Similar to New Jersey’s prior six amnesty initiatives, Governor Murphy signed a law in July 2018 that provides for complete forgiveness of certain New Jersey taxes (the “Amnesty Law”). With a start date of November 15, 2018 and an end date of January 15, 2019 (“Amnesty Period”), the Amnesty Law applies to state tax liabilities for tax returns due on or after February 1, 2009 and prior to Sept. 1, 2017. 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.[1]
Participants in the Amnesty Law are relieved from paying 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 New Jersey tax law. The Amnesty Law is not available to any taxpayer who at the time of payment is under criminal investigation or charged with a crime relating to any state tax matter. The Amnesty Law applies to all state taxes administered by the New Jersey Division of Taxation (“Division”) including gross income tax, sales and use tax, corporate business tax, motor fuels tax, etc. However, the Amnesty law does not apply to unemployment-type taxes administered by the New Jersey Department of Labor.
Full cooperation and transparency from the taxpayer is crucial during the Amnesty Period. A taxpayer’s participation in the Amnesty Law constitutes an express and absolute relinquishment of all administrative and judicial rights of appeal that have not expired when payment is made. No tax payment made under the Amnesty Law is eligible for refund or credit, whether claimed by an administrative protest or judicial appeal. The taxpayer must pay the full amount of the tax, reduced interest, and any applicable penalty under the rules and procedures established by the Director of the Division (“Director”).[2] Notwithstanding this fact, a taxpayer may pay an amount that the taxpayer believes to be owed to the Division and continue to contest disputed taxes in excess of that amount. 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.[3]
Tax amnesty primarily benefits a taxpayer that has already been assessed penalties, as interest is still imputed, in addition to penalties. New Jersey taxpayers will be subject to a five percent penalty that will be imposed on any New Jersey state tax liabilities that are eligible for amnesty but not satisfied during the Amnesty Period. This penalty is in addition to any other penalties, interest or costs of collection, and cannot be abated or waived.[4] The Amnesty Law does not preclude a taxpayer that was eligible but failed to participate in past amnesty programs from participating in the 2018 amnesty program. Taxpayers who believe they owe any New Jersey taxes should assess whether a potential outstanding tax liability exists and consider utilizing the Amnesty Law to avoid penalties and interest.
Before participating in the amnesty program, New Jersey taxpayers should consider the Voluntary Disclosure Program (“VDP”), which is permanently available and offers a shorter window of liability, plus taxpayers will enjoy anonymity in submitting a VDP application. The VDP reaches further back to previous overdue tax liability to individual taxpayers and businesses and avoid hidden penalties. Both programs offer advantages and disadvantages and each taxpayer should closely assess their specific situation with a tax professional before entering into either program.
Michael Salad is a partner in Cooper Levenson’s Business & Tax and Cyber Risk Management practice groups. He concentrates his practice on tax matters, estate planning, business transactions, mergers and acquisitions and cyber risk management. Michael holds an LL.M. in Estate Planning and Elder Law. Michael is licensed to practice law in New Jersey, Florida, Pennsylvania and the District of Columbia. Michael may be reached at 609.572.7616 or via e-mail at msalad@cooperlevenson.com. Craig Panholzer is a law clerk at Cooper Levenson who recently graduated from the University of South Carolina School of Law and graduated cum laude from Florida Atlantic University with a bachelor of arts and science degree in political science.
[1] N.J. Stat. Ann. § 54:53-20(a).
[2] N.J. Stat. Ann. § 54:53-20(f).
[3] N.J. Stat. Ann. § 54:53-20(c).
[4] N.J. Stat. Ann. § 54:53-20(b).
