Assembly Commerce, Economic Development and Agriculture Committee Statement to Assembly, No. 5371 (2025)

Summary

An Assembly Commerce, Economic Development and Agriculture Committee statement to Assembly, No. 5371, State of New Jersey, reporting the bill favorably with committee amendments. The bill amends the local payroll tax law so that employers in a municipality imposing a local payroll tax provide additional information on request, and so that the employer payroll tax does not apply to a New Jersey resident employee already taxed by an out-of-State municipality or entity. A municipality could retain up to three percent of employer payroll tax collected annually for administration costs. The statement says only Newark and Jersey City have populations in excess of 200,000 residents and both impose the tax, at a rate of up to one percent.

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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 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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