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A4128
ASSEMBLY, No. 4128
STATE OF NEW JERSEY
222nd LEGISLATURE
�
INTRODUCED FEBRUARY 19, 2026
Sponsored by:
Assemblywoman� CAROL A. MURPHY
District 7 (Burlington)
SYNOPSIS
���� Establishes certain exclusions and credits under
gross income and corporation business taxes for contributions to lifelong
learning accounts.
CURRENT VERSION OF TEXT
���� As introduced.
��
An Act
establishing certain exclusions and credits under the
gross income and corporation business taxes for use of lifelong learning
accounts, supplementing Title 54A of the New Jersey Statutes and P.L.1945,
c.162.
����
Be It
Enacted
by the Senate and General Assembly of
the State of New Jersey:
���� 1.��� a.�� The gross income of
an eligible taxpayer for a taxable year shall not include an amount of up to
$2,500 of employer contributions to a lifelong learning account of the eligible
taxpayer.
���� b.��� Gross income shall not
include earnings that accrue on the balance of a lifelong learning account to
the eligible taxpayer for the taxable year, except as provided in subsection c.
of this section.
���� c.���� (1)���� Gross income of
a taxpayer shall include qualified and nonqualified distributions from a
lifelong learning account of the taxpayer for the taxable year of
distribution.� Provided further, the exclusions allowed pursuant to N.J.S.54A:6-10
and N.J.S.54A:6-15 shall not apply to any distributions from a lifelong
learning account.
���� (2)�� Notwithstanding
paragraph (1) of this subsection, gross income of an eligible taxpayer for a
taxable year shall not include:
���� (a)�� a distribution of
contributions for the taxable year made in excess of the annual $2,500 limit
for lifelong learning account contributions, provided that the earnings thereto
are also distributed and reported as gross income, or�
���� (b)�� a distribution from the
lifelong learning account of a taxpayer that is contributed to a lifelong
learning account of the taxpayer within 60 days of distribution, provided that
this subparagraph shall not apply to a distribution occurring within 365 days
of a prior distribution which was excluded from gross income pursuant to this
subparagraph.
���� d.��� If a taxpayer makes a
nonqualified distribution from the taxpayer�s lifelong learning account the
taxpayer shall be subject to a penalty in the form of additional tax liability
due pursuant to the �New Jersey Gross Income Tax Act,� N.J.S.54A:1-1, for the
taxable year of the distribution.� The amount of the additional tax liability
shall be five percent of the amount of the nonqualified distribution.�
���� This subsection shall not
apply to nonqualified distributions incident to death, disability, divorce,
separation pursuant to a �qualified domestic relations order� as defined by
subsection (p) of section 414 of the federal Internal Revenue Code of 1986
(26 U.S.C. s.414), or a taxpayer who has attained the age of 71
as of the first day of the taxable year. Excluded employer contributions shall
be allocated to the distribution on a pro rata basis between the amount of the
distribution and the amount remaining in the account.
���� e.���� As used in this
section:
���� �Disability� means becoming
disabled and being unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can be
expected to result in death or to be of long-continued and indefinite duration.
���� �Eligible taxpayer� means a
taxpayer that as of the first day of the taxable year has attained the age of
18 but not yet attained the age of 71 and is the beneficiary for whom the
lifelong learning account has been established.
