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Summary of Legislation 2005


For additional information on specific areas, click on the links that appear at the bottom of the individual summaries.

Cigarette Sales

L. 2005, c.384, enacted on January 15, 2006, and effective April 15, 2006, raises the minimum age for the sale and purchase of cigarettes from 18 to 19 years of age. It also imposes personal liability on employees of retail dealers that are licensed under the Cigarette Tax Act, and specifies that they will be subject to penalties if they sell or provide tobacco products to a person younger than 19.

Extension of Sales and Use Tax Exemption for Sales of Energy to UEZ Businesses
L.2005, c. 374, enacted January 12, 2006, and effective immediately, amends the New Jersey Urban Enterprise Zones Act by extending eligibility for sales and use tax exemption on retail purchases of energy and utility services by those qualified UEZ businesses that employ at least 250 people (previous threshold 500 people), 50% of whom are directly employed in a manufacturing process, when the energy and utility purchased is for the exclusive use of the qualified business in the zone. The exemption is also extended to groups of two or more qualified UEZ businesses in a single “redevelopment area” (pursuant to N.J.S.A. 40A:12A-1 et seq.) when they collectively employ at least 250 people, at least 50% of them directly employed in a manufacturing process, and the energy and utility service is for the exclusive use of each of such qualified businesses.

The Act also extends the exemption to business facilities located within a county that qualifies for 50% sales tax exemption, under certain circumstances, pursuant to N.J.S.A. 54:32B-8.45 (currently Salem County), provided that the business certifies that it employs at least 50 people at the facility, at least 50% of whom are directly employed in a manufacturing process, and provided that the energy and utility services are consumed exclusively at that facility.

Corporation Business Tax and Gross Income Tax Credit for Film Production
L.2005, c.345, enacted January 12, 2006, and effective immediately, applies to qualified film production expenses incurred on or after the date of enactment. The credit provisions apply to privilege periods and taxable years beginning on or after July 1, 2005, and will expire with privilege periods and taxable years beginning after July 1, 2015.

“Qualified film production expenses” are expenses incurred in New Jersey for the production of a feature film or a television series or show of at least 15 minutes and intended for national audience, and also includes post-production costs incurred in New Jersey. Such expenses include, for example, wages paid to individuals employed in production, costs of editing, photography, sound synchronization, lighting, wardrobe, and facilities rental. Qualified expenses do not include expenses incurred in marketing or advertising a film.

The Act allows a credit against corporation business tax in an amount equal to 20% of the qualified film production expenses paid by the taxpayer during the privilege period, provided that at least 60% of the total production expenses (other than post-production) will be for services performed or goods used in New Jersey, and provided that the principal photography begins within 150 days after the credit application is approved.

The Act allows a similar credit against gross income tax. The credit is applied against the gross income tax otherwise due after other credits are applied. If the credit exceeds the amount of tax otherwise due, the excess credit will be treated as an overpayment.

Corporation Business Tax and Gross Income Tax Credits for Businesses Employing Certain Severely Handicapped Persons Through Sheltered Workshops
L.2005, c.318, enacted, January 12, 2006, and effective immediately, applies to privilege periods and taxable years beginning after enactment.

The Act allows a credit against the corporation business tax or the gross income tax in an amount equal to 20% of the salary and wages paid by the taxpayer during the privilege period or taxable year, for the employment of a handicapped person who qualifies as an “extended employee” pursuant to N.J.S.A. 34:16-40 and who has worked for the taxpayer in a “sheltered workshop” arrangement for at least the minimum amount of time set forth in the Act. The credit may not exceed 50% of the tax liability otherwise due.

New Jersey World Trade Center Scholarship Fund Contributions on Gross Income Tax Return
L.2005, c.298, enacted January 9, 2006, effective immediately, and applicable to tax years beginning on or after January 1, 2006, allows taxpayers to donate to the New Jersey World Trade Center Scholarship Fund by specifying that a certain amount of their income tax overpayments should go to that fund or by enclosing a contribution with their gross income tax returns.

Director’s Authority to Extend Gross Income Tax Deadlines
L.2005, c.297, enacted January 9, 2006, and effective immediately, authorizes the Director of the Division of Taxation to extend the gross income tax filing or payment deadlines to coincide with similar extended dates established for federal personal income tax returns.

Treatment of Tax Payments Made By Pass-Through Entities on Behalf of the Owners of the Entities
L.2005, c.288, enacted January 9, 2006, and effective privilege periods beginning on or after January 1, 2007, requires partners and other owners of pass-through entities (but excluding qualified investment partnerships or investment clubs or entities listed on a United States stock exchange) to credit against their estimated gross income taxes certain payments that the entities have made on their behalf.

Earned Income Credit

L. 2005, c. 210, enacted August 29, 2005, and effective immediately, requires the State treasurer to develop a statement regarding the earned income tax credit allowed under federal and state income tax laws, and requires the Commissioners of Labor and Workforce Development, Human Services, Community Affairs, and all employers to notify certain people about these credits, by means of the written statement developed by the Treasurer.

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Corrections Governing Wills and Estates
L. 2005, c. 160, enacted July 19, 2005, and applied retroactively to February 27, 2005, makes minor technical changes in the provisions governing wills and estates.

Repeal of Air Toxics Surcharge
L. 2005, c. 141, enacted July 7, 2005, and effective immediately, repeals the air toxics surcharge imposed under P.L.2004, c.51 (N.J.S.A.13:1D-59 et seq.), and applies retroactively to calendar year 2004 and calendar years thereafter.

