P.L. 2006, Chapter 103, the Civil Union Act was signed into law on December 21, 2006 and took effect on February 19, 2007. The Act established "civil unions" for couples of the same sex.
The legislation was passed in response to the New Jersey Supreme Court's decision in Lewis vs. Harris, 188 N.J. 415 (2006). That Court unanimously held that "committed same-sex couples must be afforded on equal terms the same rights and benefits enjoyed by married opposite-sex couples." The subsequent Act, as stated in section 4, gives partners in civil union couples "all of the same benefits, protections and responsibilities under the law, whether they derive from statute, administrative or court rule, public policy, common law or any other source of civil law, as are granted to spouses in a marriage." Section 5n of the Act provides that "legal benefits, protections and responsibilities of spouses shall apply in like manner to civil union couples" to "laws relating to taxes imposed by the State or a municipality including but not limited to homestead rebate tax allowances, tax deductions based on marital status or exemptions from realty transfer tax based on marital status."
Section 92 of the Act provides that "Whenever in any law, rule, regulation, judicial or administrative proceeding or otherwise, reference is made to "marriage," "husband," "wife," "spouse," "family," "immediate family," "dependent," "next of kin," "widow," "widower," "widowed" or another word which in a specific context denotes a marital or spousal relationship, the same shall include a civil union pursuant to the provisions of this act."
The Civil Union Act impacts New Jersey State tax law and administration in the following areas:
Realty Transfer Fee Exemption
N.J.S.A. 46:15-10(j) provides for an exemption from the fee where the deed conveying real property is to be recorded between spouses. Accordingly, the exemption now also applies to deed conveyances between civil union partners. Likewise, the exemption provided by N.J.S.A. 46:15-10(p) to recorded conveyances between ex-spouses pursuant to a divorce decree now applies to recorded conveyances between ex-civil union partners pursuant to a dissolution decree. Forms RTF-1 (grantor) and RTF-1EE (grantee where applicable) are to be used when the exemptions are claimed.
Property Tax Relief Programs
Senior Freeze (Property Tax Reimbursement): The Senior Freeze Program reimburses eligible senior citizens and disabled persons for property tax increases. The amount of the reimbursement is the difference between the amount of property taxes that were due and paid in the "base year" (the first all the eligibility requirements were met) and the amount due and paid in the current year for which the claimant is seeking the reimbursement, provided the amount paid in the current year is greater. All the eligibility requirements for the base year and for each succeeding year, up to and including the current year, must be met to qualify for the reimbursement. Also, the same rights that apply to a surviving spouse, apply to a surviving civil union partner. Opposite sex couples who married and same sex couples who entered into civil unions in 2007 and thereafter, are eligible to have their joint status applicable to the reimbursement beginning 2008, assuming all other eligibility requirements are met.
Note: Senior Freeze Information (Property Tax Reimbursement)
Homestead Benefit (Rebate): The same rules that apply to married couples apply to civil union couples. The filing status "married, filing joint return" or "married, filing separate return" may be used only if an opposite sex couple was married on December 31 of the tax year for which the benefit is claimed. As the same rule and treatment applies to civil union couples, they could begin to apply under married/civil union status in 2008 for Tax Year 2007, and every year thereafter.
Disabled Veterans Real Property Tax Exemption: A civil union couple, one of whom has a United States Veterans Administration certification of wartime service-connected disability, may be entitled to a 100% real property tax exemption on their principal residence. Eligibility guidelines that apply to married couples and surviving spouses apply equally to civil union couples. The disabled veteran must meet all requirements of New Jersey citizenship and legal or domiciliary residence in the State, principal or permanent residence in the claimed dwelling, full property ownership, active wartime service in the U.S. Armed Forces, honorable discharge, and VA certified wartime service-connected 100% permanent and total disability. With respect to the full ownership requirement for property tax exemption of the residential dwelling, a same-sex couple who has entered into a civil union meets the full ownership criterion as tenants by the entirety. Additionally, the surviving civil union partner of a deceased veteran or serviceperson may now also be entitled to a property tax exemption. This exemption may be applied for with the municipal tax assessor at any time during the tax year and is to be applied for on Form D.V.S.S.E. .
Veterans Real Property Tax Deduction: The veteran and the surviving civil union partner of a deceased veteran or serviceperson who was a citizen and resident of New Jersey at death who had active wartime service in the United States Armed Forces and who was honorably discharged or who died on active wartime duty may now also be entitled to the $250 property tax deduction. Eligibility guidelines that apply to surviving spouses apply equally to surviving civil union partners. The veteran must meet all requirements of New Jersey citizenship and legal or domiciliary residence in the State, property ownership, active wartime service in the U.S. Armed Forces, and honorable discharge as of October 1 of the pretax year to receive the deduction for the following tax year. The deduction may be applied for with the municipal tax assessor beginning in pretax year 2007 from October 1 through December 31, 2007 for receipt in Tax Year 2008 and for every year thereafter. The deduction also may be applied for with the municipal tax collector any time during Tax Year 2008 from January 1 through December 31, for receipt in that same year, provided that all eligibility requirements were met as of pretax year October 1, 2007 and for every year thereafter. Form V.S.S. is to be used when applying for the deduction.
