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New Jersey Assembly Calls for Higher SALT Cap for COVID-19 Relief

Posted on Oct. 30, 2020

New Jersey’s Democrat-controlled General Assembly has passed a resolution urging the federal government to raise the cap on the state and local tax deduction to $25,000 as part of a COVID-19 relief package.

A.R. 193 was one of several measures in the legislative package that was voted on by the Assembly October 29. The resolution was approved by a vote of 71 to 0, with one abstention. The resolution is based on recommendations from the New Jersey Economic Advisory Council, which in its final report urged Assembly Speaker Craig J. Coughlin (D) to publicly advocate for Congress to raise the SALT cap, which was set at $10,000 under the federal Tax Cuts and Jobs Act.

“High-income earners who live in New Jersey might be encouraged to remain residents of New Jersey and spend money in our state,” according to the report, which added that some of the tax savings from a higher cap “will be spent by taxpayers in our local communities, and the money available from this savings will be substantially more than a minor stimulus check.”

New Jersey Assembly Democrats spokeswoman Danielle Currie told Tax Notes that A.R. 193 does not need Senate approval and will now be sent to President Trump, congressional leaders, and each member of New Jersey’s congressional delegation.

Another bill in the package, A. 4809, passed both chambers of the Legislature. The legislation would make changes to the corporation business tax, which was revised in 2018 to adopt mandatory unitary combined reporting.

The bill would codify guidance from the Division of Taxation, which would not have an impact on state tax collections. However, other changes in the bill would affect revenues but can’t be quantified by the Legislative Budget and Finance Office, according to the bill’s fiscal note.

A. 4809 was amended October 21 in the Assembly Commerce and Economic Development Committee to provide that no penalties or interest will accrue for underpayment of tax because of retroactive provisions of the bill; provide that some transfers of real property aren’t subject to the realty transfer fee; and eliminate a provision to treat combined groups as one taxpayer for intercompany transfers for purposes of the realty transfer fee, the controlling interest transfer tax, and the bulk sales notice requirements.

The bill is supported by the New Jersey Business and Industry Association. Christopher Emigholz, the association's vice president of government affairs, called the legislation a win-win, saying it would reduce paperwork for businesses and streamline the state’s administration of the tax.

A. 4853 passed the Assembly by a vote of 72 to 0. The bill would mitigate the impact of a payroll tax increase on employers to shore up the unemployment insurance trust fund. The New Jersey Business and Industry Association supports the bill, which it said would spread out a large payroll tax increase on employers into more manageable tax increases over three years.

The Assembly also passed A. 4807, which would temporarily waive a tax imposed on some residents without health insurance coverage.

The state’s shared responsibility tax — enacted under legislation approved in 2018 that requires individual taxpayers to maintain health insurance — is imposed on taxpayers without coverage. New Jersey enacted the law to counter the Tax Cuts and Jobs Act's elimination of the tax penalty provision included in the Affordable Care Act.

A. 4807, which the Assembly passed 72 to 0, would waive the tax for taxpayers who receive state or federal unemployment benefits or who experience a substantial loss of income for any month during which the governor's executive order declaring the COVID-19 pandemic a public health emergency is in place.

The state collected about $51.3 million from the shared responsibility tax in fiscal 2020, according to the bill’s fiscal note.

The Assembly also voted 72 to 0 to pass A. 4806, which would allow municipalities to establish and operate property tax reward programs. The programs would be structured as a local merchant loyalty program and marketed as an economic development tool to encourage people who live in and nearby a municipality to shop at businesses located within it, according to the bill’s statement.

Meanwhile, the Senate voted 35 to 0 to pass a bipartisan bill (S. 3064) that would require the state treasurer to issue a report about how New York taxes the income of New Jersey residents.

After one senator said during the October 29 vote that he wants to ensure that New Jersey residents who work out of offices in New York City but are working remotely because of the pandemic pay income taxes in New Jersey, S. 3064's sponsor Sen. Steven Oroho (R) said, “We’re not talking about double taxation. . . . “We’re talking about the allocation of income that should rightly be in New Jersey and not New York.”

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