ASSEMBLY COMMITTEE SUBSTITUTE FOR
ASSEMBLY, Nos. 671 and 495
STATE OF NEW JERSEY
ADOPTED SEPTEMBER 16, 1996
Sponsored by Assemblymen BAGGER, ROMA and Assemblywoman VANDERVALK
An Act concerning medical savings accounts, and revising various parts of the statutory law.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. (New section) As used in this act:
"Account holder" means the individual on whose behalf a medical savings account is opened.
"Deduction limitation" means the amount allowable as a deduction to an individual for the tax year for a contribution to a medical savings account.
"Director" means the Director of the Division of Taxation.
"Eligible expense" means any qualified medical expense of an account holder or the account holder's qualified dependents and may include the purchase of a health benefits plan and the payment of any deductible or copayment on that plan for the first year of the plan for a qualified dependent who has lost eligibility to receive health benefits from the account holder's employer; the expense of purchasing a health benefits plan during any period of continuation coverage required under any federal or State law; the purchase of a qualified long-term health care contract as determined by the Commissioner of Banking and Insurance; and the purchase of a health plan during a period in which the individual is receiving unemployment compensation under any federal or State law. "Eligible expense" includes disbursements from a medical savings account pursuant to a filing for protection by an account holder under Title 11 of the United States Code, 11 U.S.C.§101 et seq., and shall not be included in the account holder's gross income for the year of disbursement in determining taxes due under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq. "Eligible expense" does not include the payment of a medical expense that has been or will be otherwise paid, including, but not limited to, medical expenses paid or reimbursed under a policy of motor vehicle insurance, worker's compensation insurance or plans, or an employer-funded health benefits plan.
"Health benefits plan" means a hospital and medical expense insurance policy, hospital, medical or health service corporation contract, or health maintenance organization subscriber contract, which policy or contract is delivered or issued for delivery in this State.
"Family coverage" means any coverage other than self-only coverage.
"Insurer" means any person authorized by the laws of this State to transact the business of accident and health insurance in New Jersey.
"Medical savings account" or "account" means a trust created or organized in this State exclusively for the purpose of paying the eligible medical expenses of an account holder or the account holder's qualified dependents or both.
"Permitted insurance" includes:
(1) Medicare supplemental insurance:
(2) insurance if substantially all of the coverage provided under the insurance relates to: liabilities incurred under workers' compensation laws; tort liabilities, liabilities relating to ownership or use of property or other similar liabilities as may be prescribed by regulation;
(3) insurance for a specified disease or illness; or
(4) insurance paying a fixed amount per day, or other period, of
hospitalization.
"Qualified dependent" means the spouse of an account holder or the child of an account holder when the child is:
(1) under 19 years of age or under 23 years of age and a full-time student at an accredited college or university;
(2) not self-sufficient due to mental or physical incapacitation; or
(3) legally entitled to the provisions of proper or necessary subsistence, education, medical care or other care necessary for the child' guidance, or well-being and is not otherwise emancipated, self-supporting, married or a member of the armed forces of the United States.
"Qualified higher deductible health plan" means a health benefits plan that provides for the payment of covered benefits that exceed the deductible, and is purchased in conjunction with the establishment of a medical savings account. A qualified higher deductible health benefits plan includes a health benefits plan:
(1) with an annual deductible of at least $1,500 and not more than $2,250, in the case of self-only coverage;
(2) with an annual deductible of at least $3,000 and not more than $4,500, in the case of family coverage;
(3) under which the annual out-of-pocket expenses required to be paid, other than for premiums, for covered benefits does not exceed: $3,000 for self-only coverage and $5,000 for family coverage.
For any tax year beginning in a calendar year after 1998, the above dollar amounts are increased by an amount equal to the increases authorized pursuant to the Health Insurance Portability and Accountability Act of 1996, Pub.L.104-191, ( U.S.C. ).
A qualified higher deductible health plan does not include a health benefits plan if substantially all of its coverage is "permitted insurance" or coverage for accidents, disability, dental care, vision care, or long-term care.
"Trustee" means an insurer; federally or State chartered bank, savings and loan association, savings bank or credit union; or such other person that demonstrates to the satisfaction of the director that the manner in which the account will be managed will be consistent with the requirements of this act and with any applicable requirements of the Health Insurance Portability and Accountability Act of 1996, Pub.L.104-191, ( U.S.C. ).