���� �Lifelong learning account� means
an account created or organized, for the exclusive benefit of the taxpayer, in New
Jersey as a lifelong learning account, which designation means that the
account is to be used exclusively for the purpose of making qualified
distributions.� To qualify as a lifelong learning account the account shall be
administered in adherence to the following requirements: all contributions
shall be made in an amount of money; all contributions to lifelong learning
accounts of a taxpayer for a taxable year shall not exceed $2,500, except as to
contributions which are made from funds distributed from a lifelong learning
account of the taxpayer within 60 days of the contribution, provided that the
distribution is not occurring within 365 days of a prior distribution excluded
from gross income pursuant to subparagraph (b) of paragraph (2) of subsection
c. of this section; the trustee of the lifelong learning account shall be a
bank or other entity that demonstrates to the satisfaction of the director that
the lifelong learning account shall be administered in adherence to the
requirements of this section; an eligible taxpayer�s interest in the account
balance is nonforfeitable; the trustee of the lifelong learning account shall
not invest the account�s assets in life insurance contracts or �collectibles,�
as that term is defined pursuant to subsection (m) of section 408 of the
federal Internal Revenue Code of 1986 (26 U.S.C. s.408); lifelong learning
account assets shall not be commingled with other property except in a common
trust fund or common investment fund; and requirements that the director deems
to be necessary to implement�
P.L. , c. (C. ) (pending
before the Legislature as this bill), which the director shall adopt by
regulation in accordance with the �Administrative Procedure Act,� P.L.1968,
c.410 (C.52:14B-1 et seq.).
���� �Nonqualified distribution� means
a distribution from a lifelong learning account that is not used for qualified
education expenses. A nonqualified distribution shall not include a
distribution of contributions for the taxable year made in excess of the annual
$2,500 limit for lifelong learning account contributions, provided that the
earnings thereto are also distributed and reported as gross income. A
nonqualified distribution shall not include a distribution from the lifelong
learning account of a taxpayer that is contributed to a lifelong learning
account of the taxpayer within 60 days of distribution, provided that the
distribution is not occurring within 365 days of a prior distribution excluded
from gross income pursuant to subparagraph (b) of paragraph (2) of subsection
c. of this section.
���� �Qualified distribution� means
a distribution from a lifelong learning account that is used for qualified
education expenses.
���� �Qualified education expense�
means an amount paid by an eligible taxpayer for expenses incurred and required
for instructional courses, training courses, and apprenticeship programs for
the eligible taxpayer or the eligible taxpayer�s spouse.� Qualified education
expenses shall include, but are not limited to, expenses incurred and required
for instructional courses, training courses, and apprenticeship programs which
are paid on account of books, equipment, fees, information technology devices,
supplies, tools, and tuition.� Qualified education expenses shall not include
amounts paid for any course or program taken for recreational or leisure
purposes.
���� 2.��� a.�� (1)���� An eligible
taxpayer shall be allowed a credit against the tax liability imposed pursuant
to the �New Jersey Gross Income Tax Act,� N.J.S.54A:1-1, for the taxable year
for contributions made by the eligible taxpayer to a lifelong learning account
of the eligible taxpayer for the taxable year.� Creditable contributions shall
not include contributions to a lifelong learning account of the taxpayer of
amounts distributed from a lifelong learning account of the taxpayer, as
determined by the director.
���� (2)�� (a)�� For an eligible
taxpayer filing as a married individual filing separately, or an unmarried
individual, other than individuals filing as head of household or as a
surviving spouse, pursuant to subsection b. of N.J.S.54A:2-1, for the first
$500 of contributions for the taxable year the credit shall be in an amount
equal to 50 percent of the contribution.
���� (b)�� For eligible taxpayers
filing as married individuals jointly, individuals filing as a head of
household, or individuals filing as a surviving spouse pursuant to subsection
a. of N.J.S.54A:2-1, for the first $1,000 of contributions for the taxable year
the credit shall be in an amount equal to 50 percent of the contribution.
���� (3)�� (a)�� For an eligible
taxpayer filing as a married individual filing separately, or an unmarried
individual, other than individuals filing as head of household or as a
surviving spouse, pursuant to subsection b. of N.J.S.54A:2-1, for contributions
in excess of $500 for the taxable year the credit shall be in an amount equal
to 25 percent of the contribution.
���� (b)�� For eligible taxpayers
filing as married individuals jointly, individuals filing as a head of
household, or individuals filing as a surviving spouse pursuant to subsection
a. of N.J.S.54A:2-1, for contributions in excess of $1,000 for the taxable year
the credit shall be in an amount equal to 25 percent of the contribution.
