New Jersey Tax Amnesty Bill
2009 Amnesty Bill Description
Senate Bill No. 2678 (1R) of 2009 requires the Director of the Division of Taxation to establish a 45-day State tax amnesty period, to end no later than June 15, 2009. The amnesty shall apply only to State tax liabilities for tax returns due on and after January 1, 2002 (the day following termination of the most recent amnesty period) and before February 1, 2009. During the amnesty period, a taxpayer who has failed to pay a State tax can pay the tax and one-half of the balance of interest due without the imposition of recovery fees, civil penalties and criminal penalties arising out of the late payment. The amnesty is not available to a taxpayer who, at the time of payment, is under criminal investigation or charge for any State tax matter.
If a taxpayer eligible for the amnesty fails during the amnesty period to pay taxes owed and one-half of the balance of interest due, that taxpayer shall be subject to a five percent penalty which may not be waived or abated. The five percent penalty shall be in addition to all other penalties, interest, or collection costs otherwise authorized by law.
The legislation requires the express approval of the Director before accepting amnesty payments for taxpayers that have received assessments that are the subject of administrative review (e.g., before the Conference and Appeals Branch) or judicial appeal as of March 17, 2009.
NJ Division of Taxation Tax Amnesty Rules (pending)
Estimated Revenue Impact
The Office of Legislative Services ("OLS") believes the Treasurer's estimate that the tax amnesty program would raise $100 million in FY 2009 is not unreasonable, but notes that data are lacking for a confident forecast. The OLS has no independent data on how much outstanding individual or corporate taxpayer liabilities remain delinquent, and has received no supporting data for the Treasurer's estimate. Previous amnesties have exceeded the initial revenue estimate.
As with any tax amnesty program, the net revenue impact will be determined by the balance between new tax revenues that are attracted through the amnesty offer and the revenue losses resulting from the forgiveness of interest and penalties owed by taxpayers who would otherwise have made full payment through the State's current tax compliance efforts, either during the amnesty payment period or at a later date. In addition, an amnesty may generate new recurring revenues to the extent that certain taxpayers are added to the taxpayer rolls.
Past Experiences with Amnesty Programs
Past experiences with amnesty programs have yielded a wide range of revenue collections. New Jersey's 1987 tax amnesty generated $187 million in gross revenue, yielding $68 million in additional net revenues that would otherwise not have been collected. The 1996 amnesty program was originally estimated to bring in $70 million, actually generated $359 million in gross revenue, or a net State increase of $244 million, after accounting for about $115 million which the Department of the Treasury estimated would have been collected by tax compliance efforts under normal circumstances. The 2002 amnesty program was initially estimated to bring in $150 million, but generated a gross increase in State revenues of $277 million, although no estimate of the net impact was made.
Most of the previous amnesty receipts came from the State's three largest tax revenues: the gross income tax, the sales tax, and the corporation business tax. In the 1996 program, 27 percent of collections came through the income tax, 39 percent through the sales tax, and another 27 percent through the corporation business tax. In the 2002 program, 29 percent of collections came through the income tax, 29 percent through the sales tax, and another 34 percent through the corporation business tax.