Senior Citizens Real Property Tax Deduction: A senior citizen age 65 years or older, or a person under age 65 who is permanently and totally disabled, and the senior citizen's/disabled person's surviving civil union partner, age 55 or older at the time of the deceased partner's death and by December 31 of the pretax year, may now also be entitled to the $250 property tax deduction. Eligibility guidelines that apply to surviving spouses apply equally to surviving civil union partners. Therefore, income of both civil union partners is to be considered when determining the $10,000 annual income limit. The claimant must meet requirements of New Jersey citizenship and legal or domiciliary residence in the State for a period of one year immediately preceding October 1 of the pretax year, principal or permanent residence in the claimed dwelling, property ownership, income, age or permanent and total disability. The deduction may be applied for with the municipal tax assessor beginning in pretax year 2007 from October 1 through December 31, 2007 for receipt in Tax Year 2008, and for every year thereafter. The deduction may be applied for with the municipal tax collector any time during Tax Year 2008 for receipt in 2008, and for every year thereafter, provided all pretax year eligibility requirements are timely met. Form PTD is to be used when applying for the deduction.
Transfer and Inheritance Tax
New Jersey imposes a Transfer Inheritance Tax, at graduated rates, on property having a total value of $500 or more which passes from a decedent to a beneficiary. Generally, an Inheritance Tax return must be filed and the tax paid on the transfer of real or personal property within eight months after the death of a decedent. Property passing to a decedent's surviving spouse, parents, grandparents, children, stepchildren or grandchildren is entirely exempt from the tax.
If a decedent's death occurs on or after February 19, 2007, property passing to a decedent's surviving civil union partner is entirely exempt from the tax.
In many instances, if all of a decedent's property passes to a surviving spouse/civil union partner, children, stepchildren, parents, grandparents or grandchildren, it will not be necessary to file an Inheritance Tax return with the Division of Taxation. In such cases, Form L-8 may be used to secure the release of bank accounts, stocks, bonds and brokerage accounts and if there was any real property in the name of the decedent, Form L-9 (or Form L-9NR for a non-resident survivor) may be filed to release the State's lien on the real property.
Note: The offspring of a biological parent conceived by the artificial insemination of that parent who is a partner in a civil union couple is presumed to be the child of the non-biological partner. In the Matter of the Parentage of the Child of Kimberly Robinson, 383 N.J. Super. 165; 890 A.2d 1036 (Ch. Div. 2005) (Non-biological parent of New York registered domestic partnership recognized in New Jersey, presumed to be the biological parent of child conceived by the other partner through artificial insemination where the non-biological partner has "show[n] indicia of commitment to be a spouse and to be a parent to the child."). Also, Section 4e of the Act states that "The rights of civil union couples with respect to a child of whom either becomes the parent during the term of the civil union, shall be the same as those of a married couple with respect to a child of whom either spouse or partner in a civil union couple becomes the parent during the marriage."
The Civil Union Act does not affect the treatment of domestic partners for purposes of the Transfer Inheritance Tax unless domestic partners enter into a civil union, thus ending their domestic partner status.
Note: Beginning January 1, 2018, the New Jersey Estate Tax is no longer imposed for individuals who die on or after that date.
The New Jersey Estate Tax is based upon the federal estate tax credit for state death taxes which was allowable under the provisions of the Internal Revenue Code in effect on December 31, 2001. The federal estate tax does not have a provision providing a deduction for property passing to a domestic partner.
If a federal estate tax return has or will be filed or is required to be filed with the Internal Revenue Service, any election made by a taxpayer to treat an asset in a particular manner for federal estate tax purposes must also be made for New Jersey Estate Tax purposes. A taxpayer may not make one election for federal purposes and another for State purposes with one exception. If the decedent was a partner in a civil union and died on or after February 19, 2007, survived by his/her partner, a marital deduction equal to that permitted a surviving spouse under the provisions of the Internal Revenue Code in effect on December 31, 2001, is permitted to the surviving civil union partner for New Jersey Estate Tax purposes. In these cases, a "dummy" 2006 Form 706 should be completed as though the Internal Revenue Code treated a surviving civil union partner and a surviving spouse in the same manner.
On December 31, 2016, or Before
A New Jersey Estate Tax return must be filed if the decedent's gross estate plus adjusted taxable gifts as determined in accordance with the provisions of the Internal Revenue Code in effect on December 31, 2001 exceeds $675,000. It must be filed within nine months of the decedent's death (nine months plus 30 days if the Form 706 method is used).