���� b.��� (1)�� The maximum amount
of contributions of an eligible taxpayer taken into account for a taxable year
as creditable pursuant to subsection a. of this section shall be determined
pursuant to paragraphs (2), (3), and (4) of this subsection.
���� (2)�� An eligible taxpayer
filing as a married individual filing separately, or an unmarried individual,
other than individuals filing as head of household or as a surviving spouse,
pursuant to subsection b. of N.J.S.54A:2-1, with total gross income for a
taxable year in excess of $100,000 shall reduce a maximum creditable
contribution limit of $2,500 by the percentage calculated by dividing the
amount of the eligible taxpayer�s gross income for the taxable year that is in
excess of $100,000, but not exceeding $120,000, by $20,000.� No credit shall be
allowed for contributions made by an eligible taxpayer filing as a married
individual filing separately, or an unmarried individual, other than
individuals filing as head of household or as a surviving spouse, pursuant to
subsection b. of N.J.S.54A:2-1, with total gross income for a taxable year in
excess of $120,000.
���� (3)�� Eligible taxpayers
filing as married individuals jointly, individuals filing as a head of
household, or individuals filing as a surviving spouse pursuant to subsection
a. of N.J.S.54A:2-1, with total gross income for a taxable year in excess of
$200,000 shall: (a) in the case of married individuals filing jointly, each of
whom has contributed to that individual�s lifelong learning account reduce a
maximum creditable contribution limit of $5,000, (b) in the case of individuals
filing as a head of household, or individuals filing as a surviving spouse pursuant
to subsection a. of N.J.S.54A:2-1 reduce a maximum creditable contribution
limit of $2,500, by the percentage calculated by dividing the amount of the
eligible taxpayer�s gross income for the taxable year that is in excess of
$200,000, but not exceeding $240,000, by $40,000.� No credit shall be allowed
for contributions made by eligible taxpayers filing as married individuals
jointly, individuals filing as a head of household, or individuals filing as a
surviving spouse pursuant to subsection a. of N.J.S.54A:2-1, with total gross
income for a taxable year in excess of $240,000.
���� (4)�� The maximum creditable
contribution limit determined pursuant to paragraphs (2) and (3) of this
subsection shall be reduced by the amount of employer contributions made to an
eligible taxpayer�s lifelong learning account which are excluded from gross income
pursuant to subsection a. of section 2 of
P.L. , c.���� (C.�������� )
(pending before the Legislature as this bill).
���� c.���� The order in which
credits allowed pursuant to this section and any other credits shall be applied
against the tax liability imposed pursuant to the �New Jersey Gross Income Tax
Act,� N.J.S.54A:1-1 et seq., shall be determined by the director. If any amount
of credit allowed pursuant to this section remains after the application of
credit to tax liability imposed pursuant to the �New Jersey Gross Income Tax
Act,� N.J.S.54A:1-1 et seq., that amount of credit shall be an overpayment for
the purposes of N.J.S.54A:9-7, except that subsection (f)
of N.J.S.54A:9-7 shall not apply.
���� d.��� As used in this section:
���� �Eligible taxpayer� means a
taxpayer that as of the first day of the taxable year has attained the age of
18 but not yet attained the age of 71 and is the beneficiary for whom the
lifelong learning account has been established.
