S708

An Act concerning property tax relief and increasing benefit amounts under the New Jersey earned tax income credit program and elective credit amounts under P.L.1996, c.60, subject to legislative disapproval, amending P.L.2000, c.80 and P.L.1996, c.60 and supplementing Title 54A of the New Jersey Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. (New section) This act shall be known and may be cited as the “Direct Tax Relief for New Jersey Families Act.”

2. 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) 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 the individual or 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, 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;

(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;

(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 but before January 1, 2013;

(h) 25% for taxable years beginning on or after January 1, 2013 but before January 1, 2014; and

(i) 25% for taxable years beginning on or after January 1, 2014, unless this enhanced credit amount is disapproved by the Legislature in the manner prescribed by section 5 of P.L. , c. (C. ) (pending before the Legislature as this bill), in which case the percentage of the federal earned income tax credit for that taxable year shall be 20%.

(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.2010, c.27. s.1)

3. Section 6 of P.L.1996, c.60 (C.54A:3A-20) is amended to read as follows:

6. a. (1) Notwithstanding any provision of this act to the contrary, commencing with the taxpayer's taxable year beginning on or after January 1, 1996:

(a) a taxpayer; or

(b) a resident of this State who is 65 years of age or older at the close of the taxable year or who is allowed to claim a personal deduction as a blind or disabled taxpayer pursuant to subsection b. of N.J.S.54A:3-1 but who, pursuant to N.J.S.54A:2-4, is not subject to tax; and,

who paid property taxes or rent constituting property taxes on a homestead during the calendar year may elect to take a credit instead of the deduction provided pursuant to [section] sections 3, 4, or 5 of P.L.1996, c.60 (C.54A:3A-17 et seq.) in the amount of $50, subject to the provisions of [paragraph] paragraphs (2) and (3) of this subsection.

(2) Notwithstanding the provisions of paragraph (1) of this subsection, the amount of tax liability reduction or credit allowed for the taxpayer's taxable year beginning during 1996 shall be $25 and the amount of tax liability reduction or credit allowed for the taxpayer's taxable year beginning during 1997 shall be $37.50.

(3) Notwithstanding the provisions of paragraph (1) of this subsection, for taxable years beginning on or after January 1, 2013, but before January 1, 2014 the amount of the credit allowed pursuant to this section shall be $100. For taxable years beginning on or after January 1, 2014, but before January 1, 2015 the amount of the credit allowed pursuant to this section shall be $150, unless this increased credit amount is disapproved by the Legislature in the manner prescribed by section 5 of P.L. , c. (C. ) (pending before the Legislature as this bill), in which case the amount of the credit allowed pursuant to this section shall be $100. For taxable years beginning on or after January 1, 2015, the amount of the credit allowed pursuant to this section shall be $200, unless this increased credit amount is disapproved by the Legislature in the manner prescribed by section 5 of P.L. , c. (C. ) (pending before the Legislature as this bill), in which case the amount of the credit allowed for that taxable year pursuant to this section shall be $100.

b. A husband and wife who elect to file separate income tax returns pursuant to the “New Jersey Gross Income Tax Act,” N.J.S.54A:1-1 et seq., shall each be entitled to one-half of the credit allowed pursuant to subsection a. of this section.

c. The credit shall be paid to the taxpayer as a refund of overpayment pursuant to N.J.S.54A:9-7, provided however, that subsection (f) of that section shall not apply. The credit for a claimant qualified under subsection a. of this section who, pursuant to N.J.S.54A:2-4, is not subject to tax, shall be applied for annually on an application as shall be made available by the director, to be filed with the director on or before the date for filing annual gross income tax returns. The director shall determine the form and manner by which a qualified applicant shall apply for a refund of an overpayment pursuant to this section, and the time of the refund of the overpayment. For the purposes of this section, refunds of overpayments may be combined with payments of rebates pursuant to P.L.1990, c.61 (C.54:4-8.57 et seq.).

d. Notwithstanding the provisions of subsection a. of this section, for taxable years beginning on or after January 1, 2013 no taxpayer or resident that is allowed a New Jersey direct property tax relief credit pursuant to section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill) for the taxable year shall be allowed a credit pursuant to this section for the taxable year.

(cf: P.L.1996, c.60, s.6)

4. (New section) a. There is established the New Jersey Direct Property Tax Relief Program.

