Gibbons Law Alert

Gibbons Law Alert

Tagged: Taxation

Governor Murphy Presents His Fiscal Year 2023 Budget

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Posted in State Government

On March 9, 2022

Governor Murphy presented his Fiscal Year (FY) 2023 Budget to a joint session of the State Legislature in a live address for the first time since February 2020. The proposed budget totals $48.9 billion – a $2.5 billion increase over the FY 2022 budget – and includes a $4.2 billion surplus, which is nearly double the surplus included in last year’s budget. The proposal does not include any new taxes or fees. In fact, the Governor’s spending plan includes a one-year fee holiday to waive fees typically assessed for driver’s license renewals, marriage licenses, state park entry, and license fee applications or renewals for roughly 130,000 professionals across the health care spectrum. The Governor themed his budget address around one word: Affordability. This became a key issue in the 2021 gubernatorial and legislative election, and is something both the Governor and legislative leaders identified as their priority for the current legislative session. The budget proposal looks to improve affordability in the State by addressing property taxes and access to housing. It appropriates $900 million for the Affordable New Jersey Communities for Homeowners and Renters (ANCHOR) Property Tax Relief Program, which proposes to provide property tax rebates to both homeowners and tenants. Additionally, the Governor’s budget allocates $300 million to the Affordable Housing Protection Fund to...

A Look at Governor Murphy’s Fiscal Year 2022 Budget Proposal

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Posted in State Legislative and Budget Matters

On February 24, 2021

Against the backdrop of the COVID-19 pandemic and an upcoming election in which the governorship and all 120 seats of the Legislature are on the line, Governor Murphy presented his Fiscal Year 2022 Proposed Budget through a virtual address. Unveiling a $44.8 billion spending plan, the Governor proposed no tax increases, a full payment to the pension system, new initiatives, and a significant surplus. Projected Revenues The Governor estimates total revenue in FY 2022 of $47.2 billion, due in large part to the FY 2021 revenues exceeding projections, which provides an opening balance for FY 2022 of $4.9 billion. The Administration also estimates a 2.4 percent growth in total revenue during FY 2022. Revenues are not based on any increases in tax rates or new taxes and do not account for any additional federal assistance to the State from a new stimulus package. Proposed Appropriations Total appropriations of $44.8 billion are $3.6 billion more than the prior fiscal year’s, an increase of 8.8 percent. The two largest expenses in the Proposed Budget are pre-K – 12 education ($18.1 billion) and the full Actuarially Determined Contribution (ADC) pension payment ($6.4 billion). These two items by themselves account for 55 percent of the State’s total spending. Other significant appropriations include: $2.6 billion to the State’s higher education...

A Look at the Nine-Month State Budget Proposed By Governor Murphy

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Posted in State Legislative and Budget Matters

On August 27, 2020

Governor Murphy presented a nine-month budget on August 25, 2020, for the abbreviated State Fiscal Year starting October 1, 2020. Relying on a mix of borrowing, tax increase, and budget cuts, the Governor’s proposal for the nine-month fiscal year proposes $32.4 billion in spending, with a proposed budget surplus of $2.2 billion. Coupled with the temporary three-month budget effective July 1 to September 30, 2020, total spending over the twelve-month period would total slightly more than $40 billion. The Governor’s Budget Proposal estimates that roughly $6.2 billion of funding is required to offset anticipated lost revenues from COVID-19. To make up for that shortfall, the Governor is proposing to borrow $4.0 billion as authorized by the “COVID-19 Emergency Bond Act.” The New Jersey Supreme Court recently upheld the Act as constitutionally permissible under the Emergency Exception of the Debt Limitation Clause. An additional $1.0 billion in tax increases and $1.2 billion in programmatic cuts are also proposed. The two main tax increases proposed include a tax of 10.75 percent on income over $1.0 million and an extension of the Corporate Business Tax surcharge of 2.5 percent. The Budget Proposal does maintain some programmatic spending at levels equal to that of the prior fiscal year and proposes new spending. For example, there are no cuts to...

Governor Murphy Proposes the Fiscal Year 2021 Budget

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Posted in State Legislative and Budget Matters

On February 26, 2020

Governor Phil Murphy presented the outline of his spending plan for Fiscal Year (FY) 2021 to the State Legislature on February 25, 2020. The FY 2021 Budget proposes total revenues exceeding $42.7 billion (a 4.3 percent increase from FY 2020), and $40.8 billion in total appropriations (a 2.2 percent increase from FY 2020). An additional $1.6 billion is dedicated for surplus and $300 million is directed into the State’s “rainy day” fund. If enacted as proposed, this would be the largest budget in New Jersey history. One of the biggest expenses is the annual payment to the State’s pension system; a proposed total of $4.9 billion for FY 2021. If funded at this level by the Legislature, the contribution to state pension system would consume 12 percent of all state appropriations. This contribution is still only about 80 percent of what is actuarially required. Additional priorities for the Governor include increases to the state education funding formula by $336 million; another $132 million for NJ Transit; creating the Garden State Guarantee to provide two years of tuition free higher education; funding for lead service line replacements; and expanding eligibility for the Earned Income Tax Credit Program and the Pharmaceutical Assistance for the Aged and Disabled and Senior Gold programs. The Governor proposes to pay for...