���� �Lifelong learning account� means
an account created or organized, for the exclusive benefit of the taxpayer, in New
Jersey as a lifelong learning account, which designation means that the
account is to be used exclusively for the purpose of making qualified
distributions.� To qualify as a lifelong learning account the account shall be
administered in adherence to the following requirements: all contributions
shall be made in an amount of money; all contributions to lifelong learning
accounts of a taxpayer for a taxable year shall not exceed $2,500, except as to
contributions which are made from funds distributed from a lifelong learning
account of the taxpayer within 60 days of the contribution, provided that the
distribution is not occurring within 365 days of a prior distribution excluded
from gross income pursuant to subparagraph (b) of paragraph (2) of subsection
c. of section 1 of P.L.������ , c.����� (C.������� ) (pending before the Legislature
as this bill); the trustee of the lifelong learning account shall be a bank or
other entity that demonstrates to the satisfaction of the director that the
lifelong learning account shall be administered in adherence to the
requirements of this section; an eligible taxpayer�s interest in the account
balance is nonforfeitable; the trustee of the lifelong learning account shall
not invest the account�s assets in life insurance contracts or �collectibles,�
as that term is defined pursuant to subsection (m) of section 408 of the
federal Internal Revenue Code of 1986 (26 U.S.C. s.408); lifelong learning
account assets shall not be commingled with other property except in a common
trust fund or common investment fund; and requirements that the director deems
to be necessary to implement�
P.L. , c. (C. ) (pending
before the Legislature as this bill), which the director shall adopt by
regulation in accordance with the �Administrative Procedure Act,� P.L.1968,
c.410 (C.52:14B-1 et seq.).
���� �Qualified distribution� means
a distribution from a lifelong learning account that is used for qualified
education expenses.
���� �Qualified education expense�
means an amount paid by an eligible taxpayer for expenses incurred and required
for instructional courses, training courses, and apprenticeship programs for
the eligible taxpayer or the eligible taxpayer�s spouse.� Qualified education
expenses shall include, but are not limited to, expenses incurred and required
for instructional courses, training courses, and apprenticeship programs which
are paid on account of books, equipment, fees, information technology devices,
supplies, tools, and tuition.� Qualified education expenses shall not include
amounts paid for any course or program taken for recreational or leisure
purposes.
���� 3.��� a.�� An eligible
employer taxpayer shall be allowed a credit against the tax liability imposed
for a privilege period pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5),
in an amount equal to 25 percent of a contribution made by the eligible
employer taxpayer to a lifelong learning account of a qualified employee.
���� b.��� Per qualified employee,
the maximum amount of contribution that an eligible employer taxpayer shall be
allowed as a creditable contribution per privilege period is $2,500.���
���� c.���� If an eligible employer
taxpayer that is a small business is allowed a credit pursuant to subsection a.
of this section for the privilege period, the eligible employer taxpayer shall
be allowed an additional credit amount for qualified administrative costs
associated with the credit allowed pursuant to subsection a. of this section for
the privilege period.� The additional credit amount shall be limited to an
amount equal to 50 percent of qualified administrative costs for the privilege
period, but not exceeding $500 of credit for the privilege period.� An eligible
employer taxpayer shall only qualify for an additional credit amount pursuant
to this subsection for the first and second privilege periods for which the
eligible employer taxpayer is allowed a credit pursuant to subsection a. of
this section.
���� d.��� The order in which
credits allowed pursuant to this section and any other credits shall be applied
against the tax liability imposed pursuant to section 5 of P.L.1945, c.162
(C.54:10A-5), shall be determined by the director.� If any amount of credit
allowed pursuant to this section remains after the application of credit to tax
liability imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5) that
amount of unused credit shall be allowed as a deduction against entire net
income, as determined pursuant to section 4 of P.L.1945, c.162 (C.54:10A-4),
for the privilege period immediately following the privilege period for which
the credit was allowed.�
���� e.���� As used in this
section:
���� �Eligible employer taxpayer�
means a taxpayer with one or more qualified employees.
