Summary of 2007 Tax Legislation
Electronic Waste Management Act
P.L. 2007, c. 347, enacted on January 13, 2008, and effective immediately, establishes a recycling system for used electronic devices and components. It establishes a Used Television Recycling and Management Program Fund in Treasury, administered by the Department of Environmental Protection, and containing funds generated by registration fees and market share payments to be paid by manufacturers.
Calculation of Reserve for Uncollected Property Taxes
P.L. 2007, c. 344, enacted January 13, 2008, and effective immediately, lowers the threshold for Tax Court and county tax board judgments against municipalities by changing the method of calculation of the reserve for uncollected taxes.
Changes in Urban Enterprise Zone Sales Tax Rebate Program
P.L. 2007, c. 328, enacted on January 13, 2008, and effective immediately, amends the definition of “small business” applicable to the UEZ sales tax rebate program by raising the maximum annual gross receipts threshold from less than $1 million to less than $3 million. “Small businesses” are an exception to the requirement that qualified UEZ businesses claiming exemption from sales tax on purchases for their own use in the zone must first pay the tax at the point of purchase and then apply for a refund of the tax paid. “Small businesses,” as defined in the act, may instead claim the exemption at the point of sale.
Property Tax Exemption for Spouses of Disabled Veterans
P.L. 2007, c. 317, enacted January 13, 2008, and effective immediately, allows the surviving spouse of a disabled veteran to claim a property tax exemption when the veteran’s disability declaration was granted after death.
New Recycling Tax, and Expiration of Solid Waste Services Tax
P.L. 2007, c. 311, enacted on January 13, 2008 imposes a $3.00 per ton recycling tax, effective immediately, on solid waste accepted for disposal or transfer at a solid waste facility as well as on solid waste collected by a solid waste collector that transports solid waste for transshipment or direct transportation to an out-of-State disposal site. In addition, the act provided for expiration of the solid waste services tax on February 1, 2008. Recycling tax revenues are deposited in the State Recycling Fund, administered by the Department of Environmental Protection, and used for the purposes enumerated in the act.
Extension of Eligibility for Business Relocation and Retention Tax Credits
P.L. 2007, c. 310, enacted January 13, 2008, and effective immediately, amends the Business Retention and Relocation Assistance Act. It extends eligibility for “tax credits” to businesses relocating at least 50 full-time jobs from existing locations within this state to new locations in this state. Previously the threshold for eligibility was that an employer relocate 250 jobs. The “tax credits” are granted by the Commerce and Economic Growth Commission.
Municipal Surcharge on Charges for Admission to Amusements
P.L. 2007, c. 302, enacted on January 13, 2008, and effective immediately, authorizes municipalities to enact ordinances imposing a 5% surcharge on admission charges that are also subject to New Jersey sales tax pursuant to N.J.S.A. 54:32B-3(e)(i). The surcharge is to be collected by the same people who collect the admission charges from customers, who must then remit the surcharges collected and submit monthly tax returns reporting the surcharge to the Division of Taxation. Revenue from this surcharge collected in each municipality is distributed to each municipality by the State Treasurer.
Municipal Special Event Parking Surcharge
P.L. 2007, c. 296, enacted January 13, 2008, and effective immediately, authorizes municipalities to enact ordinances imposing a 7% “special event” parking tax surcharge on charges for parking, garaging, or storing motor vehicles for special events held in the municipality on weekday evenings, weekends, and holidays.
Changes in Local Payroll Tax Provisions
P.L. 2007, c. 294, enacted January 17, 2008, and effective immediately, amends the Local Tax Authorization Act to permit municipalities that impose payroll taxes by ordinance to enact ordinances allowing the assessment of interest charges on delinquent payroll taxes owed to the municipality.
Short-term Property Tax Exemptions and Abatements
P.L. 2007, c. 268, enacted on January 13, 2008, and effective immediately, permits short-term property tax exemptions to begin immediately following the completion of a project, instead of in the next tax year following the tax year when the project was completed.
Professional Conduct of Tax Preparers
P.L. 2007, c. 258, enacted on January 11, 2008, and effective April 1, 2008, imposes certain standards for the professional conduct of tax preparers and penalties for violation of those standards. This act is administered by the Department of Banking and Insurance.
Corporation Business Tax Credit for Digital Media Content Production
P.L. 2007, c. 257, enacted on January 11, 2008, and effective immediately, establishes a corporation business tax credit for 20 percent of the expenses of producing certain digital media content in New Jersey. The act sets a limit on the combined total value of credits a business may claim for digital media content creation and film production credits. It also specifies that a business claiming tax credits for job creation for digital media production may not base its claim on job creation that is used as a basis for other types of grants or tax credits under the State’s other business incentive and grant programs.