For taxable years beginning on or after January 1, 2013, a qualified homeowner shall be allowed a New Jersey direct property tax relief credit against the tax liability otherwise due for the taxable year pursuant to the “New Jersey Gross Income Tax Act,” N.J.S.54A:1-1 et seq., after all other credits and payments. If the New Jersey direct property tax relief credit exceeds the amount of tax liability otherwise due, that amount of excess shall be refunded as an overpayment pursuant to N.J.S.54A:9-7, provided however, subsection (f) of N.J.S.54A:9-7 concerning interest shall not apply.

b. For taxable years beginning on or after January 1, 2013, but before January 1, 2014, a qualified homeowner with $400,000 or less of taxable income for the taxable year shall be allowed a New Jersey direct property tax relief credit in the amount of $100.

c. Except as otherwise provided in this subsection, for taxable years beginning on or after January 1, 2014, a qualified homeowner with $400,000 or less of taxable income for the taxable year shall be allowed a New Jersey direct property tax relief credit in an amount equal to a percentage of the amount of property tax due and paid by the qualified homeowner for the qualified homeowner’s home in the taxable year. Provided, however, that the amount of property tax due and paid that is considered for purposes of calculating the amount of the New Jersey direct property tax relief credit for the taxable year shall not exceed $10,000 per qualified homeowner and the individual, if any, with whom the qualified homeowner is eligible to file a joint return and determine tax pursuant to subsection a. of N.J.S.54A:2-1, notwithstanding subsections b. and d. of N.J.S.54A:8-3.1.

For taxable years beginning on or after January 1, 2014, but before January 1, 2015, the percentage of the amount of property tax due and paid for purposes of calculating the amount of the New Jersey direct property tax relief credit shall be four percent, unless this increased credit amount is disapproved by the Legislature in the manner prescribed by section 5 of P.L. , c. (C. ) (pending before the Legislature as this bill), in which case the amount of the credit allowed pursuant to this section shall be $100.

For taxable years beginning on or after January 1, 2015, but before January 1, 2016, the percentage of the amount of property tax due and paid for purposes of calculating the amount of the New Jersey direct property tax relief credit shall be eight percent, unless this increased credit amount is disapproved by the Legislature in the manner prescribed by section 5 of P.L. , c. (C. ) (pending before the Legislature as this bill), in which case the amount of the credit allowed pursuant to this section shall be $100.

For taxable years beginning on or after January 1, 2016, the percentage of the amount of property tax due and paid for purposes of calculating the amount of the New Jersey direct property tax relief credit shall be ten percent, unless this increased credit amount is disapproved by the Legislature in the manner prescribed by section 5 of P.L. , c. (C. ) (pending before the Legislature as this bill), in which case the amount of the credit allowed for that taxable year pursuant to this section shall be $100.

d. (1) For purposes of determining a qualified homeowner’s eligibility for a New Jersey direct property tax relief credit pursuant to this section and relative to the limits on taxable income for the taxable year:

taxable income shall be calculated without the net profits from a business that would otherwise be included in that calculation pursuant to subsection b. of N.J.S.54A:5-1;

a qualified homeowner’s taxable income for the taxable year shall be deemed to include the taxable income for the taxable year of an individual with whom the qualified homeowner is eligible to file a joint return and determine tax pursuant to subsection a. of N.J.S.54A:2-1, notwithstanding subsections b. and d. of N.J.S.54A:8-3.1; and

if the individual with whom the qualified homeowner is eligible to file a joint return and determine tax pursuant to subsection a. of N.J.S.54A:2-1, notwithstanding subsections b. and d. of N.J.S.54A:8-3.1, is not a resident, the qualified homeowner’s taxable income for the taxable year shall be calculated as if the individual with whom the qualified homeowner is eligible to file a joint return and determine tax pursuant to subsection a. of N.J.S.54A:2-1, notwithstanding subsections b. and d. of N.J.S.54A:8-3.1, were a resident for the taxable year.

(2) A New Jersey direct property tax relief credit allowed pursuant to subsection c. of this section shall be allowed in relation to the amount of the property taxes actually paid by or allocable to a qualified homeowner who has more than one home, but the aggregate amount of the property taxes claimed shall not exceed the total of the proportionate amounts of property taxes assessed and levied against or allocable to each home for the portion of the taxable year for which the qualified homeowner occupied the home as the qualified homeowner's principal residence.

