Bill Text: NJ A2982 | 2010-2011 | Regular Session | Introduced
Bill Title: Reduces benefits under the State earned income credit program and caps benefits and eligibility at federal program amounts in effect for tax year 2010.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Failed) 2010-06-21 - Withdrawn from Consideration [A2982 Detail]
Download: New_Jersey-2010-A2982-Introduced.html
Sponsored by:
Assemblyman SAMUEL D. THOMPSON
District 13 (Middlesex and Monmouth)
SYNOPSIS
Reduces benefits under the State earned income credit program and caps benefits and eligibility at federal program amounts in effect for tax year 2010.
CURRENT VERSION OF TEXT
As introduced.
An Act reducing benefit amounts under the New Jersey earned income credit program and decoupling benefits and eligibility from annual adjustments provided under federal earned income tax credit program, amending P.L.2000, c.80.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 2 of P.L.2000, c.80 (C.54A:4-7) is amended to read as follows:
2. There is established the New Jersey Earned Income Tax Credit program in the Division of Taxation in the Department of the Treasury.
a. (1) A resident individual who is eligible for a credit under section 32 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.32), as in effect on July 1, 2010 and as it applies to federal taxable years beginning in 2010, shall be allowed a credit for the taxable year equal to a percentage, as provided in paragraph (2) of this subsection, of the federal earned income tax credit that would be allowed to [and claimed by] the individual or [by] the married individuals filing a joint return under section 32 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.32) [for the same taxable year for which a credit is claimed pursuant to this section] as in effect on July 1, 2010 and as it applies to federal taxable years beginning in 2010, subject to the restrictions of this subsection and subsections b., c., d. and e. of this section.
(2) For the purposes of the calculation of the New Jersey earned income tax credit, the percentage of the federal earned income tax credit referred to in paragraph (1) of this subsection shall be:
(a) 10% for the taxable year beginning on or after January 1, 2000, but before January 1, 2001;
(b) 15% for the taxable year beginning on or after January 1, 2001, but before January 1, 2002;
(c) 17.5% for the taxable year beginning on or after January 1, 2002, but before January 1, 2003;
(d) 20% for taxable years beginning on or after January 1, 2003, but before January 1, 2008;
(e) 22.5% for taxable years beginning on or after January 1, 2008 but before January 1, 2009; [and]
(f) 25% for taxable years beginning on or after January 1, 2009 but before January 1, 2010; and
(g) 20% for taxable years beginning on or after January 1, 2010.
(3) To qualify for the New Jersey earned income tax credit, if the claimant is married, except for a claimant who files as a head of household or surviving spouse for federal income tax purposes for the taxable year, the claimant shall file a joint return or claim for the credit.
b. In the case of a part-year resident claimant, the amount of the credit allowed pursuant to this section shall be pro-rated, based upon that proportion which the total number of months of the claimant's residency in the taxable year bears to 12 in that period. For this purpose, 15 days or more shall constitute a month.
c. The amount of the credit allowed pursuant to this section shall be applied against the tax otherwise due under N.J.S.54A:1-1 et seq., after all other credits and payments. If the credit exceeds the amount of tax otherwise due, that amount of excess shall be an overpayment for the purposes of N.J.S.54A:9-7; provided however, that subsection (f) of N.J.S.54A:9-7 shall not apply. The credit provided under this section as a credit against the tax otherwise due and the amount of the credit treated as an overpayment shall be treated as a credit towards or overpayment of gross income tax, subject to all provisions of N.J.S.54A:1-1 et seq., except as may be otherwise specifically provided in P.L.2000, c.80 (C.54A:4-6 et al.).
d. The Director of the Division of Taxation in the Department of the Treasury shall have discretion to establish a program for the distribution of earned income tax credits pursuant to the provisions of this section.
e. Any earned income tax credit pursuant to this section shall not be taken into account as income or receipts for purposes of determining the eligibility of an individual for benefits or assistance or the amount or extent of benefits or assistance under any State program and, to the extent permitted by federal law, under any State program financed in whole or in part with federal funds.
(cf: P.L.2007, c.109, s.1)
2. This act shall take effect immediately and apply to taxable years beginning on or after January 1, 2010.
STATEMENT
This bill reduces, beginning for New Jersey gross income tax year 2010 and thereafter, the benefit amount provided under the New Jersey earned income credit (EIC) program as a percentage of the federal earned income tax credit (EITC), and additionally decouples the State program from the annual inflation adjustments provided under federal tax code. Decoupling from the federal program will have the effect of capping credit amounts and income eligibility thresholds under the State program at the limits in effect under the federal program as of July 1, 2010.
Currently, the State EIC program provides a refundable earned income tax credit equal to 25 percent of the federal EITC. This bill would reduce that amount to 20 percent of the federal benefit to save $45 million during FY 2011, as proposed in the Governor's Budget Recommendation. Twenty percent is the State credit amount previously in effect during FY 2008 (tax year 2007).
Additionally, the bill will realize future year savings in State program costs by decoupling the State EIC from the annual inflation adjustments in the federal program. This revision will have the effect of freezing future program benefits and income eligibility limits at tax year 2010 levels. Thus, income eligibility would be statutorily capped at: $43,352 ($48,362 married filing jointly) for taxpayers with three or more qualifying children; $40,363 ($45,373 married filing jointly) for taxpayers with two qualifying children; $35,535 ($40,545 married filing jointly) for taxpayers with one qualifying child; and $13,460 ($18,470 married filing jointly) for taxpayers with no qualifying children. Similarly, the federal maximum credit amounts upon which the 20 percent State credit would be calculated, would be fixed at: $5,666 for taxpayers with three or more qualifying children; $5,036 for taxpayers with two qualifying children; $3,050 for taxpayers with one qualifying child; and $457 for taxpayers with no qualifying children.