2. (New section) a. There shall be no limitation on the number of medical savings account plans that may be established in this State. b. Every medical savings account plan that is established in the State shall include:
(1) The payment into a medical savings account which shall, except in the case of a rollover contribution, when added to previous contributions, equal or exceed:
(a) in the case of an individual who has self-only coverage under a qualified higher deductible health plan, 65% of the annual deductible of the qualified higher deductible health plan; or
(b) in the case of an individual who has family coverage under a qualified higher deductible health plan, 75% of the annual deductible of the qualified higher deductible health plan;
(2) The purchase of a qualified higher deductible health plan; and
(3) The appointment of a trustee to administer the medical savings account.
3. (New section) a. An employer or individual shall designate a trustee to administer the medical savings account at the time the account is opened.
b. Each trustee shall send to the account holder, at least annually, a statement setting forth the balance remaining in the account holder's medical savings account and detailing the activity in the account since the last statement was issued.
c. When an account holder documents the payment of an eligible expense to the trustee of the account holder's medical savings account, the trustee shall reimburse the account holder from the account for that expense if sufficient funds are available. The reimbursement shall be made within 60 days of the trustee's receipt of the documentation. The trustee shall keep a record of the amounts disbursed from the medical savings account for documented eligible expenses and of the dates on which the expenses were incurred. This record shall be made available to any insurer or other third-party payer providing a health benefits plan to the account holder, for use in determining whether the account holder has met the deductible or other obligation required for the receipt of benefits from the insurer or third-party payer.
4. Section 6 of P.L.1992, c.161 (C17B:27A-7) is amended to read as follows:
6. The board shall establish the policy and contract forms and benefit levels to be made available by all carriers for the policies required to be issued pursuant to section 3 of P.L.1992, c.161 (C.17B:27A-4) , which shall include a medical savings account plan that conforms to any applicable federal and State requirements for medical savings accounts, and which shall be established within 60 days after the enactment of P.L. , c. (C. )(pending in the Legislature as this bill). The board shall provide the commissioner with an informational filing of the policy and contract forms and benefit levels it establishes.
a. the individual health benefits plans established by the board may include cost containment measures such as, but not limited to: utilization review of health care services, including review of medical necessity of hospital and physician services; case management benefit alternatives; selective contracting with hospitals, physicians, and other health care providers; and reasonable benefit differentials applicable to participating and nonparticipating providers; and other managed care provisions.
b. An individual health benefits plan offered pursuant to section 3 of P.L.1992, c.161 (C.17B:27A-4) shall contain a limitation of no more than 12 months on coverage for preexisting conditions, except that the limitation shall not apply to an individual who has, under a prior group or individual health benefits plan or Medicaid, with no intervening lapse in coverage of more than 30 days, been treated or diagnosed by a physician for a condition under that plan or satisfied a 12-month preexisting condition limitation.
c. In addition to the five standard individual health benefits plans provided for in section 3 of P.L.1992, c.161 (C.17B:27A-4), the board may develop up to five rider packages. Premium rates for the rider packages shall be determined in accordance with section 8 of P.L.1992, c.161 (C.17B:27A-9).
d. After the board's establishment of the individual health benefits plans required pursuant to section 3 of P.L.1992, c.161 (C.17B:27A-4), and notwithstanding any law to the contrary, a carrier shall file the policy or contract forms with the board and certify to the board that the health benefits plans to be used by the carrier are in substantial compliance with the provisions in the corresponding board approved plans. The certification shall be signed by the chief executive officer of the carrier. Upon receipt by the board of the certification, the certified plans may be used until the board, after notice and hearing, disapproves their continued use.
e. Effective immediately for an individual health benefits plan issued on or after the effective date of P.L.1995, c.316 (C.17:48E-35.10 et al.) and effective on the first 12-month anniversary date of an individual health benefits plan in effect on the effective date of P.L.1995, c.316 (C.17:48E-35.10 et al.), the individual health benefits plans required pursuant to section 3 of P.L.1992, c.161 (C.17B:27A-4), including any plan offered by a federally qualified health maintenance organization, shall contain benefits for expenses incurred in the following:
(1) Screening b by blood lead measurement for lead poisoning for children, including confirmatory blood lead testing as specified by the Department of Health pursuant to section 7 of P.L.1995 , c.316 (C.26:2-137.1); and medical evaluation and any necessary medical follow-up and treatment for lead poisoned children.