A Simplified Tax System method may also be used, but only in those situations where a federal estate tax return has not and will not be filed nor is a tax return required to be filed with the Internal Revenue Service. The Simplified Tax System is not intended for use in all estates. The Simplified Tax System requires that a Form IT- Estate be prepared and filed along with a New Jersey Inheritance Tax return, Form IT-R , and be completed in accordance with the provisions of the Inheritance Tax statute in effect on December 31, 2001.
On or after January 1, 2017, but before January 1, 2018, the Estate Tax exemption was $2 million.
On or after January 1, 2018, no Estate Tax will be imposed.
The New Jersey Gross Income Tax law follows federal gross income tax rules regarding prerequisites for eligibility for joint filing status. One of the federal prerequisites is that a married couple seeking joint filing status must have been married in the tax year for which the status is sought. Therefore, a couple that became married in 2007 would not have been able to file New Jersey State Income Tax returns for 2006. Accordingly, while civil union couples have the right to a joint filing status under New Jersey Gross Income Tax law, that right could only begin to be exercised in 2008 for Tax Year 2007, and every year thereafter.
For Tax Year 2007 and every year thereafter, a civil union partner may check the "Married/Civil Union Couple Joint" or "Married/Civil Union Couple Separate" box on the NJ-W4 Employee's Withholding Allowance Certificate and instructions for the purpose of employment income withholding. When an employee completes Form NJ-W4, the employer uses the information on the form to determine the amount of New Jersey Gross Income Tax to withhold from wages. If a civil union partner does not complete the NJ-W4, the employer will only be able to use the filing status on federal form W4 which does not indicate a civil union joint filing status for income withholding purposes. Likewise, the Declaration of Estimated Tax Form NJ 1040-ES and instructions may need to be completed and mailed to the Division on a quarterly basis. If a civil union couple intends to file jointly in 2008 for Tax Year 2007, and for every year thereafter, the Social Security number which is first on the form is the Social Security number on the payment check and is listed when filing the New Jersey Income Tax return.
Finally, section 95 of the Act makes clear that "A civil union relationship entered into outside of this State, which is valid under the laws of the jurisdiction under which the civil union relationship was created, shall be valid in this State." Various out of state jurisdictions, both within and outside of the United States, recognize and legitimize in varying degrees, same sex relationships. The Office of the Attorney General has reviewed the applicability of the Civil Union Act to those couples who may fall within those out of state relationships that are called by different terms. It has issued an opinion (February 16, 2007), stating that
"...[G]overnment-sanctioned, same-sex relationships validly established under the laws of other states and foreign nations will be valid in New Jersey beginning on February 19, 2007, either as civil unions or domestic partnerships. The name of the relationship selected by other jurisdictions, however, will not control its treatment under New Jersey law. Rather it is the nature of the rights conferred by another jurisdiction that will determine how a relationship will be treated under New Jersey law.[S]ame-sex civil unions established under the current laws of Vermont and Connecticut, as well as same-sex domestic partnerships established under the laws of California, which provide rights that closely approximate those of New Jersey civil unions, will be valid in New Jersey and treated as civil unions in our State. In addition, same-sex marriages established under the current laws of Massachusetts, Canada, the Netherlands, Belgium, South Africa and Spain will be valid in New Jersey and treated as civil unions in our State. Great Britain, New Zealand, Iceland, and Sweden provide government-sanctioned, same-sex relationships that provide rights and obligations that closely approximate those offered to married couples. These relationships, which have a variety of names, will also be valid in New Jersey and treated as civil unions in New Jersey."
The Attorney General's opinion also designates those legally sanctioned same sex couple relationships in Maine and the District of Columbia ("domestic partnerships"), and Hawaii ("reciprocal beneficiary relationships") as the equivalent of New Jersey domestic partnerships as they "provide fewer rights to domestic partners than to married couples."
Since the issuance of the Attorney General's opinion, same-sex marriages have also been established under the current laws of Vermont, New Hampshire, Connecticut, Iowa, New York and the District of Columbia, as well as other countries in addition to those listed in the opinion. Since the issuance of the Attorney General's opinion, civil unions have also been established under the current laws of Illinois, Rhode Island, Hawaii and Delaware. Some other states have laws recognizing same sex relationships which have rights similar to marriage. Any questions concerning recognition of out of state same sex relationships by New Jersey's Civil Union Act may be referred to the Division for review.
The Division has revised the forms, publications, web notices, and returns that will be used in Tax Year 2007 and thereafter, needed to implement the administration of the above State tax areas to bring them into conformity with Lewis vs. Harris and the Civil Union Act.
For further information, contact us.
The New Jersey Department of Health's Office of Vital Statistics will administer the licensing of civil unions. For more information, visit that agency's website or call 609-292-4087. Also, the Office of the State Registrar can be contacted at 609-984-3445.
For Further Information on Civil Unions and New Jersey Taxes:
For Information on the Licensing of Civil Unions: