Committee Statement - Assembly No. 5371, Employer Payroll Tax Information (New Jersey Assembly)

Summary

A committee statement to the New Jersey Assembly, No. 5371, from the Assembly Commerce, Economic Development and Agriculture Committee, reporting Assembly Bill No. 5371 favorably and with committee amendments. As amended, the bill amends the local payroll tax law to require certain employers to provide additional information requested by the municipality collecting the tax, and lets a municipality elect to retain up to three percent of employer payroll tax collected annually to pay administration costs. It also requires the Director of the Division of Taxation to furnish wage and tax withholding information to a designated municipal officer on request. The statement says the bill is identical to Senate Bill No. 4219 (2R).

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ASSEMBLY COMMERCE, ECONOMIC DEVELOPMENT AND
           AGRICULTURE COMMITTEE

                           STATEMENT TO

                      ASSEMBLY, No. 5371
                          with committee amendments



       STATE OF NEW JERSEY
                           DATED: JANUARY 5, 2025

          The Assembly Commerce, Economic Development and
      Agriculture Committee reports favorably and with committee
      amendments Assembly Bill No. 5371.
          As amended by the committee, this bill amends the local payroll
      tax law to require certain employers, which employ persons within any
      municipality that imposes a local payroll tax, to provide additional
      information to assist in the administration of the local tax, as requested
      by the municipality collecting the tax. The bill further provides that if
      an out-of-State municipality, or other out-of-State entity, imposes an
      employer payroll tax on a New Jersey resident employee, an employer
      payroll tax imposed pursuant to section 15 of P.L.1970, c.326
      (C.40:48C-15) would not apply to that employee. Finally, the bill
      provides that a municipality may elect to retain up to three percent of
      employer payroll tax collected annually to pay for the costs related to
      administering an employer payroll tax.
          The bill also expands the scope of State tax return information that
      may be disclosed by the State to a municipality that administers an
      employer payroll tax and requires that this tax return information be
      disclosed to certain municipal officials upon request. Specifically, the
      bill provides that the Director of the Division of Taxation in the
      Department of the Treasury is to, upon request by a designated
      municipal officer of a municipality authorized to impose an employer
      payroll tax, furnish wage and tax withholding information, or such
      other State tax return information as may be necessary, for the two
      following purposes: (1) verifying the payroll information reported by
      employers subject to the employer payroll tax; and (2) identifying each
      employer operating within the municipality that is subject to the
      employer payroll tax, and which did not report payroll information for
      a preceding calendar quarter.         This would enable an eligible
      municipality to certify that information in the municipality’s employer
      database is consistent with the information employers submit to the
      Division of Taxation.
          The bill also removes a provision of current law that provides that
      this disclosure of information would be subject to the discretion of the
                                   2

Director of the Division of Taxation. Concerning the disclosure of
State tax return information to municipalities that administer an
employer payroll tax pursuant to the “Local Tax Authorization Act,”
P.L.1970, c.326 (C.40:48C-1 et seq.), under the “Local Tax
Authorization Act,” a municipality with a population in excess of
200,000 residents is authorized to enact an ordinance imposing an
employer payroll tax on certain employers operating within the
municipality. Currently, only the cities of Newark and Jersey City
have populations in excess of 200,000 residents and both have adopted
an ordinance to impose an employer payroll tax. A municipality that
imposes an employer payroll tax pursuant to the “Local Tax
Authorization Act” is permitted to tax, at a rate of up to one percent,
an amount equal to the total remuneration paid by employers to
employees for certain services if those services are performed within
the municipality or those services are performed outside the
municipality and the place from which the services are supervised is
within the municipality.
    Under current law, the Director of the Division of Taxation in the
Department of the Treasury is generally prohibited from disclosing
State tax return information, except as otherwise permitted in statute.
Currently, the director, at their discretion, is authorized to furnish
certain State tax return information to a municipality authorized to
impose an employer payroll tax under the “Local Tax Authorization
Act.” This disclosure of information is limited to employer-provided
wage and tax withholding information contained in tax reports or
returns filed under the New Jersey gross income tax, and the
municipality may only use this information to verify the payroll
information reported by employers subject to the employer payroll tax
to an eligible municipality.
    As amended and reported by the committee, Assembly Bill No.
5371 is identical to Senate Bill No. 4219 (2R), as that bill was also
amended and reported by the committee on this date.

COMMITTEE AMENDMENTS:
    The committee amendments to the bill:
    1) provide that a qualifying municipality may elect to retain up to
three percent of employer payroll tax collected annually to pay for the
costs related to administering an employer payroll tax;
    2) require that certain State tax return information be disclosed to
a designated municipal officer of a municipality authorized to impose
an employer payroll tax upon request;
    3)     provide that the manner of certain submissions of
documentation is to be prescribed by the municipality imposing the
employer payroll tax rather than the Division of Local Government
Services in the Department of Community Affairs; and
    4) make technical changes.


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