Bill Text: NJ A5257 | 2018-2019 | Regular Session | Introduced
Bill Title: Indexes for inflation gross income eligibility caps and maximum exclusion amounts for pension and other retirement income under gross income tax.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2019-05-13 - Introduced, Referred to Assembly Appropriations Committee [A5257 Detail]
Download: New_Jersey-2018-A5257-Introduced.html
Sponsored by:
Assemblyman DANIEL R. BENSON
District 14 (Mercer and Middlesex)
SYNOPSIS
Indexes for inflation gross income eligibility caps and maximum exclusion amounts for pension and other retirement income under gross income tax.
CURRENT VERSION OF TEXT
As introduced.
An Act concerning inflation and the pension and other retirement income exclusions under the gross income tax, amending N.J.S.54A:6-10 and P.L.1977, c.273
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. N.J.S.54A:6-10 is amended to read as follows:
54A:6-10. Pensions and annuities.
a. Gross income shall not include that part of any amount received as an annuity under an annuity, endowment, or life insurance contract which bears the same ratio to such amount as the investment in the contract as of the annuity starting date bears to the expected return under the contract as of such date. Where (1) part of the consideration for an annuity, endowment, or life insurance contract is contributed by the employer, and (2) during the three-year period beginning on the date on which an amount is first received under the contract as an annuity, the aggregate amount receivable by the employee under the terms of the contract is equal to or greater than the consideration for the contract contributed by the employee, then all amounts received as an annuity under the contract shall be excluded from gross income until there has been so excluded an amount equal to the consideration for the contract contributed by the employee.
b. (1) In addition to that part of any amount received as an annuity which is excludable from gross income as herein provided, gross income shall not include payments:
for taxable years beginning before January 1, 2000, of up to $10,000 for a married couple filing jointly, $5,000 for a married person filing separately, or $7,500 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;
for the taxable year beginning on or after January 1, 2000, but before January 1, 2001, of up to $12,500 for a married couple filing jointly, $6,250 for a married person filing separately, or $9,375 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;
for the taxable year beginning on or after January 1, 2001, but before January 1, 2002, of up to $15,000 for a married couple filing jointly, $7,500 for a married person filing separately, or $11,250 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;
for the taxable year beginning on or after January 1, 2002, but before January 1, 2003, of up to $17,500 for a married couple filing jointly, $8,750 for a married person filing separately, or $13,125 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;
for taxable years beginning on or after January 1, 2003, but before January 1, 2017 of up to $20,000 for a married couple filing jointly, $10,000 for a married person filing separately, or $15,000 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;
for taxable years beginning on or after January 1, 2017, but before January 1, 2018, of up to $40,000 for a married couple filing jointly, $20,000 for a married person filing separately, or $30,000 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;
for taxable years beginning on or after January 1, 2018, but before January 1, 2019, of up to $60,000 for a married couple filing jointly, $30,000 for a married person filing separately, or $45,000 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;
for taxable years beginning on or after January 1, 2019, but before January 1, 2020, of up to $80,000 for a married couple filing jointly, $40,000 for a married person filing separately, or $60,000 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;
for taxable years beginning on or after January 1, 2020, of up to $100,000 for a married couple filing jointly, $50,000 for a married person filing separately, or $75,000 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1,
which are received as an annuity, endowment or life insurance contract, or payments of any such amounts which are received as pension, disability, or retirement benefits, under any public or private plan, whether the consideration therefor is contributed by the employee or employer or both, by any person who is 62 years of age or older or who, by virtue of disability, is or would be eligible to receive payments under the federal Social Security Act.
For taxable years beginning on or after January 1, 2021, the director shall annually recompute the amount of the exclusion allowed pursuant to this subsection for the particular taxable year by multiplying the amount of the exclusion allowed for the previous taxable year by the cost-of-living adjustment. Notwithstanding the amount of the exclusion stated hereinabove for taxable years beginning on or after January 1, 2020, a taxpayer shall use the recalculated amount of the exclusion as recomputed by the director for the taxable year. The director shall round the recalculated exclusion amount up to the next highest dollar. As used herein, "cost-of-living adjustment" means the factor calculated by dividing the consumer price index for all urban consumers for the nation, as prepared by the United States Department of Labor as of the close of the 12-month period ending on August 31 of the calendar year prior to the calendar year in which the taxable year begins, by that index as of the close of the 12-month period ending on August 31 of the preceding calendar year.