(2) All childhood immunizations as recommended by the Advisory Committee on Immunization Practices of the United States Public Health Service and the Department of Health pursuant to section 7 of P.L.1995, c.316 (C.26:2-137.1). A carrier shall notify its insureds, in writing, of any change in the health care services provided with respect to childhood immunizations and any related changes in premium. Such notification shall be in a form and manner to be determined by the Commissioner of Insurance.
The benefits shall be provided to the same extent as for any other medical condition under the health benefits plan, except that no deductible shall be applied for benefits provided pursuant to this section. This section shall apply to all individual health benefits plans in which the carrier has reserved the right to change the premium.
(cf: P.L.1995, c.316, s.5)
5. Section 17 of P.L.1992, c.162 (C.17B:27A-33) is amended to read as follows:
17. Subject to the approval of the commissioner, the board shall formulate the five health benefits plans, one of which shall be a medical savings account plan which shall conform to any applicable federal and State requirements for medical savings accounts, and which shall be established within 60 days of the enactment of P.L. , c. (C. )(pending in the Legislature as this bill), to be made available by small employer carriers in accordance with the provisions of this act, and shall promulgate five standard forms pursuant thereto. The board may establish benefits levels, deductibles and copayments, exclusions, and limitations for such health benefits plans in accordance with the law.
The board shall submit the forms so established to the commissioner for his approval. The commissioner shall approve the forms if he finds them to be consistent with the provisions of section 3 of P.L.1992, c.162 (C.17B:27A-19). Any form submitted to the commissioner by the board shall be deemed approved if not expressly disapproved in writing within 60 days of its receipt by the commissioner. Such forms may contain, but shall not be limited to, the following provisions:
a. Utilization review of health care services, including review of medical necessity of hospital and physician services;
b. Managed care systems, including large case management;
c. Provision for selective contracting with hospitals, physicians, and other health care providers;
d. Reasonable benefits differentials which are applicable to participating and nonparticipating providers;
e. Notwithstanding the provisions of section 4 of P.L.1992, c.162 (C.17B:27A-20) to the contrary, the board may, from time to time, adjust coinsurance and deductibles;
f. Such other provisions which may be quantifiably established to be cost containment devices;
g. The department shall publish annually a list of the premiums charged for each of the five small employer health benefits plans and for any rider package by all carriers writing such plans. The department shall also publish the toll free telephone number of each such carrier.
(cf: P.L.1993, c.162, s.8)
6. (New section) No amount deposited into a medical savings account shall be included in gross income as defined in N.J.S.54A:5-1 unless such account ceases to be a medical savings account. No amount paid or distributed from a medical savings account which is used exclusively to pay eligible medical expenses of any account holder or the account holder's qualified dependents shall be included in gross income. For purposes of this act, any amount that is a deductible expense pursuant to the Health Insurance Portability and Accountability Act of 1996, Pub.L.104-191, ( U.S.C. ), shall be deemed to be a deductible expense under this act and any amount that is an excludable expense under the Health Insurance Portability and Accountability Act of 1996, Pub.L.104-191, ( U.S.C. ), shall be deemed to be an excludable expense under this act.
The deduction for medical savings account contributions shall not exceed compensation. In the case of employees, or self-employed individuals, the deduction allowed for contributions to a medical savings account shall not exceed the individual's wages, salaries, tips, and other employee compensation that are attributable to the individual's employment.
7. (New section) Notwithstanding the provisions of this act to the contrary, with respect to medical savings accounts, no tax payer shall be qualified for a deduction from gross income pursuant to N.J.S.54A:1-1 et seq. unless that tax payer qualifies as an "eligible individual" under the Health Insurance Portability and Accountability Act of 1996, Pub.L.104-191, ( U.S.C. ).
