ASSEMBLY, No. 1176

 

STATE OF NEW JERSEY

 

Introduced Pending Technical Review by Legislative Counsel

 

PRE-FILED FOR INTRODUCTION IN THE 1996 SESSION

 

 

By Assemblyman DALTON

 

 

An Act concerning the exclusion of certain retirement income from gross income under the gross income tax, amending N.J.S.54A:6-10 and P.L.1977, c.273.

 

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

 

    1. N.J.S.54A:6-10 is amended to read as follows:

    54A:6-10. Pensions and annuities. Gross income shall not include that part of any amount received as an annuity under an annuity, endowment, or life insurance contract which bears the same ratio to such amount as the investment in the contract as of the annuity starting date bears to the expected return under the contract as of such date. Where (1) part of the consideration for an annuity, endowment, or life insurance contract is contributed by the employer, and (2) during the three-year period beginning on the date on which an amount is first received under the contract as an annuity, the aggregate amount receivable by the employee under the terms of the contract is equal to or greater than the consideration for the contract contributed by the employee, then all amounts received as an annuity under the contract shall be excluded from gross income until there has been so excluded an amount equal to the consideration for the contract contributed by the employee.

    In addition to that part of any amount received as an annuity which is excludable from gross income as herein provided, gross income shall not include payments of up to[$10,000.00] $20,000.00 for a married couple filing jointly,[$5,000.00] $10,000.00 for a married person filing separately, or[$7,500.00] $20,000.00 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1, which are received as an annuity, endowment or life insurance contract, or payments of any such amounts which are received as pension, disability, or retirement benefits, under any public or private plan, whether the consideration therefor is contributed by the employee or employer or both, by any person who is [62] 55 years of age or older or who, by virtue of disability, is or would be eligible to receive payments under the federal Social Security Act.

    Gross income shall not include any amount received under any public or private plan by reason of a permanent and total disability.

    Gross income shall not include distributions from an employees' trust described in section 401(a) of the Internal Revenue Code of 1986, as amended (hereinafter referred to as "the Code" ), which is exempt from tax under section 501(a) of the Code if the distribution, except the portion representing the employees' contributions, is rolled over in accordance with section 402(a)(5) or section 403(a)(4) of the Code. The distribution shall be paid in one or more installments which constitute a lump-sum distribution within the meaning of section 402(e)(4)(A) (determined without reference to subsection (e)(4)(B)), or be on account of a termination of a plan of which the trust is a part or, in the case of a profit-sharing or stock bonus plan, a complete discontinuance of contributions under such plan.

(cf: P.L.1990, c.61, s.16)

 

    2. Section 3 of P.L.1977, c.273 (C.54A:6-15) is amended to read as follows:

    3. Other retirement income. a. Gross income shall not include income of up to [$10,000.00] $20,000.00 for a married couple filing jointly,[$5,000.00] $10,000.00 for a married person filing separately, or[$7,500.00] $20,000.00 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1, when received in any tax year by a person aged [62] 55 years or older who received no income in excess of $3,000.00 from one or more of the sources enumerated in subsections a., b., k. and p. of N.J.S.54A:5-1, provided, however, that the total exclusion under this subsection and that allowable under N.J.S.54A:6-10 shall not exceed the amounts of the exclusions set forth in this subsection.

    b. In addition to the exclusion provided under N.J.S.54A:6-10 and subsection a. of this section, gross income shall not include income of up to $6,000.00 for a married couple filing jointly or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1, or $3,000.00 for a single person or a married person filing separately, who is not covered under N.J.S.54A:6-2 or N.J.S.54A:6-3, but who would be eligible in any year to receive payments under either section if he or she were covered thereby.

(cf: P.L.1993, c.173, s.17)

 

    3. This act shall take effect immediately, but shall apply to taxable years beginning on or after the effective date.

 

STATEMENT

 

    This bill amends N.J.S.54A:6-10 of the New Jersey Gross Income Tax Act so that a person 55 years of age or older, or a disabled individual eligible for federal Social Security benefits, would be able to exclude from gross income up to $20,000 of certain retirement income if filing either jointly as a married couple or individually as a single taxpayer, or $10,000 if married but filing separately. Currently under N.J.S.54A:6-10, a person 62 years of age or older, or a disabled individual eligible for federal Social Security benefits, may exclude only up to $10,000 in retirement income if married filing jointly, $5,000 if married filing separately and $7,500 if filing as a single taxpayer. Excludable retirement income includes such items as payments upon an annuity, endowment or life insurance contract, pension, disability or retirement benefit payments from a private or public plan, or Individual Retirement Account withdrawals.

    In addition, N.J.S.54A:6-15 is amended to increase the excludable amounts of other retirement income to match the levels in N.J.S.54A:6-10. Currently N.J.S.54A:6-15 permits the exclusion from gross income of other retirement income, such as interest and dividend earnings from investments, but only if the taxpayer has less than $3,000 in income from such sources as a salary or wage, net profit from a business, or distribution of partnership income. The above current restriction is retained by the bill, as well as the restriction which limits the total amount of income excludable under both N.J.S.54:6-10 and N.J.S.54A:6-15 to $20,000 for a married couple filing jointly or an individual filing as a single taxpayer, or $10,000 for a married person filing separately.

 

 

 

Increases amount of certain retirement income which may be excluded from gross income under the gross income tax; reduces age at which exclusion may be taken.