ASSEMBLY APPROPRIATIONS COMMITTEE
STATEMENT TO
[First Reprint]
ASSEMBLY, No. 5371
STATE OF NEW JERSEY
DATED: JANUARY 8, 2026
The Assembly Appropriations Committee reports favorably Assembly Bill No. 5371 (1R).
As reported, this bill amends the local payroll tax law to require certain employers, which employ persons within any municipality that imposes a local payroll tax, to provide additional information to assist in the administration of the local tax, as requested by the municipality collecting the tax. The bill further provides that if an out-of-State municipality, or other out-of-State entity, imposes an employer payroll tax on a New Jersey resident employee, an employer payroll tax imposed pursuant to section 15 of P.L.1970, c.326 (C.40:48C-15) would not apply to that employee. Finally, the bill provides that a municipality may elect to retain up to three percent of employer payroll tax collected annually to pay for the costs related to administering an employer payroll tax.
The bill also expands the scope of State tax return information that may be disclosed by the State to a municipality that administers an employer payroll tax and requires that this tax return information be disclosed to certain municipal officials upon request. Specifically, the bill provides that the Director of the Division of Taxation in the Department of the Treasury is to, upon request by a designated municipal officer of a municipality authorized to impose an employer payroll tax, furnish wage and tax withholding information, or such other State tax return information as may be necessary, for the two following purposes: (1) verifying the payroll information reported by employers subject to the employer payroll tax; and (2) identifying each employer operating within the municipality that is subject to the employer payroll tax, and which did not report payroll information for a preceding calendar quarter. This would enable an eligible municipality to certify that information in the municipality’s employer database is consistent with the information employers submit to the Division of Taxation.
The bill also removes a provision of current law that provides that this disclosure of information would be subject to the discretion of the Director of the Division of Taxation. Concerning the disclosure of State tax return information to municipalities that administer an employer payroll tax pursuant to the “Local Tax Authorization Act,” P.L.1970, c.326 (C.40:48C-1 et seq.), under the “Local Tax Authorization Act,” a municipality with a population in excess of 200,000 residents is authorized to enact an ordinance imposing an employer payroll tax on certain employers operating within the municipality. Currently, only the cities of Newark and Jersey City have populations in excess of 200,000 residents and both have adopted an ordinance to impose an employer payroll tax. A municipality that imposes an employer payroll tax pursuant to the “Local Tax Authorization Act” is permitted to tax, at a rate of up to one percent, an amount equal to the total remuneration paid by employers to employees for certain services if those services are performed within the municipality or those services are performed outside the municipality and the place from which the services are supervised is within the municipality.
Under current law, the Director of the Division of Taxation in the Department of the Treasury is generally prohibited from disclosing State tax return information, except as otherwise permitted in statute. Currently, the director, at their discretion, is authorized to furnish certain State tax return information to a municipality authorized to impose an employer payroll tax under the “Local Tax Authorization Act.” This disclosure of information is limited to employer-provided wage and tax withholding information contained in tax reports or returns filed under the New Jersey gross income tax, and the municipality may only use this information to verify the payroll information reported by employers subject to the employer payroll tax to an eligible municipality.
As reported by the committee, Assembly Bill No. 5371 (1R) is identical to Senate Bill No. 4219 (3R), which was also reported by the committee on this date.
FISCAL IMPACT:
The Office of Legislative Services (OLS) concludes that the bill will have two countervailing effects on employer payroll taxes collected by the City of Newark and the City of Jersey City for the benefit of their public school districts. On the one hand, annual revenues will increase because the bill supports these municipalities in their payroll tax enforcement and collection activities by requiring the State to share certain tax return information and authorizing the use of up to three percent of collections for tax administration and enforcement.
On the other hand, a certain amount of employer payroll tax revenue will be forgone from the bill exempting from the tax renumeration paid to New Jersey resident employees who are already subject to an employer payroll tax in another state.
The bill will potentially shift financial resources from Jersey City Public Schools and Newark Public Schools to their respective municipality since the bill permits Jersey City and Newark to retain, through an ordinance, up to three percent of employer payroll tax collections for the administration of the tax. The OLS has calculated this potential annual revenue shift at $2.2 million for Newark and $2.5 million for Jersey City.