(2) For taxable years beginning on or after January 1, 2005, the exclusion provided by this subsection shall only be allowed if the taxpayer has gross income for the taxable year of not more than $100,000 ;
for taxable years beginning on or after January 1, 2021, the director shall annually recompute the gross income cap for eligibility for the exclusion for the particular taxable year by multiplying the amount of the gross income cap for the previous taxable year by the cost-of-living adjustment. Notwithstanding the $100,000 gross income cap stated hereinabove for taxable years beginning on or after January 1, 2005, the exclusion provided by this subsection shall be allowed only if the taxpayer has gross income for the taxable year of not more than the amount of the recalculated gross income cap as recomputed by the director. The director shall round the recalculated gross income cap up to the next highest dollar. As used herein, "cost-of-living adjustment" means the factor calculated by dividing the consumer price index for all urban consumers for the nation, as prepared by the United States Department of Labor as of the close of the 12-month period ending on August 31 of the calendar year prior to the calendar year in which the taxable year begins, by that index as of the close of the 12-month period ending on August 31 of the preceding calendar year.
c. Gross income shall not include any amount received under any public or private plan by reason of a permanent and total disability.
d. Gross income shall not include distributions from an employees' trust described in section 401(a) of the Internal Revenue Code of 1986, as amended (hereinafter referred to as "the Code"), which is exempt from tax under section 501(a) of the Code if the distribution, except the portion representing the employees' contributions, is rolled over in accordance with section 402(a)(5) or section 403(a)(4) of the Code. The distribution shall be paid in one or more installments which constitute a lump-sum distribution within the meaning of section 402(e)(4)(A) (determined without reference to subsection (e)(4)(B)), or be on account of a termination of a plan of which the trust is a part or, in the case of a profit-sharing or stock bonus plan, a complete discontinuance of contributions under such plan.
(cf: P.L.2016, c.57, s.9)
2. Section 3 of P.L.1977, c.273 (C.54A:6-15) is amended to read as follows:
3. Other retirement income. a. (1) Gross income shall not include income:
for taxable years beginning before January 1, 2000, of up to $10,000 for a married couple filing jointly, $5,000 for a married person filing separately, or $7,500 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;
for the taxable year beginning on or after January 1, 2000, but before January 1, 2001, of up to $12,500 for a married couple filing jointly, $6,250 for a married person filing separately, or $9,375 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;
for the taxable year beginning on or after January 1, 2001, but before January 1, 2002, of up to $15,000 for a married couple filing jointly, $7,500 for a married person filing separately, or $11,250 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;
for the taxable year beginning on or after January 1, 2002, but before January 1, 2003, of up to $17,500 for a married couple filing jointly, $8,750 for a married person filing separately, or $13,125 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;
for taxable years beginning on or after January 1, 2003, but before January 1, 2017, gross income shall not include income of up to $20,000 for a married couple filing jointly, $10,000 for a married person filing separately, or $15,000 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;
for taxable years beginning on or after January 1, 2017 but before January 1, 2018, gross income shall not include income of up to $40,000 for a married couple filing jointly, $20,000 for a married person filing separately, or $30,000 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;
for taxable years beginning on or after January 1, 2018, but before January 1, 2019, gross income shall not include income of up to $60,000 for a married couple filing jointly, $30,000 for a married person filing separately, or $45,000 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;
for taxable years beginning on or after January 1, 2019, but before January 1, 2020, gross income shall not include income of up to $80,000 for a married couple filing jointly, $40,000 for a married person filing separately, or $60,000 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1;
for taxable years beginning on or after January 1, 2020, gross income shall not include income of up to $100,000 for a married couple filing jointly, $50,000 for a married person filing separately, or $75,000 for an individual filing as a single taxpayer or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1, when received in any tax year by a person aged 62 years or older who received no income in excess of $3,000 from one or more of the sources enumerated in subsections a., b., k. and p. of N.J.S.54A:5-1.