(3) If title to a home is held by more than one individual as joint tenants or tenants in common, each qualified homeowner shall be allowed a New Jersey direct property tax relief credit only in relation to the qualified homeowner's proportionate share of the property taxes assessed and levied against the home. The proportionate share shall be equal to that of all other individuals who hold the title, but if the conveyance under which the title is held provides for unequal interests therein, a qualified homeowner's share of the property taxes shall be in proportion to the qualified homeowner's interest in the title.

(4) If title to a home is held by a husband and wife who own the home as tenants by the entirety, or if that husband and wife are both residential shareholders of a cooperative or mutual housing corporation and occupy the same home therein, and who elect to file separate income tax returns pursuant to the “New Jersey Gross Income Tax Act,” N.J.S.54A:1-1 et seq., that husband and wife shall each be entitled to one-half of the New Jersey direct property tax relief credit for which they may be jointly eligible pursuant to this section.

(5) If a qualified homeowner’s home consists of more than one unit, the qualified homeowner’s New Jersey direct property tax relief credit allowed pursuant to subsection c. of this section shall be allowed only in relation to the proportionate share of the property taxes assessed and levied against the residential unit occupied by the qualified homeowner, as determined by the local tax assessor.

e. The Director of the Division of Taxation in the Department of the Treasury shall adopt rules and regulations in accordance with the “Administrative Procedure Act,” P.L.1968, c.410 (C.52:14B-1 et seq.), as the director determines are necessary to implement P.L. , c. (pending before the Legislature as this bill).

The director shall implement a simplified application process for the New Jersey direct property tax relief credit for qualified homeowners that are not required to file a gross income tax return pursuant to N.J.S.54A:8-3.1.

f. As used in this section:

“Condominium” means the form of real property ownership provided for under the “Condominium Act,” P.L.1969, c.257 (C.46:8B-1 et seq.).

“Continuing care retirement community” means a residential facility primarily for retired persons where lodging and nursing, medical or other health related services at the same or another location are provided as continuing care to an individual pursuant to an agreement effective for the life of the individual or for a period greater than one year, including mutually terminable contracts, and in consideration of the payment of an entrance fee with or without other periodic charges.

“Cooperative” means a housing corporation or association which entitles the holder of a share or membership interest thereof to possess and occupy for dwelling purposes a house, apartment, or other unit of housing owned or leased by the corporation or association, or to lease or purchase a unit of housing constructed or to be constructed by the corporation or association.

“Dwelling house” means any residential property assessed as real property which consists of not more than four units, of which not more than one may be used for commercial purposes, but shall not include a unit in a condominium, cooperative, horizontal property regime, or mutual housing corporation.

“Home” means a qualified homeowner’s principal residence in New Jersey that qualifies as one of the following types of homesteads:

(1) a dwelling house and the land on which that dwelling house is located;

(2) a dwelling house situated on land owned by a person other than the qualified homeowner which constitutes the place of the qualified homeowner’s dwelling house;

(3) a condominium unit or a unit in a horizontal property regime which constitutes the place of the qualified homeowner's condominium unit or unit in a horizontal property regime;

(4) a homestead where ownership is represented by the qualified homeowner’s interest as a tenant for life or a tenant under a lease for 99 years or more and the qualified homeowner is entitled to and actually takes possession of the homestead under an executory contract for the sale thereof or under an agreement with a lending institution which holds title as security for a loan, or a resident of a continuing care retirement community pursuant to a contract for continuing care for the life of that person which requires the resident to bear, separately from any other charges, the proportionate share of property taxes attributable to the unit that the resident occupies; and

(5) a unit in a cooperative or mutual housing corporation which constitutes the place of domicile of a residential shareholder or lessee therein, or of a lessee or shareholder who is not a residential shareholder therein.

“Horizontal property regime” means the form of real property ownership provided for under the “Horizontal Property Act,” P.L.1963, c.168 (C.46:8A-1 et seq.).

“Mutual housing corporation” means a corporation not-for-profit, incorporated under the laws of this State on a mutual or cooperative basis within the scope of section 607 of the Lanham Public War Housing Act (“National Defense Housing Act”), Pub.L. 76-849 (42 U.S.C. s.1587), as amended, which acquired a National Defense Housing Project pursuant to that act.