8. N.J.S.54A:5-1 is amended to read as follows:
54A:5-1. New Jersey Gross Income Defined. New Jersey gross income shall consist of the following categories of income:
a. Salaries, wages, tips, fees, commissions, bonuses, and other remuneration received for services rendered whether in cash or in property , including all withdrawals from a medical savings account that are not for eligible expenses as defined in section 1 of P.L. , c. (C. )(pending in the Legislature as this bill).
b. Net profits from business. The net income from the operation of a business, profession or other activity after provision for all costs and expenses incurred in the conduct thereof, determined either on a cash or accrual basis in accordance with the method of accounting allowed for federal income tax purposes but without deduction of the amount of:
(1) taxes based on income;
(2) a civil, civil administrative, or criminal penalty or fine, including a penalty or fine under an administrative consent order, assessed and collected for a violation of a State or federal environmental law, an administrative consent order, or an environmental ordinance or resolution of a local governmental entity, and any interest earned on the penalty or fine, and any economic benefits having accrued to the violator as a result of a violation, which benefits are assessed and recovered in a civil, civil administrative, or criminal action, or pursuant to an administrative consent order. The provisions of this paragraph shall not apply to a penalty or fine assessed or collected for a violation of a State or federal environmental law, or local environmental ordinance or resolution, if the penalty or fine was for a violation that resulted from fire, riot, sabotage, flood, storm event, natural cause, or other act of God beyond the reasonable control of the violator, or caused by an act or omission of a person who was outside the reasonable control of the violator; and
(3) treble damages paid to the Department of Environmental Protection and Energy pursuant to subsection a. of section 7 of P.L.1976, c.141 (C.58:10-23.11f) for costs incurred by the department in removing, or arranging for the removal of, an unauthorized discharge upon the failure of the discharger to comply with a directive from the department to remove, or arrange for the removal of, a discharge.
c. Net gains or income from disposition of property. Net gains or net income, less net losses, derived from the sale, exchange or other disposition of property, including real or personal, whether tangible or intangible as determined in accordance with the method of accounting allowed for federal income tax purposes. For the purpose of determining gain or loss, the basis of property shall be the adjusted basis used for federal income tax purposes, except as expressly provided for under this act, but without a deduction for penalties, fines, or economic benefits excepted pursuant to paragraph (2), or for treble damages excepted pursuant to paragraph (3) of subsection b. of this section.
A taxpayer's net gain or loss on the sale, exchange or other disposition of a share of an S corporation shall be calculated by increasing the adjusted basis of the share by an amount equal to the shareholder's net losses and deductions in respect of the share allowed and deducted from income for federal income tax purposes, not including any personal net operating loss deductions, to the extent that such net losses were not offset by the taxpayer's pro rata share of S corporation income otherwise subject to taxation pursuant to subsection p. of this section in respect of another S corporation, subject to rules of priority and assignment determined by the director.
For the tax year 1976, any taxpayer with a tax liability under this subsection, or under the "Tax on Capital Gains and Other Unearned Income Act," P.L.1975, c.172 (C.54:8B-1 et seq.), shall not be subject to payment of an amount greater than the amount he would have paid if either return had covered all capital transactions during the full tax year 1976; provided, however, that the rate which shall apply to any capital gain shall be that in effect on the date of the transaction. To the extent that any loss is used to offset any gain under P.L.1975, c.172, it shall not be used to offset any gain under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq. et seq.
The term "net gains or income" shall not include gains or income derived from obligations which are referred to in clause (1) or (2) of N.J.S.54A:6-14 of this act or from securities which evidence ownership in a qualified investment fund as defined in section 2 of P.L.1987, c.310 (C.54A:6-14.1). The term "net gains or net income" shall not include gains or income from transactions to the extent to which nonrecognition is allowed for federal income tax purposes. The term "sale, exchange or other disposition" shall not include the exchange of stock or securities in a corporation a party to a reorganization in pursuance of a plan of reorganization, solely for stock or securities in such corporation or in another corporation a party to the reorganization and the transfer of property to a corporation by one or more persons solely in exchange for stock or securities in such corporation if immediately after the exchange such person or persons are in control of the corporation. For purposes of this clause, stock or securities issued for services shall not be considered as issued in return for property.