Assessment Appeal Deadlines
P.L. 2007, c. 256, enacted January 11, 2008, and effective immediately, changes the deadline for appeals of certain property tax assessments. When there has been a municipal-wide revaluation or reassessment, a taxpayer or taxing district may appeal to the county board of taxation on or before May 1, or, if the assessed value of the property exceeds $750,000, may instead file a complaint directly with the State Tax Court.
New Jersey Veterans Haven Support Fund
P.L. 2007, c. 233, enacted on January 15, 2008, effective immediately, and applicable to taxable years beginning on or after January 11, 2008, establishes a New Jersey Veterans Haven Support Fund and allows taxpayers to make contributions to this fund through an option on the individual gross income tax return.
Penalties for Motor Fuel Sale Violations
P.L. 2007, c.221, enacted January 3, 2008, and effective on that date, imposes monetary penalties for violations of the law governing retail sales of motor fuels.
Charity Care Fraud Prevention and Detection Act
P.L. 2007, c.217, enacted on December 20, 2007, and effective January 19, 2008, establishes procedures to prevent and correct fraud and mistakes in the charity health care system. This act provides that the State Treasurer and the Commissioner of Health and Senior Services should establish an inter-agency agreement under which Division of Taxation will conduct random checks of personal state income tax returns filed by individuals who have been determined to be eligible for charity health care.
Disclosure Requirements Imposed on Recipients of Development Subsidies
P.L. 2007, c.200, enacted on November 2, 2007, and effective immediately, but with its key provisions inoperative until April 30, 2008, requires corporations that receive development subsidies, including tax incentives from a state agency, instrumentality, or authority, to submit annual reports for five years disclosing certain information about their officers and detailing their progress in creating jobs. It also requires applicants for such development subsidies to disclose information about the corporation, previous development subsidies sought or received, and to detail their employment expansion goals.
Prohibition of Certain Regulation of Voice Over Internet Protocol and Internet Protocol-enabled Services
P.L. 2007, c. 195, enacted on October 26, 2007, and effective immediately, prohibits the State, state public entities, and political subdivisions of the State from enacting, adopting, or enforcing any laws, ordinances, regulations, orders, or other standards or provisions that have the effect of regulating the rates, terms, or conditions of voice over Internet protocol (VoIP) or Internet protocol-enabled (IP-enabled) services. This law does not, however, affect the application of criminal or other statutes that apply generally to the conduct of business in the State, consumer protection, or unfair or deceptive trade practices; the authority to enforce the requirements of federal law regarding collection of enhanced 9-1-1 fees, telecommunications relay service fees, or federal Universal Service Fund fees on VoIP or IP-enabled services; the authority to set requirements for providing or operating cable services to set requirements for providing or operating cable services pursuant to 47 U.S.C. § 521 or N.J.S.A. 48:5A-1 et seq.; the authority to manage use of public rights of way; or the authority of the Board of Public Utilities to regulate circuit switched local exchange access service.
Clarification of Historic Site Real Property Tax Exemptions
P.L. 2007, c.157, enacted on August 21, 2007, and effective immediately, clarifies the effect of P.L. 2004, c.183, which had supplemented the 1962 historic site real property tax exemption law by setting revised requirements for historic site tax exempt status. The Legislature’s enactment of P.L. 2007, c.157, was a response to the Supreme Court’s decision in University Cottage Club of Princeton New Jersey Corp. v. New Jersey Department of Environmental Protection and Borough of Princeton, 191 N.J. 38 (2007), regarding the application of the historic site tax exemption law to the University Cottage Club. The Legislature noted that the Court’s interpretation of the intended effect of P.L. 2004, c. 183, was contrary to legislative intent, and therefore it enacted P.L. 2007, c.157, as corrective legislation to clarify its intent regarding the scope and applicability of the requirements for historic site real property tax exemption.
P.L. 2007, c.157, clarifies that the historic site real property tax exemption law is intended to apply only to historic sites that have a significant degree of public access, and not to private clubs that allow minimal public access and minimal benefit to the public. It makes the strict requirements imposed under the previous law, P.L. 2004, c.183, applicable to historic sites applying for tax exempt status after July 1, 1999 or determined to be eligible after that date. The Act also shifts the authority to certify an historic site as real property tax exempt from the Commissioner of Environmental Protection to the Director of the Division of Taxation, and it requires municipal tax assessors to certify annually that each certified tax exempt historic site continues to meet the qualifications for exemption.
