Bill > S1900

Introduced Session

This bill directs the Division of Taxation to produce instructional materials on the appropriate gross income tax treatment of 457 deferred compensation plans. The purpose of the bill is to make the appropriate income tax treatment, particularly the exclusion upon distribution, more readily apparent to taxpayers. Under current law, state governments, local governments, and certain tax exempt organizations are allowed to establish deferred compensation plans for employees. For federal income tax purposes, the contributions and earnings on those plans defer taxation until distribution. Though New Jersey does not track the federal deferral on contributions, it does exclude from tax the portion of plan proceeds representing previously taxed contributions upon distribution. Depending on the composition of contributions to the plan, the portion of a distribution that is excludable for New Jersey gross income tax purposes can vary. Though New Jersey's current gross income tax return instructions address these issues, that guidance is not explicitly detailed to 457 plans. To make the process of claiming the exclusion less onerous for taxpayers, this bill directs the Division of Taxation to include specific instructions in the gross income tax return instructional materials that address the appropriate treatment of 457 plan contributions and distributions.

AI Summary

Committee Categories

Jim Whelan (D)*, 

Introduced in the Senate, Referred to Senate Budget and Appropriations Committee (on 03/10/2016)