NJBIA on Monday supported legislation that would ease taxpayer compliance, simplify tax administration for the state Treasury and end COVID-19 tax extensions that have become a burden to many New Jersey taxpayers.
The Senate Budget and Appropriations Committee unanimously released the legislation, A-4295/S-2876, which now advances to the full Senate.
“All three of the tax changes proposed in this legislation have singular and unique benefits,” NJBIA Chief Government Affairs Officer Christopher Emigholz said in written testimony submitted to the committee. “We thank the sponsors of the bill and urge the committee to advance it for the betterment of the taxpayers and tax process. It’s a win-win.”
The bill achieves three priorities.
First, it eliminates the requirement that a taxpayer who qualifies as an S corporation for federal tax purposes must affirmatively elect New Jersey S corporation status relating to state Corporate Business Tax and Gross Income Tax.
NJBIA and the New Jersey Society of CPAs also successfully requested an amendment to allow for an opt-out if taxpayers do not want this done automatically, as it could be better for them in some cases to file differently.
Secondly, it adapts the New Jersey gross income tax to the new federal partnership audit regime that focuses on auditing the partnership, rather than individual partners for greater efficiency.
Emigholz said New Jersey has previously scored poorly on the Council on State Taxation (COST) tax administration scorecard, found here. This provision would address best practices in reporting of those federal changes.
Thirdly, the bill ends the extension of time for the statute of limitations on tax due that was enacted in response to the COVID-19 pandemic. It also ends the extension for the provisions regarding the State’s payment of interest on a taxpayer’s overpayment of tax.
Both end dates for these extensions are currently tied by statute to the end of the state of emergency declared by Gov. Phil Murphy in Executive Order No. 103. Separately, in Executive Order No. 170, the Governor extended the time for taxpayers to file a claim for a refund on taxes paid. The end date for that extension is tied to the end of the public health emergency.
On June 4, 2021, the Governor terminated the public health emergency with Executive Order No. 244, but did not terminate the state of emergency. As a result, the extension of time for the statute of limitations on tax due, and payment of interest on tax overpayments, still do not have an end date, while the extension of time for the filing of refund claims does have an end date.
“The COVID tax extensions ended by this bill have become a burden to many taxpayers,” Emigholz said. “This has become one of the top questions and concerns I have been hearing from the business tax community these days and corrects a fundamental unfairness and inequity that does not allow businesses to close out their books. It was needed during the pandemic but is no longer.”
