New Jersey Proposal May Significantly Reduce the Value of IEEPA Tariff Refunds

Manufacturers, distributors, and importers have spent considerable time preparing for potential refunds of tariffs imposed under the International Emergency Economic Powers Act (IEEPA) following the US Supreme Court's decision to invalidate certain tariffs. A newly introduced New Jersey bill would add a state tax on those tariff refunds, altering their economics for entities subject to the New Jersey Corporation Business Tax.

Key Takeaways

• New Jersey Assembly Bill 5227, introduced June 8, 2026, would impose a 90% surtax on certain IEEPA tariff refunds received by taxpayers subject to the New Jersey Corporation Business Tax.
• The surtax would apply to a taxpayer's apportioned tariff refund and would exclude refunds received before the bill's effective date.
• A company that passed tariff costs to customers could return those amounts and still owe state tax on the recovery, creating a cash flow mismatch.
• The bill directs surtax revenue to a proposed New Jersey Consumer Tariff Relief Fund and limits the tax credits available to offset the surtax.
• As of July 2026, Assembly Bill 5227 remains in the Assembly Consumer Affairs Committee and has not been enacted.
• Other states may pursue similar measures, so multistate importers should weigh state tax on tariff refunds before committing refund proceeds.

What Would Assembly Bill 5227 Do

As currently drafted, Assembly Bill 5227 would apply to certain tariff refunds that the US Customs and Border Protection issued related to tariffs imposed under specific IEEPA authorities that a court order later invalidated. The bill would impose a surtax equal to 90% of the taxpayer's apportioned tariff refund they would receive during a taxable period.

The bill remains in the Assembly Consumer Affairs Committee and has not been enacted.

Why This Matters to Manufacturers and Distributors

A critical issue many importers are now evaluating is who ultimately benefits from a tariff refund? Many organizations absorbed tariffs, partially passed them through, or separately billed customers for tariff-related costs. Documentation of those arrangements may vary by contract, customer arrangement, industry practice, and how tariff costs were invoiced. Refund allocation discussions will likely arise throughout supply chains because refunds generally flow back to the importer of record, even though multiple parties may have borne the tariff costs. The New Jersey proposal introduces another layer of complexity.

Consider a hypothetical scenario. An importer receives a $10 million IEEPA tariff refund. The business determines that contractual obligations or customer-relationship considerations require it to return a substantial portion of the refund to customers. If Assembly Bill 5227 is enacted in its current form, New Jersey would potentially assess a surtax based on the taxpayer's apportioned refund amount.

While the actual tax impact would depend on numerous factors, including New Jersey apportionment and entity structure, the proposal demonstrates how entities could face competing claims on refund proceeds from customers, suppliers, lenders, and taxing authorities.

For CFOs and treasury teams, this becomes as much a liquidity planning issue as a tax issue.

Strategic Implications for Customer Refund Discussions

For those manufacturing and distribution companies that have not yet finalized their position regarding recovery sharing with customers, management teams may wish to consider the following before making any commitments:

1. State Tax Exposure May Not Yet Be Fully Known

The New Jersey proposal highlights the possibility that states could seek revenue from tariff refunds. Entities evaluating customer refund requests should consider whether additional tax liabilities could arise after they receive refunds.

2. Cash Flow Timing Matters

A business could face pressure to immediately distribute refund proceeds, while state tax obligations, reporting requirements, or tax assessments may emerge after. This mismatch could create working capital strain.

3. Contract Language Becomes Increasingly Important

Organizations should carefully review customer agreements to determine:

• Whether tariff amounts were separately identified.
• Whether contractual refund obligations exist.
• Whether pricing changes were characterized as tariff surcharges or broader price increases.
• Whether any future tax liabilities are contemplated under existing agreements.

4. Documentation Will Be Critical

The bill authorizes the New Jersey Division of Taxation to request documentation supporting paid tariffs and received refunds, so organizations should maintain detailed records supporting both refund claims and subsequent allocations of refund proceeds.

Could Other States Follow?

New Jersey is not the first state to explore ways to capture a portion of the economic benefits associated with tariff-related recoveries and related trade policy developments. While the specific mechanisms differ, other state legislatures across the country could examine whether extraordinary federal policy outcomes, including significant corporate recoveries or windfalls, present opportunities to generate revenue or fund consumer-relief initiatives.

Organizations should therefore see Assembly Bill 5227 as more than simply a New Jersey issue, but as part of a possible signal of broader state-level interest in the downstream fiscal implications of federal trade and economic policies. As large tariff refunds begin flowing back to importers, multistate taxpayers should monitor whether other jurisdictions introduce similar tax, surcharge, reporting, or revenue-recapture measures.

For manufacturers, distributors, and importers operating in multiple states, this raises an important planning consideration. Entities should not assume that the federal tariff refund amount they ultimately receive will represent the final economic benefit the organization will retain. State tax authorities and policymakers may continue to evaluate ways to participate in those recoveries, creating additional uncertainty regarding the after-tax value of refund claims.

Accordingly, organizations should monitor legislative developments not only in New Jersey but across all jurisdictions in which they operate. A combination of federal, state, contractual, and customer-related considerations affects the ultimate value of a tariff refund, making a thorough, multistate analysis increasingly important before an organization distributes or commits refund proceeds.

What You Should Be Doing Now

Manufacturers, distributors, importers, and finance leaders should consider:

• Quantifying anticipated IEEPA tariff refunds.
• Evaluating potential state and local tax implications on tariffs before committing refund proceeds.
• Reviewing customer contracts and tariff pass-through arrangements.
• Modeling multiple cash flow scenarios that incorporate potential state tax liabilities.
• Coordinating among tax, legal, trade compliance, finance, and treasury functions before distributing recovered amounts.
• Monitoring legislative developments in New Jersey and other states.

Bottom Line

Assembly Bill 5227 is only a proposed bill and faces a lengthy legislative process before becoming law. Nevertheless, the proposal is a reminder that organizations should not view tariff refunds solely through a customs or trade lens. They may also create significant state tax, liquidity, contractual, and strategic considerations.

As organizations begin receiving or planning for IEEPA tariff recoveries, management teams should make sure that customer reimbursement decisions, cash flow forecasts, and state tax analyses are aligned. A refund that appears straightforward at the federal level could become considerably more complex once you consider state tax implications and downstream contractual obligations.

EisnerAmper's Manufacturing & Distribution team continues to monitor developments involving tariff refunds, state tax implications, financial reporting considerations, and supply chain impacts. Contact us below if you have any questions about how the proposal may impact your organization.

This article was prepared with AI assistance and edited and enhanced by EisnerAmper professionals for accuracy and completeness. All technical content, analysis, and recommendations reflect the knowledge of our team.