For purposes of this clause, the term "reorganization" means:
(i) A statutory merger or consolidation;
(ii) The acquisition by one corporation, in exchange solely for all or part of its voting stock (or in exchange solely for all or a part of the voting stock of a corporation which is in control of the acquiring corporation) of stock of another corporation if, immediately after the acquisition, the acquiring corporation has control of such other corporation (whether or not such acquiring corporation had control immediately before the acquisition);
(iii) The acquisition by one corporation, in exchange solely for all or part of its voting stock (or in exchange solely for all or a part of the voting stock of a corporation which is in control of the acquiring corporation), of substantially all of the properties of another corporation, but in determining whether the exchange is solely for stock the assumption by the acquiring corporation of a liability of the other, or the fact that property acquired is subject to a liability, shall be disregarded;
(iv) A transfer by a corporation of all or a part of its assets to another corporation if immediately after the transfer the transferor, or one or more of its shareholders (including persons who were shareholders immediately before the transfer), or any combination thereof, is in control of the corporation to which the assets are transferred;
(v) A recapitalization;
(vi) A mere change in identity, form, or place of organization however effected; or
(vii) The acquisition by one corporation, in exchange for stock of a corporation (referred to in this subclause as "controlling corporation") which is in control of the acquiring corporation, of substantially all of the properties of another corporation which in the transaction is merged into the acquiring corporation shall not disqualify a transaction under subclause (i) if such transaction would have qualified under subclause (i) if the merger had been into the controlling corporation, and no stock of the acquiring corporation is used in the transaction;
(viii) A transaction otherwise qualifying under subclause (i) shall not be disqualified by reason of the fact that stock of a corporation (referred to in this subclause as the "controlling corporation") which before the merger was in control of the merged corporation is used in the transaction, if after the transaction, the corporation surviving the merger holds substantially all of its properties and of the properties of the merged corporation (other than stock of the controlling corporation distributed in the transaction); and in the transaction, former shareholders of the surviving corporation exchanged, for an amount of voting stock of the controlling corporation, an amount of stock in the surviving corporation which constitutes control of such corporation.
For purposes of this clause, the term "control" means the ownership of stock possessing at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the total number of shares of all other classes of stock of the corporation.
For purposes of this clause, the term "a party to a reorganization" includes a corporation resulting from a reorganization, and both corporations, in the case of a reorganization resulting from the acquisition by one corporation of stock or properties of another. In the case of a reorganization qualifying under subclause (i) by reason of subclause (vii) the term "a party to a reorganization" includes the controlling corporation referred to in such subclause (vii).
Notwithstanding any provisions hereof, upon every such exchange or conversion, the taxpayer's basis for the stock or securities received shall be the same as the taxpayer's actual or attributed basis for the stock, securities or property surrendered in exchange therefor.
d. Net gains or net income derived from or in the form of rents, royalties, patents, and copyrights.
e. Interest, except interest referred to in clause (1) or (2) of N.J.S.54A:6-14, or distributions paid by a qualified investment fund as defined in section 2 of P.L.1987, c.310 (C.54A:6-14.1), to the extent provided in that section .
f. Dividends. "Dividends" means any distribution in cash or property made by a corporation, association or business trust that is not an S corporation, (1) out of accumulated earnings and profits, or (2) out of earnings and profits of the year in which such dividend is paid and any distribution in cash or property made by an S corporation, as specifically determined pursuant to section 16 of P.L.1993, c.173 (C.54A:5-14).
The term "dividends" shall not include distributions paid by a qualified investment fund as defined in section 2 of P.L.1987, c.310 (C.54A:6-14.1), to the extent provided in that section.
g. Gambling winnings.
h. Net gains or income derived through estates or trusts.
i. Income in respect of a decedent.
j. Amounts distributed or withdrawn from an employee trust attributable to contributions to the trust which were excluded from gross income under the provisions of chapter 6 of Title 54A of the New Jersey Statutes and pensions and annuities except to the extent of exclusions in N.J.S.54A:6-10 hereunder, notwithstanding the provisions of N.J.S.18A:66-51, P.L.1973, c.140, s.41 (C.43:6A-41), P.L.1954, c.84, s.53 (C.43:15A-53), P.L.1944, c.255, s.17 (C.43:16A-17), P.L.1965, c.89, s.45 (C.53:5A-45), R.S.43:10-14, P.L.1943, c.160, s.22 (C.43:10-18.22), P.L.1948, c.310, s.22 (C.43:10-18.71), P.L.1954, c.218, s.32 (C.43:13-22.34), P.L.1964, c.275, s.11 (C.43:13-22.60), R.S.43:10-57, P.L.1938, c.330, s.13 (C.43:10-105), R.S.43:13-44, and P.L.1943, c.189, s.5 (C.43:13-37.5).
