Legislation Proposed to Confront the Unjust Taxation of NJ Residents by Other States

On Sep 2, 2022

Gov. Phil Murphy has announced the proposal of bipartisan legislation designed to provide relief to New Jersey residents facing unjust taxation from other states where their employer is based. The legislation is designed to confront the long-standing issue of tax credits New Jersey provides to residents who pay taxes to other jurisdictions, which has cost the state billions in foregone revenue. The proposals would provide relief to taxpayers while combating aggressive taxation from other states and providing grants to incentivize employment in New Jersey.

“This is an issue that warrants no debate; on both sides of the aisle, we can all agree that we must protect our residents from unfair and inordinate taxation from other states,” Murphy said. “The proposals, while supporting our hard-working residents in their efforts to dispute such taxation, will help promote employment in New Jersey and counteract lost tax revenue to our neighbors. Amid profound political divisions across the country, I look forward to achieving bipartisan support for legislation that will ensure a fiscally healthier and fairer New Jersey.”

Three proposals were drafted to take concrete steps toward addressing the resident credits for taxes paid to other jurisdictions (COJ) issue. The Murphy Administration filed a U.S. Supreme Court amicus brief in late 2020 in support of New Hampshire’s effort to challenge a similar situation with Massachusetts. The Supreme Court ultimately declined to take up the case, and the administration has been working to develop viable relief options since.

Under the first initiative, New Jersey would adopt its own “Convenience of Employer” provision, which would allow the state to tax employees of New Jersey firms if they work at home in other states for their own convenience (instead of the employer’s need). This will start the process of creating parity with New York, which has its own provision that it uses to tax New Jersey residents working for New York firms who work at home for their own convenience, and with all other states that maintain the same legal rule.

Under the second initiative, the state would award tax credits to incentivize New Jersey residents to file legal actions against other states that collect taxes from them for services they perform while physically located in New Jersey.

Finally, the third initiative would establish a one-time $10 million pilot program, to be administered by the New Jersey Economic Development Authority (EDA), which would provide grants to certain businesses that assign their employees to New Jersey locations, incentivizing job growth and capital investments throughout the state.

“We’ve been working hard to find solutions so that New Jersey residents, many of whom have been working from home since the pandemic began, won’t face an unfair disadvantage financially,” said Deputy State Treasurer Aaron Binder. “A significant amount of time and consideration went into developing these well thought out proposals to help ensure tax fairness and spur employment in New Jersey.”

“Recent actions by neighboring states to add exorbitant congestion fees, on top of what New Jerseyans already pay in other states’ taxes, makes the need for this initiative indisputable,” said Senator Joseph Lagana (D). “New Jersey is already fighting an uphill battle when it comes to drawing back federal tax dollars; we cannot afford to continue losing revenue to neighboring states too. These proposals will help NJ residents reap the full benefits of what our own state has to offer.”

Senator Jon Bramnick (R) supports the proposed legislation, saying it is in the “best interest of our hard-working residents. These proposals will help stop, once and for all, the unjust taxation of New Jersey taxpayers while further boosting our fiscal health and burgeoning economy.”

In a statement published by the New Jersey Senate Republican Office, Bramnick commented that that the proposed legislation is the result of years of effort by Senate Republican Leader Steve Oroho to bring attention to the issue and highlight the need for reforms to protect taxpayers.

“I’m glad the administration has finally agreed with Leader Oroho and Republicans who have been calling for the state to aggressively pursue tax fairness for New Jersey residents who continue to be unjustly taxed by New York and other states,” said Bramnick. “The bipartisan legislation that we announced yesterday is just the first step in addressing the serious and expensive inequities that Leader Oroho has been talking about for years. I know there are more solutions that we can all discuss to keep moving the ball forward.”

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