Here for the Holidays – New Jersey’s Tax Amnesty Program

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Posted in Regulatory Counseling and Departmental Action

On December 10, 2018

As a welcome end-of-year present for those with overdue taxes, New Jersey recently launched its tax amnesty program, which began on November 15, 2018 and will end on January 15, 2019. Tax amnesty is available only for State tax liabilities for tax returns due on or after February 1, 2009, and before September 1, 2017. The program offers a waiver of some penalties, Referral Cost Recovery Fees, or cost of collection fees and one-half of the balance of the interest that remains due as of November 1, 2018. My Gibbons colleagues, Peter J. Ulrich and Todd M. Kellert, wrote an article on the Tax Amnesty Program, which you can find here. If you have any questions, please contact us since the program is quickly coming to a close.

Governor Murphy Delivers Fiscal Year 2019 Budget Address

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Posted in State Legislative and Budget Matters

On March 14, 2018

Governor Phil Murphy delivered his first budget address to the New Jersey State Legislature on Tuesday, March 13th. The Governor’s proposed Fiscal Year (FY) 2019 Budget totals $37.4 billion, which is a $2.7 billion increase from the $34.7 billion spending plan enacted in Fiscal Year 2018. The Governor stated that the proposed FY 2019 Budget is “realistic and responsible,” affirms New Jersey’s values, and will begin the process of returning New Jersey to being a “good value for good money.” To accomplish this, Governor Murphy is proposing to: Increase public school spending by $341 million in FY 2019 with the goal of reaching full funding in four years; Invest an additional $83 million in pre-K this year and start a four-year expansion of a statewide program; Make community college tuition free for all in three years by investing an additional $50 million this fiscal year; Add 3,500 new Tuition Aid Grant awards; Triple funding for New Jersey Transit with an additional $242 million in investment; Increase the Earned Income Tax Credit from 35 percent to 40 percent over three years; Provide $3.2 billion in payments to the state pension system; Increase the minimum wage to $11 per hour for state employees; Raise the state property tax deduction to $15,000; and Create a new Child and...

Key Business Provisions in the Tax Reform Law

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Posted in Federal Legislation

On December 29, 2017

On December 22, 2017, President Donald Trump signed into law H.R. 1 (the “Tax Act”), that enacted sweeping changes to the United States tax code. Below are some of the key sections of the Tax Act impacting businesses. These provisions are effective January 1, 2018, unless otherwise noted. Corporate Tax Rate and Alternative Minimum Tax (“AMT”) Currently, corporations are taxed at rates that range up to 35% and are additionally subject to the AMT. Corporations do not benefit from lower long-term capital gain rates. The Tax Act lowers the corporate tax rate to a flat 21% and eliminates the corporate AMT, both effective beginning in 2018 and on a permanent basis. In connection with the corporate rate cut, the Section 199 domestic manufacturing deduction is repealed going forward. The dividends received deduction is reduced from 80% to 65% and 70% to 50%, depending on ownership percentage. Increased Cost Recovery (Bonus Depreciation) Currently, taxpayers can immediately write off 50% of the cost of “qualified property” (generally, tangible personal property with a recovery period of 20 years or less). This ratio drops to 40% in 2018, 30% in 2019, and phases out after that. The Tax Act initially allows full current expensing for property placed in service after September 27, 2017, reducing the percentage that may be...

Federal Tax Reform and the Potential Repeal of the Cash Method of Accounting

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Posted in Federal Legislation

On May 26, 2017

In the wake of the introduction by President Trump of his Tax Reform proposal on April 26, 2017, Congress, especially the U.S. House of Representatives Committee on Ways and Means, will be considering various methods to fund tax rate reductions. The White House formally delivered the President’s proposed budget to Congress on May 23, 2017. One proposal likely to be under consideration is the repeal of the cash method of tax accounting for service businesses, though many experts dispute whether many of the budget’s finer details will ever pass both houses of Congress. Under current law, the cash method of accounting cannot be used for income tax purposes by (i) businesses that sell goods and therefore must keep inventories, and (ii) C corporations with average annual gross receipts of $5,000,000 or more. A taxpayer-favorable exception from the C corporation rule is available for qualified personal service corporations, consisting of personal service corporations (PSCs) in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting, when at least 95% of the stock of such PSCs is owned directly or indirectly by employees performing services in one of such fields. To oversimplify things, this means that law firms pay federal tax based on actual cash receipts, not based upon billings or upon what...

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