Bill > A4473

Introduced Session

This bill would eliminate a conflict between two fraud exceptions contained in current State law governing the statute of limitations for tax assessments under the "New Jersey Gross Income Tax Act." Under current law, the Division of Taxation ("division") in the Department of the Treasury is required to assess additional taxes within three years after a taxpayer has filed a tax return. However, this three-year statute of limitations does not apply in certain cases, including when a taxpayer has filed a false or fraudulent return. In other words, the division may issue an assessment at any time if a taxpayer files a false or fraudulent return with the intent to evade tax. Current law also authorizes the division to issue an assessment for a deficiency arising out of an erroneous refund within three years from the issuance of the refund. This statute of limitations is extended to five years in cases in which any part of the refund was induced by fraud or misrepresentation of a material fact. The statute, however, does not explicitly define "fraud" or "misrepresentation of a material fact," which has led to questions concerning whether the statute treats fraud as having a standard that is different from misrepresentation of a material fact. This bill seeks to eliminate the disparity in treatment between when: 1) a taxpayer files a false or fraudulent return, in which case the division may assess additional taxes at any time; and 2) a fraudulent return yields a refund to a taxpayer, in which case the division may assess additional taxes within five years from the issuance of the refund. Specifically, the bill would eliminate the five-year statute of limitations on assessments for erroneous refunds that are induced by fraud. With this change, the bill provides that the division may assess additional taxes at any time if it appears that any part of an erroneous refund was induced by the filing of a false or fraudulent return with intent to evade tax. This change would eliminate the current conflict between the two fraud exceptions and specifies that the filing of a false or fraudulent return would not include a taxpayer's inadvertence, reliance on incorrect technical advice, honest difference of opinion, negligence, or carelessness. The bill eliminates the use of the term "misrepresentation of a material fact." Finally, the bill's provisions would take effect immediately and would apply retroactively to assessments of deficiencies arising out of erroneous refunds that were made within the five years preceding the date of enactment of the bill.

AI Summary

Committee Categories

Dan Hutchison (D)*,  Sterley Stanley (D)*,  Barbara McCann Stamato (D),  Shanique Speight (D), 

Received in the Senate, Referred to Senate State Government, Wagering, Tourism & Historic Preservation Committee (on 09/30/2024)

Official Document