Penalties for Employers in the Construction Industry Who Misclassify Employees as “Independent Contractors”
P.L. 2007, c. 114, enacted on July 13, 2007, establishes penalties for employers who misclassify construction work employees as “independent contractors”, thereby affecting their rights and obligations under laws affecting state and federal income tax withholding, social security, unemployment and disability benefits, workers’ compensation, and other benefits. The act makes it a criminal offense for an employer (or its agent, officer, foreman, employee) to misclassify a construction work employee, with the degree of the offense ranging from disorderly persons offense to second degree, depending on the intent and on the monetary value of the work contract. In addition, such misclassification may be subject to administrative penalties and civil penalties imposed by the Commissioner of Labor and Workforce Development, including suspension of registration, stop-work orders, and fines.
The act creates a presumption that, for purposes of the gross income tax act and certain state benefit laws, workers who are remunerated by an employer for services performed in improving real property are deemed to be “employees” unless they meet all the criteria of a three-prong test, set forth in the act, establishing that the worker is an independent contractor.
Earned Income Tax Credit
P.L. 2007, c. 109, enacted on June 28, 2007, and effective immediately, applicable to taxable years beginning on or after January 1, 2007, expands both the eligibility and the amount of state earned income tax credit. The act extends eligibility for the state credit to any individual who is eligible for federal earned income tax credit.
Set-off of Certain Debts Against Lottery Winnings
P.L. 2007, c. 106, enacted June 28, 2007, and effective immediately, provides that child support debts and debts to state government institutions and agencies, such as the Victims of Crime Compensation Board, and certain other debts shall be offset by the Department of Treasury against state lottery prizes greater than $600. (This act does not directly affect taxation.)
Sales Tax Exemption for Membership Fees for Access to Certain Facilities of Exempt Organizations and Government Entities and for Municipal and County Parking
P.L. 2007, c. 105, enacted June 28, 2007, and effective July 1, 2007, carves out certain exceptions to two new impositions of sales tax that were part of the expansion of sales and use tax effected by P.L. 2006, c. 44, effective October 1, 2006.
The act amends N.J.S.A. 54:32B-3(h), which imposes sales tax on fees and dues for use of the facilities of health and fitness, athletic, sporting, and shopping clubs and organizations. The amendment exempts such fees and dues if the club or organization is either an exempt private organization or an exempt public entity pursuant to N.J.S.A. 54:32B-9.
The act also amends N.J.S.A. 54:32B-3(i) which imposes tax on receipts for parking or garaging a motor vehicle, with certain exceptions. The amendment carved out additional exceptions: municipal parking and garaging, even when not “metered,” and certain parking fees at Atlantic City casinos.
Liability of Fiduciary Agents for Certain Taxes
P.L. 2007, c. 102, enacted June 28, 2007, effective immediately, and operative on October 1, 2007, imposes personal liability on certain individuals and entities that, as the State’s fiduciary agents, are required to collect and remit the Cape May tourism tax, N.J.S.A. 40:54D-4, the Atlantic City luxury tax, N.J.S.A. 40:48-8.15 et seq., the state hotel and motel occupancy fee, N.J.S.A. 54:32D-1, the emergency preparedness and 9-1-1 system assessment, N.J.S.A. 54:17C-18, and the cosmetic medical procedures gross receipts tax, N.J.S.A. 54:32E-1.
Tax Clearance Program for Certain Business Assistance and Incentives
P.L. 2007, c. 101, enacted June 28, 2007, and operative on July 1, 2007, establishes a tax clearance certificate requirement for awards of certain monetary and financial incentives offered to businesses by State departments, agencies, instrumentalities, and independent authorities. The act prescribes that as a precondition for obtaining an award of business assistance or incentives, such as grants, loans, and other financial assistance (but not including tax credits or tax exemptions), the applicant must obtain a tax clearance certificate from the Division of Taxation showing that it has filed and paid its required tax returns, taxes, fees, and any penalties and interest due.
Changes in Tax Debt Collection and Compliance Procedures
P.L. 2007, c. 100, enacted June 28, 2007, and effective immediately, but with the provision applicable to bulk sales not operative until August 1, 2007, makes several changes in tax compliance procedures in order to enhance tax collection and increase revenue.
