S2523

An Act allowing a child tax credit under the gross income tax, supplementing Title 54A of the New Jersey Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. a. There is established the New Jersey Child Tax Credit program in the Division of Taxation in the Department of the Treasury.

b. A taxpayer with New Jersey taxable income of $80,000 or less shall be allowed a credit against the tax otherwise due pursuant to the “New Jersey Gross Income Tax Act,” N.J.S.54A:1-1 et seq. for each child who has not attained the age of six years as of the close of the taxable year and for which the taxpayer is allowed a deduction under N.J.S.54A:3-1. For a taxpayer with New Jersey taxable income of $30,000 or less, the credit amount shall be $500 for each child. For a taxpayer with New Jersey taxable income of more than $30,000 but less than $80,000 the credit amount shall be $500 reduced by $10 for every $1,000 of income that the taxpayer’s taxable income exceeds $30,000. The income limit set forth in this section shall apply to taxpayers of any filing status.

c. A taxpayer shall be allowed the credit pursuant to this section whether the taxpayer uses a Social Security number or an Individual Taxpayer Identification Number on their tax forms.

d. If the amount of the credit allowed pursuant to this section exceeds the amount of tax otherwise due pursuant to the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., after all other credits and deductions, the amount of excess shall be treated as a refundable overpayment.

e. To qualify for the credit allowed pursuant to this section, a taxpayer shall file a joint return if the taxpayer is married, except for a taxpayer who files as a head of household or surviving spouse for federal income tax purposes for the taxable year.

f. In the case of a part-year resident, the amount of the credit allowed pursuant to this section shall be pro-rated, based upon that proportion which the total number of months of the taxpayer’s residency in the taxable year bears to 12 in that period. For this purpose, 15 days or more shall constitute a month.

g. Any tax credit pursuant to this section shall not be taken into account as income for purposes of determining the eligibility of an individual for benefits or assistance or the amount or extent of benefits or assistance under any State program and, to the extent permitted by federal law, under any State program financed in whole or in part with federal funds.

h. The Division of Taxation shall issue data as part of the annual tax expenditure report, as required by section 1 of P.L.2009, c.189 (C.52:27B-20a) to include the number of taxpayers claiming the New Jersey Child Tax Credit, as well as claimants’ income, the number of children benefitting, and the average credit amount per child and per claimant.

2. This act shall take effect immediately and shall apply retroactively to taxable years ending on and after the effective date.

STATEMENT

This bill establishes the New Jersey Child Tax Credit program allowing a gross income tax credit for each child of the taxpayer under the age of six years.

The credit amount will be $500 per child of the taxpayer if the taxpayer’s income is $30,000 or less. The $500 amount will be reduced by $10 for every $1,000 of income that the taxpayer’s taxable income exceeds $30,000 until the taxpayer’s income reaches $80,000. A taxpayer will be allowed to claim the credit whether the taxpayer uses a Social Security number or an Individual Taxpayer Identification Number (ITIN) on their tax forms. The credit is refundable, meaning that any excess credit beyond the taxpayer’s tax liability will be paid to the taxpayer in the form of a tax refund.

The bill sponsor notes that the expanded federal Child Tax Credit, part of the 2021 American Rescue Plan Act, has substantially reduced child poverty, improved family financial footing, and made New Jersey a more affordable place to raise children safely and healthily. Although New Jersey’s overall population has increased from 2010 to 2020, its child population has decreased, and strong pro-family policies are needed to ensure that families can afford to raise children in the Garden State. All families with children deserve to be able to afford to raise them in New Jersey, regardless of household income or economic status. With the high cost of child-rearing in New Jersey, including high housing, child care, and transportation costs, low- and moderate-income families need direct financial relief to stabilize family budgets and cover these costs. A New Jersey Child Tax Credit can promote strong child development, reduce child poverty and food insufficiency, and help make New Jersey a better place to live, work, and raise a family. A New Jersey Child Tax Credit can help close the racial income and wealth gaps in New Jersey and ensure a more equitable future for New Jersey’s children.