State Tax Law Changes - New Jersey and New York

Both the states of New Jersey and New York have made tax law changes that affect businesses and individuals. The following is a summary of some of the pertinent, recently enacted changes.

New Jersey

The major provisions of the New Jersey budget signed by Governor Corzine on June 29, 2009 include:

Increased gross/personal income tax rate for high income individuals

Applies to the 2009 year retroactive to 1/1/09
Taxable income greater than $400,000 - 8%
Taxable income greater than $500,000 - 10.25%
Taxable income greater than $1,000,000 - 10.75%
No penalties for underpayment of tax estimates or insufficient withholding based on rate increases for compensation earned before 10/1/09

Real Property Tax Deduction Limitation applicable to tax years beginning 1/1/2009

$10,000 real property tax deduction has generally been reduced or eliminated for taxpayers with income greater than $150,000

Property Tax Rebates limited for certain taxpayers for 2009

Income over $75,000 and not a senior citizen or disabled-rebate eliminated
Senior citizens and disabled individuals with income over $150,000-eliminated
2/3 of last year’s rebate-income between $50,000 and $75,000
Same rebate as last year - earnings of less than $50,000

Corporation Business Tax Changes (CBT)

4% surcharge extended to years ended before 7/1/2010
Recent federal legislation has provided for a deferral of debt relief income in certain circumstances. New Jersey will not follow the federal rule

New York
Metropolitan Commuter Transportation Mobility Tax (MCTMT)

New York enacted a new payroll tax to fund the MTA imposed on employers and self-employed individuals engaging in business within the Metropolitan Commuter Transportation District (MCTD).

MCTD includes:

New York City (Manhattan, Bronx, Brooklyn, Queens and Staten Island)
The counties of Rockland, Nassau, Suffolk, Putnam, Dutchess and Westchester

Tax Applies to:

Employers required to withhold NYS income tax from wages for employees employed within the MCTD
Individuals with net earnings from self-employment allocated to the MCTD, including partners in partnerships and members of LLCs taxed as partnerships

Tax Rate:

Employers pay: .34% of employer’s payroll expense for employees employed within the MCTD. This tax is not withheld from employee wages and cannot be deducted from employee’s compensation
Individuals pay: .34% of net earnings from self-employment allocated to the MCTD

Exclusions:

Employers whose payroll expense does not exceed $2,500 in a calendar quarter
Individuals with net earnings from self-employment allocated to MCTD of $10,000 or less for the tax year

Payment by Employers:

Initial payment PrompTax filers: Same date as 1st withholding due on or after 10/31/2009. The tax is retroactive covering the period beginning 3/1/2009
Initial payment for other filers: 11/2/09 for period 3/1/2009 - 9/30/2009
Subsequent payments are due quarterly by the last day of the month following the quarter (October 1-December 31st due January 31)
No tax credits may be used to reduce the amount of this tax

Payment by Individuals:

Initial payment due 11/2/2009 calculated based on 10/12ths of net earnings from self-employment tax allocated to the MCTD for the 2009 calendar year
As an alternative to each partner making estimated payments and filings, group returns and group estimated payments will be an option for certain partnerships

We will continue to keep you updated as additional information becomes available from the New York State Department of Taxation and Finance.

For more information, please contact Peggy Tilles, JD, LLM at ptilles@smf-cpa.com.