Seven-Year Exemption Period from Certain Taxes on Energy for Certain Manufacturers
P.L. 2007, c. 94, enacted May 10, 2007, and effective immediately, provides an exemption from sales tax imposed on energy and utility services and from the transitional energy facility assessment unit rate surcharge. This exemption is to be applied only to a manufacturing facility producing products using recycled materials and satisfying several precise and complex criteria (currently applicable only to one manufacturing facility in the State). The Act provides that the exemption is in effect for seven years, and during that time the economic effect of allowing the facility’s exemption will be reviewed annually.
Short-term Property Tax Abatement for Certain Homes Altered to Accommodate Disabilities
P.L. 2007, c. 91, enacted on May 6, 2007, and effective immediately, permits municipalities to allow a five-year property tax abatement for certain improvements made on single-family dwellings located in an area declared in need of redevelopment, if half of the occupants of the dwelling qualify for federal income tax credit because of permanent and total disability. The tax relief, which will allow the improved property to be assessed based on its value before the renovations or reconstruction, will apply if the improvements were made in order to accommodate the occupants’ physical disabilities and the work was done by volunteer labor satisfying certain statutory criteria.
Short-term Property Tax Abatement for Certain Reconstructed Homes
P.L. 2007, c. 90, enacted on May 6, 2007, and effective immediately, allows short-term property tax relief for a five-year period for owners of residential property, located in a redevelopment area, which has been rebuilt or renovated by certain volunteer labor after being destroyed or damaged by fire. The act enables municipalities to enact an ordinance granting a five-year exemption from property tax on the value of the improvements made in such situations.
Revisions of Neighborhood Revitalization State Tax Credit
P.L. 2007, c. 89, enacted May 6, 2007, and effective immediately, increases the amount of state tax credits granted to businesses providing funding to qualified neighborhood revitalization projects.
Cigarette Fire Safety and Firefighter Protection Act
P.L. 2007, c. 86, enacted May 6, 2007, and effective June 1, 2008, sets various requirements to ensure that cigarettes sold in the State satisfy fire safety standards. It also provides that in the regular course of its inspections of cigarette dealers, the Division of Taxation may inspect cigarettes to determine whether they are marked, as required by this Act. If they are not, the Director of the Division of Taxation shall notify the Director of the Division of Fire Safety in the Department of Community Affairs, notwithstanding the provisions of the confidentiality provision (N.J.S.A. 54:50-8) of the State Tax Uniform Procedure Law.
Uniform Shared Services and Consolidation Act and Other Reforms Affecting Public School and Municipal Budgets and Responsibilities of Executive County Superintendents of Schools
P.L. 2007, c. 63, which became law on April 3, 2007, enacted several portions of a large package of reform proposals. Many of the provisions were designed to encourage fiscal savings among local units of government through a system of shared services. Other provisions promote openness and ease of public access to information regarding the budgeting processes for municipalities and public school systems, and others expand the authority of executive county superintendents (superintendents of schools). The act indirectly affects local property taxation.
Homestead Credit Program
P.L. 2007, c. 62, enacted on April 3, 2007, establishes a system of homestead credits for homeowners and residential tenants, replacing the current homestead rebate program. The credit program provides taxpayers with benefits calculated as a percentage of the property tax (up to a maximum of $10,000 tax) that they paid during the previous year. The percentages used to calculate this benefit are based on income levels, with higher percentage benefits allowed for the lower income levels, and with no benefit allowed for those whose income exceeds $250,000. The act also imposes a 4% property tax levy cap on school districts and county and local governments, subject to limited exceptions and adjustments. The tax levy cap provisions will apply to budget years beginning on or after July 1, 2007, but not to years beginning after June 30, 2012. The homestead credit provisions will begin to apply to claims for rebates and credits for property tax paid for tax year 2006.
New Jersey Tax and Fiscal Policy Study Commission
P.L. 2007, c. 43, enacted on February 21, 2007, and effective immediately, establishes a nine-member commission “in but not of the Department of Treasury,” charged with responsibility for continuously studying state and local tax issues and reporting annually to the Governor and the Legislature.
Sports and Entertainment Districts
P.L. 2007, c. 30, enacted on January 26, 2007, and effective immediately, authorizes eligible municipalities to create “sports and entertainment districts” in order to promote the development of projects in the districts. “Eligible municipalities” are municipalities falling within a certain range of population size and density and in which part of an urban enterprise zone is located. The act authorizes municipalities establishing these districts to impose one or more of several new local taxes and to dedicate the revenue from some or all of those taxes to financing projects in the sports and entertainment districts. The new taxes allowed include, for example, 2% local taxes that may be imposed on certain categories of transactions that are also subject to state sales and use tax. These taxes would be in addition to any other state or local tax or fee imposed on the same transaction.