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New Jersey enacts tax amnesty program

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On July 1, 2018, New Jersey enacted legislation directing the director of the Division of Taxation to establish a 90-day tax amnesty program that must conclude by Jan. 15, 2019.1 The program applies to state tax liabilities for returns due prior to Sept. 1, 2017, and provides relief from certain penalties and one-half the interest due.

Operation of program The program applies only to state tax liabilities for tax returns due on or after February 1, 2009 and prior to Sept. 1, 2017.2 During the amnesty period, a taxpayer who has failed to pay a state tax may pay the tax and one-half of the balance of the interest that is due as of Nov. 1, 2018. Participants in the program are relieved from paying the remaining one-half of the interest that is due as well as any late payment penalty, late filing penalty, cost of collection, delinquency penalty or recovery fee. However, the taxpayer is required to pay any civil fraud or criminal penalty arising from an obligation imposed under any state tax law. The program is not available to any taxpayer who at the time of payment is under criminal investigation or charge for any state tax matter.3

No taxpayer is eligible for amnesty unless the taxpayer pays the full amount of the tax, reduced interest, and any applicable penalty under the rules and procedures established by the director.4 If a taxpayer has not previously filed a tax return to report the tax due for which the taxpayer is seeking amnesty, the taxpayer must file the required return by the end of the amnesty period. The director is authorized to adopt emergency regulations to implement the amnesty program.5

A taxpayer’s participation in the program constitutes an express and absolute relinquishment of all administrative and judicial rights of appeal that have not expired when the payment is made.6 No tax payment made under the program is eligible for refund or credit, whether claimed by an administrative protest or judicial appeal.

A 5% penalty will be imposed on any state tax liabilities that are eligible for amnesty that are not satisfied during the amnesty period.7 This penalty is in addition to any other penalties, interest or costs of collection, and cannot be abated or waived.

CommentaryThis is the first tax amnesty program that New Jersey has offered since 2014, and comes at a time in which New Jersey’s income and sales tax systems are about to substantially change. The statute does not preclude a taxpayer that was eligible but failed to participate in past amnesty programs from participating in the upcoming amnesty program. Taxpayers who believe they owe any New Jersey taxes should review whether a potential outstanding tax liability may exist and if so, consider participating in the program to avoid penalties and one-half of the interest. Because the amnesty program provisions in the legislation are fairly general and the exact dates of the program have not been announced, taxpayers considering participation in the program should consult the Division of Taxation’s Web site as the amnesty program approaches for further information. In some cases, taxpayers may decide that it is more advantageous to enter into a voluntary disclosure agreement (VDA) to address their prior years’ tax liabilities.8

State tax amnesty programs continue to be offered by states looking to generate revenue through increased compliance with the tax law. Taxpayers also should consider participation in the amnesty programs that currently are being offered by Alabama9 and Connecticut.10


  1 Ch. 46 (A.B. 3438), Laws 2018. As originally passed by the legislature, the tax amnesty program would have been conducted over a six-month period that concluded by Dec. 31, 2018. Following a conditional veto by Gov. Phil Murphy, the legislature amended the bill to reflect the governor’s recommendations.
2 A.B. 3438, § 1.a. The statute provides that the amnesty program applies to “any state tax,” but does not specifically list the tax types that are eligible for amnesty.
3 A person is not eligible for amnesty if the person has been notified by the Office of Criminal Investigation in the Division of Taxation that he or she is under investigation for a state tax matter, unless the office certifies to the director that the matter was resolved. A.B. 3438, § 1.e.
4 A.B. 3438, § 1.f.
5 A.B. 3438, § 1.g.
6 A.B. 3438, § 1.c.
7 A.B. 3438, § 1.b.
8 For information on the New Jersey VDA program, see the Division of Taxation’s Web site at https://www.state.nj.us/treasury/taxation/voldisc.shtml.
9 For further information, see GT SALT Alert: Alabama Tax Amnesty Program Begins July 1.
10 This program is discussed in GT SALT Alert: Connecticut Budget Revises Net Deferred Tax Liability Deduction Provisions.




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