For taxable years beginning on or after January 1, 2021, the director shall annually recompute the amount of the exclusion allowed pursuant to this subsection for the particular taxable year by multiplying the amount of the exclusion allowed for the previous taxable year by the cost-of-living adjustment. Notwithstanding the amount of the exclusion stated hereinabove for taxable years beginning on or after January 1, 2020, a taxpayer shall use the recalculated amount of the exclusion as recomputed by the director for the taxable year. The director shall round the recalculated exclusion amount up to the next highest dollar. As used herein, "cost-of-living adjustment" means the factor calculated by dividing the consumer price index for all urban consumers for the nation, as prepared by the United States Department of Labor as of the close of the 12-month period ending on August 31 of the calendar year prior to the calendar year in which the taxable year begins, by that index as of the close of the 12-month period ending on August 31 of the preceding calendar year.
(2) For taxable years beginning on or after January 1, 2005, the exclusion provided by this subsection shall only be allowed if the taxpayer has gross income for the taxable year of not more than $100,000 ;
for taxable years beginning on or after January 1, 2021, the director shall annually recompute the gross income cap for eligibility for the exclusion for the particular taxable year by multiplying the amount of the gross income cap for the previous taxable year by the cost-of-living adjustment. Notwithstanding the $100,000 gross income cap stated hereinabove for taxable years beginning on or after January 1, 2005, the exclusion provided by this subsection shall be allowed only if the taxpayer has gross income for the taxable year of not more than the amount of the recalculated gross income cap as recomputed by the director. The director shall round the recalculated gross income cap up to the next highest dollar. As used herein, "cost-of-living adjustment" means the factor calculated by dividing the consumer price index for all urban consumers for the nation, as prepared by the United States Department of Labor as of the close of the 12-month period ending on August 31 of the calendar year prior to the calendar year in which the taxable year begins, by that index as of the close of the 12-month period ending on August 31 of the preceding calendar year.
(3) The total exclusion under this subsection and that allowable under N.J.S.54A:6-10 shall not exceed the amounts of the exclusions set forth in this subsection.
b. In addition to the exclusion provided under N.J.S.54A:6-10 and subsection a. of this section, gross income shall not include income of up to $6,000 for a married couple filing jointly or an individual determining tax pursuant to subsection a. of N.J.S.54A:2-1, or $3,000 for a single person or a married person filing separately, who is not covered under N.J.S.54A:6-2 or N.J.S.54A:6-3, but who would be eligible in any year to receive payments under either section if he or she were covered thereby.
(cf: P.L.2016, c.57, s.10)
3. This act shall take effect immediately and apply to taxable years commencing on or after January 1, 2021.
STATEMENT
This bill indexes for inflation the pension and other retirement income exclusions and the gross income caps for eligibility for the exclusions under the New Jersey gross income tax for taxable years beginning on or after January 1, 2021. By indexing the amount of the exclusions and the gross income caps annually for inflation, the pension and other retirement income exclusions will take into consideration the general upward movement in the cost of goods and services that is known as inflation.
The bill requires that the Director of the Division of Taxation, beginning with taxable years commencing or after January 1, 2021, annually recompute the amount of the exclusions allowed to eligible taxpayers by multiplying the amount of the exclusion allowed for the previous taxable year by the cost-of-living adjustment. The bill defines "cost-of-living adjustment" as the factor calculated by dividing the Consumer Price Index for all urban consumers for the nation, as prepared by the United States Department of Labor as of the close of the 12-month period ending on August 31 of the calendar year prior to the calendar year in which the taxable year begins, by that index as of the close of the 12-month period ending on August 31 of the preceding calendar year.
Similarly, the bill also requires that the director annually recompute the gross income cap by multiplying the amount of the cap on gross income for eligibility for the exclusions for the previous taxable year by the cost-of-living adjustment. The gross income cap is that amount of gross income above which a taxpayer is not eligible to exclude pension and other retirement income from taxable income for a taxable year for purposes of the New Jersey Gross Income Tax.
