New Jersey: Legislation Imposing Millionaire Tax and Extending Corporate Surcharge Enacted

On September 29, 2020, New Jersey Governor Phil Murphy signed two bills into law that increase taxes on certain individuals and corporations. Under Assembly Bill 10, the personal income tax rate is increased from 8.97 percent to 10.75 percent for persons with income over $1 million.  Individuals with income over $5 million were already subject to a 10.75 percent rate on such income. This so-called millionaire’s tax, effective retroactively to tax years beginning on or after January 1, 2020, is expected to generate about $390 million in 2021. Additionally, beginning with the 2020 tax year, New Jersey will provide a tax rebate of up to $500 for certain qualified taxpayers with at least one dependent child.

Also effective retroactively to January 1, 2020, Assembly Bill 4721 extends the Corporation Business Tax (CBT) surtax. As such, CBT taxpayers, except public utilities, having allocated taxable New Jersey net income in excess of $1 million are subject to an additional 2.5 percent rate of tax for the privilege periods beginning on or after January 1, 2018 through December 31, 2023 (unless the federal corporate income tax rate is increased to at least 35 percent). Before this extension, the surtax was imposed at a 2.5 percent rate for tax years beginning on after January 1, 2018 through December 31, 2019 and was then reduced to 1.5 percent for tax years on or after January 1, 2020 through December 31, 2021. For more information on these rate changes, please contact Jim Venere at 973-912-6349.