENT

This bill increases the rate of the New Jersey gross income tax for taxpayers with taxable incomes exceeding $1,000,000 in taxable years beginning on or after January 1, 2020. The bill provides for adjusted income taxation at the following bracket at the following rate: over $1,000,000 is adjusted from 8.97% to 10.75%. The bill permanently imposes the tax rate at this $1,000,000 income bracket that was temporarily imposed during taxable year 2009.

The bill also dedicates the gross income tax revenue collected from the "millionaires'" tax increase for annual real property tax relief to be provided directly to real property taxpayers. All income

tax revenue collected from the increase in the gross income tax rate imposed on taxable income in excess of $1,000,000 will be deposited in a subaccount in the constitutionally established Property Tax Relief Fund. All revenue derived annually from the tax rate increase is pledged to be used annually for direct real property taxpayer relief. This subaccount, to be known as the Direct Taxpayer Property Tax Relief Fund, is the revenue and budget account that will ensure that direct tax relief continues to be funded from this source.