k. Distributive share of partnership income.
l. Amounts received as prizes and awards, except as provided in N.J.S.54A:6-8 and N.J.S.54A:6-11 hereunder.
m. Rental value of a residence furnished by an employer or a rental allowance paid by an employer to provide a home.
n. Alimony and separate maintenance payments to the extent that such payments are required to be made under a decree of divorce or separate maintenance but not including payments for support of minor children.
o. Income, gain or profit derived from acts or omissions defined as crimes or offenses under the laws of this State or any other jurisdiction.
p. Net pro rata share of S corporation income.
(cf: P.L.1993, c.173, s.9)
9. N.J.S.54A:9-6 is amended to read as follows:
54A:9-6. Additions to tax and civil penalties. (a) Failure to file tax return. In case of failure to file a tax return under this act on or before the prescribed date (determined with regard to any extension of time for filing), unless it is shown that such failure is due to reasonable cause and not due to willful neglect, there shall be added to the amount required to be shown as tax on such return such amount as is required under the State Tax Uniform Procedure Law, R.S. 54:48-1 et seq. For this purpose, the amount of tax required to be shown on the return shall be reduced by the amount of any part of the tax which is paid on or before the date prescribed for payment of the tax and by the amount of any credit against the tax which may be claimed upon the return.
(b) Deficiency due to negligence. If any part of a deficiency is due to negligence or intentional disregard of this act or rules or regulations hereunder (but without intent to defraud), there shall be added to the tax an amount equal to 10% of the deficiency.
(c) Failure to file declaration or underpayment of estimated tax. If any taxpayer fails to file a declaration of estimated tax or fails to pay all or any part of an installment of estimated tax, he shall be deemed to have made an underpayment of estimated tax. There shall be added to the tax for the taxable year an amount at the rate as is required under the State Tax Uniform Procedure Law, R.S.54:48-1 et seq., upon the amount of the underpayment for the period of the underpayment but not beyond the 15th day of the fourth month following the close of the taxable year. The amount of underpayment shall be the excess of the amount of the installment which would be required to be paid if the estimated tax were equal to 80% of the tax (two-thirds of the tax for farmers referred to in subsection (e) of section 54A:8-4) shown on the return for the taxable year (or if no return was filed, of the tax for such year) over the amount, if any, of the installment paid on or before the last day prescribed for such payment. No underpayment shall be deemed to exist with respect to a declaration or installment otherwise due on or after the taxpayer's death.
(d) Exception to addition for underpayment of estimated tax. The addition to tax under subsection (c) with respect to any underpayment of any installment shall not be imposed if the total amount of all payments of estimated tax made on or before the last date prescribed for the payment of such installment equals or exceeds whichever of the following is the lesser--
(1) The amount which would have been required to be paid on or before such date if the estimated tax were whichever of the following is the least--
(A) The tax shown on the return of the individual for the preceding taxable year, if a return showing a liability for tax was filed by the individual for the preceding taxable year and such preceding year was a taxable year of 12 months, or
(B) An amount equal to the tax computed, at the rates applicable to the taxable year, on the basis of the taxpayer's status with respect to his personal exemptions for the taxable year, but otherwise on the basis of the facts shown on his return for, and the law applicable to, the preceding taxable year, or
(C) An amount equal to 80% of the tax for the taxable year (two-thirds of the tax for farmers referred to in subsection (e) of section 54A:8-4) computed by placing on an annualized basis the income for the months in the taxable year ending before the month in which the installment is required to be paid. For purposes of this subparagraph, the income shall be placed on an annualized basis by--
(i) Multiplying by 12 (or, in the case of a taxable year of less than 12 months, the number of months in the taxable year) the income for the months in the taxable year ending before the month in which the installment is required to be paid,
(ii) Dividing the resulting amount by the number of months in the taxable year ending before the month in which such installment date falls, and
(iii) Deducting from such amount the deductions for personal exemptions allowable for the taxable year (such personal exemptions being determined as of the last date prescribed for payment of the installment); or
(2) An amount equal to 90% of the tax computed, at the rates applicable to the taxable year, on the basis of the actual income for the months in the taxable year ending before the month in which the installment is required to be paid.
