A3192

An Act excluding from gross income taxation certain pension payments received by police officers and firefighters, amending N.J.S.54A:6-10.

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.

(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.

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.

e. Gross income shall not include any amount of pension payments received from the Police and Firemen’s Retirement System, as described in P.L.1944, c.255 (C.43:16A-1 et seq.); any amount of pension payments received from the State Police Retirement System, as described in P.L.1965, c.89 (C.53:5A-1 et seq.); and any amount of payments received from a federal, state, or municipal pension plan by reason of service as a police officer or firefighter as defined in P.L.1944, c.255 (C.43:16A-1 et seq.).

(cf: P.L.2016, c.57, s.9)

2. This act shall take effect immediately and apply to taxable years beginning on or after January 1 next following enactment.

STATEMENT

This bill exempts from gross income taxation certain pension payments received by police officers and firefighters.

This bill excludes from gross income pension payments received from New Jersey’s Police and Firemen’s Retirement System and State Police Retirement System. Additionally, any public pension payments, whether from the federal government, a state government or a municipal government, received as a result of service as a police officer or firefighter, as defined by the Police and Firemen’s Retirement System, are exempt from taxation.

This bill fulfills two important public policy rationales. The first is to attract new police officer and firefighter recruits in New Jersey. The second is to attract retirees to the State of New Jersey so that they may contribute to the New Jersey economy through their residency in this State while simultaneously benefiting from this exclusion from gross income.