Senate Commerce Committee Statement to Senate, No. 891 — State of New Jersey (February 10, 2022)

Summary

The Senate Commerce Committee of the State of New Jersey, in a statement dated February 10, 2022, reports favorably and with committee amendments Senate Bill No. 891 on tax preparer practices involving refund anticipation checks and loans. The statement says many preparers offer such loans and checks, particularly to low-income residents, at exorbitant interest rates. Preparers could not require a refund anticipation check agreement to complete a return, or advertise the services as "free" or "no fee" when they lead to higher fees for other services. Preparers must itemize all charges, fees and interest, and violators would be subject to the Consumer Fraud Act. The bill applies to filings prepared in 2023 for calendar year 2022.

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SENATE COMMERCE COMMITTEE

STATEMENT TO

SENATE, No.
891

with
committee amendments

STATE
OF NEW JERSEY

DATED: FEBRUARY
10, 2022

The Senate Commerce Committee reports favorably and
with committee amendments Senate Bill No. 891.

As
amended, this bill prohibits tax preparers from engaging in certain practices
involving refund anticipation checks and loans.

An
income tax refund is the largest lump-sum payment that many residents in the
State receive in a given year, and many tax preparers take advantage of this
fact by offering residents—particularly low-income residents—refund
anticipation loans and checks at exorbitant interest rates or with other
exploitative practices. Under this bill, tax preparers will be prohibited from
requiring clients to enter into a refund anticipation check agreement in order
to complete a tax return. Tax preparers will also be prohibited from providing,
offering, or advertising refund anticipation loan or check services using terms
such as “free,” “no cost,” “no fee,” or other language that would lead a client
to reasonably believe that the refund anticipation loan or check is provided at
no cost to the client if the issuance of a refund anticipation loan or check
results in, or is predicated upon, the assessment of higher or additional fees
for other tax preparation or other services than are charged to clients who do
not receive refund anticipation loan or check services.

Additionally,
tax preparers will be required to provide an itemized statement of all service
charges and fees for tax return preparation, electronic filing of a tax return,
providing or facilitating a refund anticipation loan or refund anticipation
check and any interest charged, including the estimated amount of interest in
the event a refund is delayed, under the terms and conditions of a refund
anticipation loan; and any amounts to be paid to the tax preparer in the event
a refund is delayed, under the terms and conditions of a refund anticipation
check. Tax preparers who violate any of the provisions of this bill will be
subject to the Consumer Fraud Act. As used in this bill, “refund anticipation
check” means a check, stored value card, or other payment mechanism
representing the actual or anticipated proceeds of the client’s federal or
State income tax refund which was issued by a depository institution, tax
preparer, or other person that received or anticipates receipt of a direct
deposit of the client’s federal or State income tax refund and for which the
client has paid a fee or other consideration for such payment mechanism.

Lastly,
the effective date of the bill is immediate and its application to begin with
tax filings prepared in 2023 for calendar year 2022.

COMMITTEE AMENDMENTS:

The committee amended the bill to:

(1) add a subsequent reference to “fees” in the
provision on what itemized statements are to include;

(2) stipulate that an itemized statement is to
include any amounts paid to the tax preparer in the event a refund is delayed,
under the terms and conditions of a refund anticipation check; and

(3) clarify that the application of the bill is to
begin with tax filings prepared in 2023 for calendar year 2022.

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