(e) Deficiency due to fraud. If any part of a deficiency is due to fraud, there shall be added to the tax an amount equal to 50% of the deficiency. This amount shall be in lieu of any other addition to tax imposed by subsection (a) or (b).
(f) Nonwillful failure to pay withholding tax. If any employer, without intent to evade or defeat any tax imposed by this act or the payment thereof, shall fail to make a return and pay a tax withheld by him at the time required by or under the provisions of section 54A:7-4, such employer shall be liable for such tax and shall pay the same together with interest thereon and the addition to tax provided in subsection (a), and such interest and addition to tax shall not be charged to or collected from the employee by the employer. The director shall have the same rights and powers for the collection of such tax, interest and addition to tax against such employer as are now prescribed by this act for the collection of tax against an individual taxpayer.
(g) Willful failure to collect and pay over tax. Any person required to collect, truthfully account for, and pay over the tax imposed by this act who willfully fails to collect such tax or truthfully account for and pay over such tax or willfully attempts in any manner to evade or defeat the tax or the payment thereof, shall, in addition to other penalties provided by law, be liable to a penalty equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over. No addition to tax under subsection (b) or (c) shall be imposed for any offense to which this subsection applies.
(h) Failure to file certain information returns. In case of each failure to file a statement of a payment to another person, required under authority of subsection (c) of section 54A:8-6 (relating to information at source, including the duplicate statement of tax withheld on wages) on the date prescribed therefor (determined with regard to any extension of time for filing), unless it is shown that such failure is due to reasonable cause and not to willful neglect, there shall, upon notice and demand by the director and in the same manner as tax, be paid by the person so failing to file the statement, a penalty of $2.00 for each statement not so filed, but the total amount imposed on the delinquent person for all such failures during any calendar year shall not exceed $2,000.00.
(i) Additional penalty. Any person who with fraudulent intent shall fail to pay, or to deduct or withhold and pay, any tax, or to make, render, sign or certify any return or declaration of estimated tax or to supply any information within the time required by or under this act, shall be liable to penalty of not more than $5,000.00, in addition to any other amounts required under this act, to be imposed, assessed and collected by the director. The director shall have the power, in his discretion, to waive, reduce or compromise any penalty under this subsection.
(j) Additions treated as tax. The additions to tax and penalties provided by this section shall be paid upon notice and demand and shall be assessed, collected and paid in the same manner as taxes and any reference in this act to income tax or tax imposed by this act, shall be deemed also to refer to the additions to tax and penalties provided by this section. For purposes of section 54A:9-2, this subsection shall not apply to:
(1) Any addition to tax under subsection (a) except as to that portion attributable to a deficiency;
(2) Any addition to tax under subsection (e); and
(3) Any additional penalty under subsection (i).
(k) Determination of deficiency. For purposes of subsections (b) and (c), the amount shown as the tax by the taxpayer upon his return shall be taken into account in determining the amount of the deficiency only if such return was filed on or before the last day prescribed for the filing of such return, determined with regard to any extension of time for such filing.
(l) Person defined. For purposes of subsections (f), (g), (h) and (i), the term person or employer includes an individual, corporation or partnership or an officer or employee of any corporation (including a dissolved corporation) or a member or employee of any partnership, who as such officer, employee, or member is under a duty to perform the act in respect of which the violation occurs.
m. There shall be added to the tax due for a taxable year a penalty for withdrawal of amounts from a medical savings account for any purpose that is not an eligible expense as defined in section 1 of P.L. , c. (C. )(pending in the Legislature as this bill). The penalty shall be equal to 10% of the amount of any withdrawal from the account that is not an eligible expense.
(cf: P.L.1987, c.76, s.59)
10. This act shall take effect immediately and sections 6 through 9 shall apply to deductions for taxable years beginning on or after January 1 next following enactment.
Establishes certain standards and provides certain tax advantages for medical savings accounts established in New Jersey.