SENATE, No. 1440
STATE OF NEW JERSEY
INTRODUCED SEPTEMBER 19, 1996
By Senator CONNORS
An Act concerning interest on gross income tax refunds, amending N.J.S.54A:9-7.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. N.J.S.54A:9-7 is amended to read as follows:
54A:9-7. Overpayment. (a) General. The director, within the applicable period of limitations may credit an overpayment of income tax against any liability in respect of any tax imposed by the tax law on the person who made the overpayment, and the balance shall be refunded by the comptroller out of the proceeds of the tax retained by him for such general purpose. Any refund under this section shall be made only upon the filing of a return and upon a certificate of the director approved by the comptroller. The State Treasurer, as a condition precedent to the approval of such a certificate, may examine into the facts as disclosed by the return of the person who made the overpayment and other information and data available in the files of the director.
(b) Excessive withholding. If the amount allowable as a credit for tax withheld from the taxpayer exceeds his tax to which the credit relates, the excess shall be considered an overpayment.
(c) Overpayment by employer. If there has been an overpayment of tax required to be deducted and withheld under N.J.S.54A:7-4, refund shall be made to the employer only to the extent that the amount of the overpayment was not deducted and withheld by the employer.
(d) Credits against estimated tax. The director may prescribe regulations providing for the crediting against the estimated income tax for any taxable year of the amount determined to be an overpayment of the income tax for a preceding taxable year. If any overpayment of income tax is so claimed as a credit against estimated tax for the succeeding taxable year, such amount shall be considered as a payment of the income tax for the succeeding taxable year (whether or not claimed as a credit in the declaration of estimated tax for such succeeding taxable year), and no claim for credit or refund of such overpayment shall be allowed for the taxable year for which the overpayment arises.
(e) Rule where no tax liability. If there is no tax liability for a period in respect of which an amount is paid as income tax, such amount shall be considered an overpayment.
(f) Under regulations prescribed by the director with approval of the State Treasurer interest shall be allowed and paid at the rate determined by the director to be equal to the prime rate pursuant to R.S.54:48-2 upon any overpayment in respect of the tax imposed by this act, determined for each month or fraction thereof, compounded annually at the end of each year, from the date that such interest commences to accrue to the date of refund; but no interest shall be allowed or paid on an overpayment of less than $1.00, nor upon any overpayment refunded within [six months] 45 days after the last date prescribed, or permitted by extension of time, for filing the return or within [six months] 45 days after the return is filed, whichever is later.
(cf: P.L.1993, c.331, s.5)
2. This act shall take effect immediately and apply to refunds for taxable years ending after its enactment.
STATEMENT
This bill requires New Jersey to pay interest on gross income tax overpayments refunded more than 45 days after the due date of the filing of a return, or 45 days after the permitted extension of the filing, whichever is later.
Currently, interest is paid on refunds from the later of the date that a gross income tax return is filed or the date that the tax return is due, but the payment of interest is forgiven if a refund is made within six months. This bill decreases the forgiveness period to 45 days.
This bill provides parity with the federal Internal Revenue Code, which provides a 45 day forgiveness period for interest on federal tax refunds. Refunded taxes are the taxpayer's property. Taxes are typically paid over by the taxpayer's employer, through wage and salary withholding. The refunded taxes may already have been in the possession of the State for as much as fifteen months. This bill will assure that taxpayers are compensated for delayed refunds, and will remove any incentive for delaying refund payments.
Requires State to pay interest on gross income tax overpayments refunded more than 45 days after timely filing.