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July 29, 2005

State of New Jersey Tax Legislation for 2006 Budget

GIT Pension and Retirement Income Exclusions

L. 2005, c. 130, enacted July 6, 2005, and effective immediately for taxable years beginning on or after January 1, 2005, eliminates the New Jersey Gross Income Tax pension exclusion and other retirement income exclusion for certain taxpayers. The exclusions remain available for taxpayers that have gross income of not more than $100,000.00.

Uncoupling Certain Qualified Production Activities Income

L. 2005, c. 127, enacted July 2, 2005, and effective immediately, applicable to privilege periods beginning after December 31, 2004 for corporate business tax purposes, and to taxable years beginning after December 31, 2004 for gross income tax purposes, amends the corporation business tax and the gross income tax to disallow a deduction for certain qualified production activities income that was provided for federal income tax purposes under the American Jobs Creation Act of 2004. The uncoupling does not apply to gross receipts from qualifying production property manufactured or produced by the taxpayer, but will apply to the activities that are described in Section 199 of the IRC, and will apply to qualified production property grown or extracted by the taxpayer.

Major Changes to Sales and Use Tax Act

L. 2005, c. 126 conforms the State's Sales and Use Tax Act to the Streamlined Sales and Use Tax Agreement. The law allows New Jersey to join with 42 other states and the District of Columbia, to continue the task of modernizing the administration of sales and use tax by adopting common definitions and uniformly understood tax principles.

The law makes amendments and supplements to the New Jersey Sales and Use Tax Act that are necessary to make the laws conform to the terms of the Streamlined Sales and Use Tax Agreement. Significant areas of the Act that were changed include sections on leasing, direct mail operations, sales of food and clothing, and deductions for bad debts.

Click here to review the New Jersey Streamlined Sales and Use Tax Notice (*.pdf format).

Multistate Reciprocal Personal Income Tax Set-off Program

L. 2005, c. 125, enacted July 2, 2005, and effective immediately, authorizes the implementation of a multistate reciprocal personal income tax set-off program which allows the Director of the Division of Taxation to withhold another state's tax claims from New Jersey gross income tax refunds if the other state withholds New Jersey gross income tax claims from its personal income tax refunds.

Increase in Homestead Rebate Appropriations

L. 2005, c. 121, enacted July 6, 2005, and effective immediately, makes a supplemental appropriation of $400,000,000 to pay homestead rebate claims beginning July 1, 2005. Property tax relief benefits for New Jersey homeowners and tenants were increased in 2004 with the enactment of the FAIR (Fair and Immediate Relief) program. The deadline for filing FAIR applications is August 15, 2005. The new rate amounts for 2005 are as follows: