FISCAL NOTE TO

ASSEMBLY, No. 229

STATE OF NEW JERSEY

DATED: FEBRUARY 24, 1997

      Assembly Bill No. 229 of 1996 excludes military pension income of retired members of the Armed Forces of the United States from income under the New Jersey gross income tax. The exclusion would apply to taxable years beginning on or after January 1, 1996.

      The Division of Taxation estimated a loss of tax revenue to the State of approximately $5.0 million in fiscal year (FY)1997; $5.2 million in FY1998; and $5.3 million in FY1999. This estimate was based on approximately 20,000 military retirees in the State receiving military pension payments totaling $240.3 million paid in 1994. This amount was adjusted for the rate reductions in State gross income tax and a growth rate of the Consumer Price Index which the US Department of Defense uses for cost-of-living adjustments. The division also noted that without amending the effective date, the first year loss would be substantially higher to cover refunds on gross income tax paid on military pensions back to January 1, 1996.

      The Office of Legislative Services concurs with the estimated tax loss.

This fiscal note has been prepared pursuant to P.L.1980, c.67.