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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.

Insurance Tax Premium Caps
L. 2005, c. 128, enacted July 6, 2005, and effective immediately for periods beginning January 1, 2005, amends the maximum tax rule capping taxable premiums at 12.5% of total premiums for any company whose taxable premiums in New Jersey exceeds 12.5% of its total taxable premiums, by excluding all health service corporations established pursuant to the provisions of P.L. 1985, c. 236 (N.J.S.A.17:48A-1 et seq.) from the coverage of the cap. The law also imposes the insurance premium tax on all premiums of health services corporations and on any life, accident or health insurance corporation which a health services corporation owns stock in, controls, or otherwise becomes affiliated with.

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 in Sales and Use Tax Act to Conform to Interstate Streamlining Agreement
L. 2005, c. 126, enacted July 2, 2005, and effective October 1, 2005, amends and supplements the Sales and Use Tax Act in order to make it conform to the provisions of the interstate Streamlined Sales and Use Tax Agreement (SSUTA). This agreement was developed over the course of several years through the joint effort of over forty states participating in the Streamlined Sales and Use Tax Project in order to facilitate multi-state tax administration and compliance.

A key element of the new law is the adoption of new definitions of various tax base and exemption categories that are now consistent with the uniform definitions in the SSUTA. Changes in definitions may result in changes to the taxability of certain items. Some of the most significant changes in definitions were in the area of foods, for example, “candy,” “soft drinks,” “prepared food,” in the area of clothing, and in the area of medical-related items and “grooming and hygiene products.” In addition, the law now includes definitions of terms related to computers and software, which had previously gone unmentioned in the Sales and Use Tax Act. The new law changes the sales and use tax treatment of leases and rentals and of “bad debts” and also affects the treatment of “direct mail.” Among the other significant changes are provisions setting forth how various transactions are to be “sourced” (i.e. which state’s sales tax laws, if any, will apply to a particular transaction), simplified procedures for returns, remittances, and exemption certificates, and a voluntary centralized vendor registration system.

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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.

Enhanced Debt Collection Procedures
L. 2005, c. 124, enacted July 2, 2005, and effective immediately, provides enhanced procedures for the Department of Treasury in the collection of certain debts owed to a New Jersey state department or agency.

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:

Homeowners age 65 or over or disabled:
Income: Rebate Amount:
Not over $70,000: $1,000 - $1,200
$70,001 to $125,000: $600 - $800
$125,001 to $200,000: $500
Homeowners under age 65 and not disabled:
$0 to $125,000: $350
$125,001 to $200,000: $300
Tenants age 65 or over or disabled:
$0 to $70,000
Married, Filing Jointly or Head of Household or Qualifying Widow(er) or Married, Filing Separately (Same Residence)
$150 - $825
$70,001 to $100,000
Married, Filing Jointly or Head of Household or Qualifying Widow(er) or Married, Filing Separately (Same Residence)
$150
$0 to $35,000
Single or Married, Filing Separately (Separate Residence)
$150 - $825
$35,001 to $100,000
Single or Married, Filing Separately (Separate Residence)
$150
Tenants under age 65 and not disabled:
$0 to $100,000 $75


Cigarette Sales – Facilitating Tax Collection
L. 2005, c.85, enacted on May 4, 2005, and effective November 1, 2005, requires that retail sales of cigarettes may be made only when the purchaser is in the physical presence of the seller, unless the seller has fully complied with certain requirements, including collecting or verifying payment of applicable state cigarette and sales and use taxes, and verifying certain information about the purchaser.

Expansion of Eligibility for Veterans’ Property Tax Deduction

L. 2005, c.64, enacted April 7, 2005, expands the definition of “veterans” who are eligible for various benefits. It includes “Operation Northern Watch” and “Operation Southern Watch,” occurring on or after August 27, 1992, among those operations that constitute “active service in time of war.” Participants in these operations are now eligible for the $250 annual property tax deduction or the property tax exemption for 100% disabled veterans.

Exclusion of Certain Military Housing Allowances from Gross Income
L. 2005, c.63, enacted April 7, 2005, and applicable immediately to tax years beginning on or after January 1, 2004, amends the gross income tax act by excluding from gross income the housing and subsistence allowances given to National Guard members on active duty and members of the active and reserve components of the United States Armed Forces.

County Boards of Taxation
L. 2005, c.44, enacted March 21, 2005, and effective immediately, increases the membership of county boards of taxation.

Estimated Gross Income Tax on Nonresidents’ Sale of Real Property
L. 2005, c.20, enacted January 19, 2005, and applied retroactively to August 1, 2004, clarified that nonresidents must pay a minimum estimated gross income tax of 2% of the consideration paid on their sale of real property in New Jersey.

Revisions of Realty Transfer Fee
L. 2005, c.19, enacted January 19, 2005, effective February 1, 2005, and applicable to transfers of real property occurring on or after that date, made various changes in the statute imposing a 1% transfer fee on the buyer of real property purchased for more than $1 million. It limits the fee to transfers of property that is classified as Class 2 residential; or property that includes both Class 3A farm property and a structure suitable for residential use, as well as any other real property transferred to the same grantee in conjunction with that transfer; or property that constitutes a “cooperative unit” within the meaning of N.J.S.A. 46:8D-3. It also exempts transfers to charitable organizations that are exempt from federal income tax pursuant to 26 U.S.C.A. §501(c)(3).

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Last Updated: Wednesday, 08/20/14



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