§2 -
Note
P.L. 2007, CHAPTER 109, approved June 28, 2007
Senate, No. 2647
1 AN ACT expanding eligibility for the New Jersey earned income tax
2 credit program to equal eligibility under the federal earned
3 income tax program and enhancing the benefit amount, and
4 amending P.L.2000, c.80.
5
6 BE IT ENACTED by the Senate and General Assembly of the State
7 of New Jersey:
8
9 1. Section 2 of P.L.2000, c.80 (C.54A:4-7) is amended to read
10 as follows:
11 2. There is established the New Jersey Earned Income Tax
12 Credit program in the Division of Taxation in the Department of the
13 Treasury.
14 a. (1) A resident individual who is eligible for a credit under
15 section 32 of the federal Internal Revenue Code of 1986 (26 U.S.C.
16 s32) [with gross income of $20,000 or less for the taxable year who
17 files as a head of household or surviving spouse for federal income
18 tax purposes for the taxable year, or married resident individuals
19 with combined gross income of $20,000 or less for the taxable year
20 who file a joint return for federal income tax purposes for the
21 taxable year,] shall be allowed a credit for the taxable year equal to
22 a percentage, as provided in paragraph (2) of this subsection, of the
23 federal earned income tax credit allowed to and claimed by the
24 individual or by the married individuals filing a joint return under
25 section 32 of the federal Internal Revenue Code of 1986[,] (26
26 U.S.C. s.32 [,] ) for the same taxable year for which a credit is
27 claimed pursuant to this section, subject to the restrictions of this
28 subsection and subsections b., c., d. and e. of this section.
29 (2) For the purposes of the calculation of the New Jersey earned
30 income tax credit, the percentage of the federal earned income tax
31 credit referred to in paragraph (1) of this subsection shall be:
32 (a) 10% for the taxable year beginning on or after January 1,
33 2000, but before January 1, 2001;
34 (b) 15% for the taxable year beginning on or after January 1,
35 2001, but before January 1, 2002;
36 (c) 17.5% for the taxable year beginning on or after January 1,
37 2002, but before January 1, 2003; [and]
38 (d) 20% for taxable years beginning on or after January 1, 2003,
39 but before January 1, 2008
40 (e) 22.5% for taxable years beginning on or after January 1,
41 2008 but before January 1, 2009; and
42 (f) 25% for taxable years beginning on or after January 1, 2009.
43 (3) To qualify for the New Jersey earned income tax credit[:
EXPLANATION – Matter enclosed in bold-faced brackets [thus] in the above bill is
not enacted and is intended to be omitted in the law.
Matter underlined thus is new matter.
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1 (a) the claimant's federal earned income tax credit for the
2 taxable year must be a credit that is based on having at least one
3 "qualifying child" within the meaning of section 32 of the federal
4 Internal Revenue Code of 1986, 26 U.S.C.s.32; and
5 (b)] , if the claimant is married, except for a claimant who files as
6 a head of household or surviving spouse for federal income tax
7 purposes for the taxable year, the claimant shall file a joint return or
8 claim for the credit.
9 [(4) As used in this section, "gross income" means gross income
10 required to be reported pursuant to the "New Jersey Gross Income
11 Tax Act," N.J.S.54A:1-1 et seq., other than income excludable from
12 the gross income tax return but before reduction thereof by any
13 applicable exemptions, deductions and credits received during the
14 taxable year by the claimant individual or the claimant married
15 individuals filing a joint return. In the case of a part-year resident,
16 gross income means gross income that a part-year resident would
17 have reported if the part-year resident had been a resident for the
18 entire taxable year.]
19 b. In the case of a part-year resident claimant, the amount of the
20 credit allowed pursuant to this section shall be pro-rated, based upon
21 that proportion which the total number of months of the claimant's
22 residency in the taxable year bears to 12 in that period. For this
23 purpose, 15 days or more shall constitute a month.
24 c. The amount of the credit allowed pursuant to this section
25 shall be applied against the tax otherwise due under N.J.S.54A:-1-1
26 et seq., after all other credits and payments. If the credit exceeds the
27 amount of tax otherwise due, that amount of excess shall be an
28 overpayment for the purposes of N.J.S.54A:9-7; provided however,
29 that subsection (f) of N.J.S.54A:9-7 shall not apply. The credit
30 provided under this section as a credit against the tax otherwise due
31 and the amount of the credit treated as an overpayment shall be
32 treated as a credit towards or overpayment of gross income tax,
33 subject to all provisions of N.J.S.54A:1-1 et seq., except as may be
34 otherwise specifically provided in P.L.2000, c.80 (C.54A:4-6 et al.).
35 d. The Director of the Division of Taxation in the Department
36 of the Treasury shall have discretion to establish a program for the
37 distribution of earned income tax credits pursuant to the provisions
38 of this section.
39 e. Any earned income tax credit pursuant to this section shall
40 not be taken into account as income or receipts for purposes of
41 determining the eligibility of an individual for benefits or assistance
42 or the amount or extent of benefits or assistance under any State
43 program and, to the extent permitted by federal law, under any State
44 program financed in whole or in part with federal funds.
45 (cf: P.L.2002, c.80, s.2.)
46
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1 2. This act shall take effect immediately and apply to taxable
2 years beginning on or after January 1, 2007.
3
4
5 STATEMENT
6
7 This bill expands and enhances the benefit provided under the
8 existing State Earned Income Credit (EIC) program as proposed in
9 the Governor’s FY2008 Budget Recommendation.
10 Specifically, the bill would enable all individuals eligible to
11 receive a benefit under the federal Earned Income Tax Credit
12 (EITC) program to participate in the State EIC program. Currently,
13 individuals who are eligible for the federal program but who do not
14 have dependent children cannot participate in the State program.
15 Moreover, while the federal program phases out at an income limit
16 of $38,348 for individuals with two or more children (an amount
17 which is adjusted annually for inflation), the current State EIC has a
18 fixed eligibility threshold of $20,000, the only State program to
19 impose an income eligibility threshold below federal program limits.
20 By extending the State EIC to both individuals without dependent
21 children as well as those earning above $20,000 in income, this bill
22 has the potential to more than double the number of taxpayers
23 receiving an EIC. According to Division of Taxation data some
24 213,000 taxpayers received a State EIC benefit during Tax Year
25 2004, while 497,000 taxpayers participated in the federal EITC
26 program during the same period.
27 In addition to expanding program eligibility, the bill also
28 increases, on a phased-in basis over three years, the State benefit
29 amount to 25 percent of the federal benefit by Tax Year 2010.
30 Currently, the State EIC provides a refundable earned income tax
31 credit under the New Jersey gross income tax equal to 20 percent of
32 the federal EITC. Under this bill, the State benefit amount would
33 increase from 20 percent in FY2008 (TY 2007) to 22.5 percent in
34 FY2009 (TY2008) and finally 25 percent in FY2010 (TY2009).
35
36
37
38
39 Expands program eligibility and enhances benefit amount under
40 the New Jersey earned income tax credit program.