Permits farm income averaging credit under the New Jersey gross income tax.

A145

ASSEMBLY, No. 145

STATE OF NEW JERSEY

222nd LEGISLATURE

�

PRE-FILED FOR INTRODUCTION IN THE 2026 SESSION

Sponsored by:

Assemblywoman DAWN FANTASIA

District 24 (Morris, Sussex and Warren)

Assemblyman MICHAEL INGANAMORT

District 24 (Morris, Sussex and Warren)

SYNOPSIS

���� Permits farm income averaging credit under the New
Jersey gross income tax.

CURRENT VERSION OF TEXT

���� Introduced Pending Technical Review by Legislative
Counsel.

��

An Act

permitting a farm income averaging credit under the New Jersey gross income
tax, and 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.� A taxpayer who has
farming income during a taxable year shall be allowed to claim a credit against
the tax otherwise due for the taxable year pursuant to the "New Jersey
Gross Income Tax Act," N.J.S.54A:1-1 et seq., in an amount as is determined
pursuant to this section.

���� b.��� The credit allowed
pursuant to this section shall be equal to the difference between the
taxpayer's tax liability that otherwise would be determined pursuant to
N.J.S.54A:1-1 et seq., and the tax liability that would be determined by
substituting the farm averaging income for the farming income in the
determination of the taxpayer's tax liability pursuant to N.J.S.54A:1-1 et
seq., provided however, that no credit shall be allowed pursuant to this
section in an amount in excess of $5,000.

���� c.���� As used in this
section:

���� "Agricultural
commodity" means plants, other than horticultural commodities, and
animals, other than dogs, useful to humans, including but not limited to
forages and sod crops; grains and feed crops; dairy animals and dairy products;
poultry and poultry products, livestock, including beef cattle, sheep, swine,
horses, ponies, mules or goats; bees and apiary products; fur animals; and
trees and forest products, produced for sale.

���� "Base years" means
the three taxable years of the taxpayer immediately prior to the taxable year
for which the taxpayer is claiming the credit allowed pursuant to this section.

���� "Farm averaging
income" means the sum of (1) the farming income reported by the taxpayer
for the taxable year for which the credit is sought to be claimed, and (2) the
base years' farming income, which sum is divided by four.� Any taxable year within
the base years in which the taxpayer reported a loss from farming income shall
be considered as zero in the determination of that sum.� Any taxable year
within the base years in which the taxpayer does not engage in farming business
shall be disregarded in the determination of "farm averaging income"
and the denominator of four shall be reduced accordingly.

���� "Farming business"
means a trade or business conducted in this State the sole activity of which is
the cultivating of land or raising, breeding, boarding, rehabilitating,
training or grazing of any agricultural or horticultural commodity, and any of
such activity if devoted to and meeting the requirements and qualifications for
payments or other compensation pursuant to a soil conservation

program under an agreement with an
agency of the federal government.

���� "Farming income"
means the net profit or loss of a farming business in the categories of income
described in subsection b., k. or p. of N.J.S.54A:5-1.

���� "Horticultural
commodity" means fruits of all kinds, including grapes, nuts and berries;
vegetables; and nursery floral, ornamental and greenhouse products, produced
for sale.

���� d.��� The Director of the
Division of Taxation shall adopt rules and regulations as are necessary for the
implementation of this section.

���� 2.��� This act shall take
effect immediately and shall apply to taxable years beginning on or after
January 1 next following the date of enactment.

STATEMENT

���� This bill provides New
Jersey farmers with a credit against their annual New Jersey gross income tax
determined by using income averaging (averaging out yearly gains and losses or
varying levels of gains over a four-year period) from their farming business.�
The value of the credit is equal to the difference between a New Jersey
farmer's income without four-year farming income averaging and with farming
income averaging.� The maximum annual credit allowed is $5,000.

���� Farmers are faced with a
variety of risks that impact the economic viability of their farming
operations.� Risks associated with production, weather, financial management,
marketing and labor influence the potential for success.� In order to assist
farmers, the federal government enacted income averaging provisions that would
permit farmers to have more control over the cyclical nature of agricultural
risks and even out their tax liabilities for a more secure future.� This New
Jersey tax credit will provide farmers with New Jersey gross income tax relief
in taxable years that follow the less profitable years of their New Jersey
farming business.