SENATE, No. 1985

STATE OF NEW JERSEY

INTRODUCED APRIL 17, 1997

By Senators LaROSSA and LITTELL

An Act concerning the State collection of certain federal tax funds and their sequestration in response to federal sanctions for State failure to respond to certain federal mandates deemed unconstitutional by the Legislature, supplementing Title 52 of the Revised Statutes.

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

    1. This act shall be known and may be cited as the "State Sovereignty and Federal Tax Funds Act."

    2. a. The Legislature finds and declares that the United States Constitution states that "[t]he powers not delegated to the United States by the Constitution, nor prohibited by it to the states are reserved to the states respectively, or to the people." The Legislature finds that the Tenth Amendment to the United States Constitution defines the total scope of federal power as being that specifically stated in the United States Constitution and no more.

    b. The Legislature recognizes that the Congress of the United States has the power to lay and collect taxes pursuant only to clause 1 of Section 8 of Article I of, clauses 4 and 5 of Section 9 of Article I of, and the Sixteenth Amendment to, the United States Constitution.

    c. The Legislature finds that neither the federal government, its agencies and agents, or the Congress has the power under the United States Constitution to withhold from the states benefits of those taxes by use of federal mandates that are outside the scope of the powers enumerated in the United States Constitution for the federal government.

    d. In light of the continuing unconstitutional federal mandates that withhold the benefits of the taxes, the State hereby reasserts its claim of sovereignty pursuant to the Tenth Amendment to the United States Constitution.

    3. For purposes of this act, the following terms have the following meanings:

    "Consumer tax" means any tax imposed by the federal government on any beer, liquor, wine or similar alcoholic beverage, tobacco, gasoline, or any other consumer goods;

    "Excise tax" means any tax that forms a component of the federal Highway Trust Fund;

    "Fund" means the Federal Tax Fund established pursuant to section 4 of this act; and

    "Income tax" means any tax imposed by federal government on any income earned by a taxpayer.

    4. The "Federal Tax Fund" is hereby created as a special fund in the State General Fund. Any interest earned on the deposit of moneys in the fund, along with any civil penalties assessed pursuant to section 10 of this act, shall remain in the fund and shall not revert to the General Fund at the end of any fiscal year. The interest earned on the deposit of moneys and any civil penalties shall be used to pay any necessary administrative costs incurred pursuant to this act.

    5. Any person liable for any federal excise, income, or consumer tax shall remit the tax, when due, along with the federal taxpayer number of the person to the Director of the Division of Taxation of the New Jersey Department of the Treasury for deposit into the fund.

    6. All moneys collected pursuant to section 5 of this act shall be transmitted to the State Treasurer who shall deposit these moneys into the fund on behalf of the person that remitted the tax.

    7. a. Except as provided in subsection b. of this section, the State Treasurer shall transfer, at the end of each month, the moneys held in the fund, less any interest earned on the deposit, to the Internal Revenue Service in payment of the tax obligation of those persons who remitted the tax to the Director of the Division of Taxation.

    b. If the federal government imposes a sanction of any kind on the State for failing to enact legislation called for by federal mandates that a majority of the members of each House of the Legislature deems to be unconstitutional, by withholding or reprogramming any State-derived federal moneys from such things as, but not limited to, highway construction, highway safety, or any other programs, the State Treasurer shall not transfer any taxes held in the fund, but shall retain the moneys in the fund until such time as the sanctions are lifted. If the lifting of the sanction occurs within 90 days of the sanction's imposition, the State Treasurer shall transfer the amounts held in the fund to the Internal Revenue Service within 10 days of the lifting of the sanction. If the sanction is not lifted within 90 days, the State shall impose a surcharge on the moneys in the fund to be used for payment to continue funding of any project for which funds have been withheld or reprogrammed.

    8. If the federal government imposes any sanctions on the State while the Legislature is not in session, the Governor shall call the Legislature into special session to provide an opportunity for taking actions pursuant to subsection b. of section 7 of this act.

    9. Any actions by the federal government, its agencies or agents, or the Congress against any person in this State for compliance with this act shall be considered as an action against this State and this State shall make an appropriate response to cause the action to cease and desist. This State shall take all necessary measures to recover from the federal government, its agencies or agents, or the Congress the reasonable costs of defending the action.

    10. Any person who fails to comply with this act shall be subject to a civil penalty in an amount equal to 150 percent of the tax owed for each day the person fails to comply with this act. Any civil penalties assessed under this section shall be deposited into the fund.

    11. This act shall take effect immediately and shall apply to federal taxes payable after enactment.

STATEMENT

    This bill creates the Federal Tax Fund in the State General Fund. The bill requires any person liable for any federal excise, income, or consumer tax, as defined by the bill, to remit the tax to the Director of the Division of Taxation for deposit into the new fund. All moneys so collected would be transmitted to the State Treasurer who would be required to deposit them into the fund on behalf of the persons who remitted the tax. The Treasurer would transfer the moneys held in the fund to the Internal Revenue Service in payment of the tax obligations of the persons who remitted the taxes to the director.

    However, if the federal government imposes sanctions of any kind on the State for failing to enact legislation called for by federal mandates, which the Legislature deems by its vote to be unconstitutional, by withholding State-derived federal moneys, the bill prohibits the State Treasurer from transferring taxes held in the fund to the federal government. If sanctions against the State are not lifted after 90 days, the State would use moneys in the fund for payment to continue funding of any project for which funds were withheld. The bill penalizes any person who fails to comply with its provisions with

a civil penalty of 150% of the tax owed for each day that the person does not comply.

"State Sovereignty and Federal Tax Funds Act."