Bill
S 4106
Excludes certain retirement plan contributions, withdrawals, and rollovers from New Jersey gross income, reducing taxable income for eligible retirement activities.
Excludes certain retirement savings plan contributions, withdrawals, and rollovers from gross income tax
S 4106 aims to modify the New Jersey gross income tax treatment of specific activities related to retirement savings plans. By excluding certain contributions, withdrawals, and rollovers from gross income, the bill seeks to provide tax relief or favorable tax treatment for individuals relying on retirement savings accounts.
Contribution Exclusion:
The bill proposes that certain contributions to retirement savings plans would be excluded from gross income for tax purposes. This would reduce the immediate taxable income of taxpayers making eligible contributions.
Withdrawal Exclusion:
Qualified withdrawals from retirement savings plans would be excluded from gross income. This means distributions typically subject to income tax would be exempt or not fully taxable, depending on the statute’s final language.
Rollover Exclusion:
Rollovers between retirement accounts (e.g., moving funds from one qualified plan to another) would be excluded from gross income. This excludes the rollover amounts from taxable income when the transfer occurs, consistent with how rollovers are treated in many jurisdictions to avoid tax penalties or double taxation.
Scope of Plans Covered:
While the text provided does not list every plan type, the bill generally covers retirement savings vehicles such as 401(k)-style plans, IRAs, and other qualified retirement accounts, and it specifies that certain contributions, withdrawals, and rollovers in these plans are treated as excluded from gross income.
Tax Year and Administration:
The bill delineates how these exclusions interact with New Jersey’s gross income tax calculations and would be administered by the Division of Taxation. Details on specific forms, reporting requirements, or interaction with other deductions/credits would be provided in the bill’s full language.
Taxpayers with Retirement Savings Accounts:
Individuals making eligible retirement plan contributions, taking qualified withdrawals, or performing rollovers would be directly affected by the exclusion from gross income.
New Jersey Taxpayers (General Population):
All residents who itemize or compute gross income for state tax purposes could see changes in taxable income based on their retirement activities.
State Revenue System:
The New Jersey Division of Taxation would implement the administrative changes, including any guidance, forms, and enforcement implications.
Introduction and Referral:
Introduced in the New Jersey Senate (Session 222) and referred to the Senate Budget and Appropriations Committee.
Sponsor:
Co-sponsored by Senator Tony Bucco (as listed).
Next Steps (Potential):
If advanced, the bill would typically proceed through committee hearings, potential amendments, and then floor votes in the Senate and Assembly before reaching the governor. The exact timeline would depend on committee action and legislative priorities.
Tax Revenue:
Excluding contributions, withdrawals, and rollovers from gross income could reduce state income tax revenue in the near term, depending on how broadly the exclusions apply and taxpayer behavior.
Tax Fairness and Administration:
The change aligns New Jersey with common tax treatment of retirement savings in many jurisdictions, potentially simplifying certain aspects of retirement income planning for residents.
Policy Implications:
The bill’s impact on pension planning, retirement readiness, and state tax competitiveness could be significant, subject to the final text’s exact definitions, limits, and any sunset or phase-in provisions.
Note: This summary reflects the information available from the bill’s introductory materials and standard legislative practice. The precise definitions, eligibility criteria, limitations, phase-ins, and interaction with existing deductions or credits will be determined by the full text of the bill and any amendments adopted during the legislative process.
Compiled from official sources — confirm details with the bill’s official record.
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