“Principal residence” means a home actually and continually occupied by a qualified homeowner as the qualified homeowner's permanent residence, as distinguished from a “vacation home,” property owned and rented or offered for rent by the qualified homeowner, and other secondary real property holdings.

“Property tax” means payments to a municipality for which an assessment by a municipality has been made on an ad valorem basis on land and improvements, and shall not include payments made in lieu of taxes.

“Qualified homeowner” means a resident of the State that owns a home in New Jersey which is the resident’s principal residence.

“Residential shareholder” means a tenant or holder of a membership interest in a cooperative or mutual housing corporation and who may deduct real property taxes for purposes of federal income tax pursuant to section 216 of the federal Internal Revenue Code (26 U.S.C. s.216).

5. (New Section) For purposes of determining the applicable credit amounts for taxable years beginning on or after January 1, 2014 for the New Jersey Direct Property Tax Relief Program as provided in section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill), for the elective credit commonly referred to as the renter’s credit as provided in section 6 of P.L.1996, c.60 (C.54A:3A-20) as amended by section 3 of P.L. , c. (pending before the Legislature as this bill), and for the New Jersey earned income tax credit program as provided in section 2 of P.L.2000, c.80 (C.54A:4-7) as amended by section 2 of P.L. , c. (pending before the Legislature as this bill), if in any year the Legislature believes that the fiscal condition of the State is such that tax credits in enhanced amounts for these programs should not be made available to eligible taxpayers during that taxable year and adopts a concurrent resolution on or before June 1 of that taxable year stating that the Legislature is not in agreement with providing enhanced benefits for that year, then the credit amounts for all three of these programs shall be the lower of the amounts or percentages specified in section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill), in section 6 of P.L.1996, c.60 (C.54A:3A-20) as amended by section 3 of P.L. , c. (pending before the Legislature as this bill), and in section 2 of P.L.2000, c.80 (C.54A:4-7) as amended by section 2 of P.L. , c. (pending before the Legislature as this bill).

6. This act shall take effect immediately and apply to taxable years beginning on or after January 1, 2013.

STATEMENT

This bill provides direct property tax relief through the New Jersey gross income tax and also increases certain tax credits. The purpose of the bill is to deliver real relief to working and middle class families, responsibly stimulating New Jersey's economy while improving the state’s tax climate. The bill has the following three components: (i) establishes the New Jersey Direct Property Tax Relief Program to provide a refundable credit against the income tax based on property taxes paid; (ii) increases the New Jersey earned income tax credit from 20 percent to 25 percent of the federal earned income tax credit; and (iii) quadruples the current credit for homestead property taxes, which is commonly referred to as the renter’s credit. The bill enacts the comprehensive tax relief plan proposed by Governor Christie in his recommended amendments to Senate Bill No. 2535.

The New Jersey Direct Property Tax Relief Program

The bill establishes the New Jersey Direct Property Tax Relief Program, which provides a refundable property tax relief credit under the gross income tax. The credit is available for qualified homeowners with up to $400,000 of annual taxable income.

The credit amount is phased in over four taxable years.

Taxable Year	Available Credit
2013	$100
2014*	4% of first $10,000 of Property Taxes Paid
2015*	8% of first $10,000 of Property Taxes Paid
2016 and Thereafter*	10% of first $10,000 of Property Taxes Paid

*For taxable years 2014 and thereafter, the available credit may be adjusted to $100 by action of the Legislature if the Legislature decides that the fiscal condition of the State is such that tax credits in enhanced amounts should not be made available to eligible taxpayers during that taxable year.

The “Renter’s Credit” Increase

The bill increases the value of the current gross income tax credit for homestead property taxes, which is sometimes referred to as the “renter’s credit,” over a three-year period.

Taxable Year	Available Credit
2012	$50 (current law)
2013	$100
2014*	$150
2015 and Thereafter*	$200

The Earned Income Tax Credit Increase

The bill increases the New Jersey earned income tax credit amount as a percentage of the federal earned income tax credit from 20 percent to 25 percent beginning with taxable year 2013.

However, for taxable years 2014 and thereafter, the credit percentage may be adjusted back to 20 percent of the federal earned income tax credit by action of the Legislature if the Legislature decides that the fiscal condition of the State is such that tax credits in enhanced amounts should not be made available to eligible taxpayers during that taxable year.