���� �Lifelong learning account� means
an account created or organized, for the exclusive benefit of the qualified
employee, in New Jersey as a lifelong learning account, which designation means
that the account is to be used exclusively for the purpose of making qualified
distributions.� To qualify as a lifelong learning account the account shall be
administered in adherence to the following requirements: all contributions
shall be made in an amount of money; all contributions to lifelong learning
accounts of a qualified employee for a taxable year shall not exceed $2,500, except
as to contributions which are made from funds distributed from a lifelong
learning account of the qualified employee within 60 days of the contribution,
provided that the distribution is not occurring within 365 days of a prior
distribution excluded from gross income pursuant to subparagraph (b) of
paragraph (2) of subsection c. of section 1 of P.L.������ , c.����� (C.�������
) (pending before the Legislature as this bill); the trustee of the lifelong
learning account shall be a bank or other entity that demonstrates to the
satisfaction of the director that the lifelong learning account shall be
administered in adherence to the requirements of this section; a qualified
employee�s interest in the account balance is nonforfeitable; the trustee of
the lifelong learning account shall not invest the account�s assets in life
insurance contracts or �collectibles,� as that term is defined pursuant to
subsection (m) of section 408 of the federal Internal Revenue Code of
1986 (26 U.S.C. s.408); lifelong learning account assets
shall not be commingled with other property except in a common trust fund or
common investment fund; and requirements that the director deems to be necessary
to implement� P.L.������ , c.������ (C.������� ) (pending before the
Legislature as this bill), which the director shall adopt by regulation in
accordance with the �Administrative Procedure Act,� P.L.1968, c.410 (C.52:14B-1
et seq.).
���� �Qualified distribution� means
a distribution from a lifelong learning account that is used for qualified
education expenses.
���� �Qualified education expense�
means an amount paid by a qualified employee for expenses incurred and required
for instructional courses, training courses, and apprenticeship programs for
the qualified employee or the qualified employee�s spouse.� Qualified education
expenses shall include, but are not limited to, expenses incurred and required
for instructional courses, training courses, and apprenticeship programs which
are paid on account of books, equipment, fees, information technology devices,
supplies, tools, and tuition.� Qualified education expenses shall not include
amounts paid for any course or program taken for recreational or leisure
purposes.
���� �Qualified employee� means an
individual that as of the first day of the privilege period has attained the
age of 18 but not yet attained the age of 71 and is the beneficiary for whom
the lifelong learning account has been established.
���� �Small business� means a
taxpayer that for the privilege period has no more than 100 employees, each of
which receives no less than $5,000 of annual compensation.
���� 4.��� a.�� An eligible
employer taxpayer shall be allowed a credit against the tax liability imposed
for a taxable year pursuant to the �New Jersey Gross Income Tax Act,�
N.J.S.54A:1-1 et seq., in an amount equal to 25 percent of a contribution made
by the eligible employer taxpayer to a qualified employee�s lifelong learning
account.
���� b.��� Per employee, the
maximum amount of contribution that an eligible employer taxpayer shall be
allowed as a creditable contribution per taxable year is $2,500.���
���� c.���� If an eligible employer
taxpayer that is a small business is allowed a credit pursuant to subsection a.
of this section for the taxable year, the eligible employer taxpayer shall be
allowed an additional credit amount for qualified administrative costs
associated with the credit allowed pursuant to subsection a. of this section
for the taxable year.� The additional credit amount shall be limited to an
amount equal to 50 percent of qualified administrative costs for the taxable
year, but not exceeding $500 of credit for the taxable year.� An eligible
employer taxpayer shall only qualify for an additional credit amount pursuant
to this subsection for the first and second taxable years for which the
eligible employer taxpayer is allowed a credit pursuant to subsection a. of
this section.
���� d.��� The order in which
credits allowed pursuant to this section and any other credits shall be applied
against the tax liability imposed pursuant to the �New Jersey Gross Income Tax
Act,� N.J.S.54A:1-1 et seq., shall be determined by the director.� If any
amount of credit allowed pursuant to this section remains after the application
of credit to tax liability imposed pursuant to the �New Jersey Gross Income Tax
Act,� N.J.S.54A:1-1 et seq., that amount of unused credit shall be allowed as a
deduction against gross income, as determined pursuant to N.J.S.54A:5-1, for
the taxable year immediately following the taxable year for which the credit
was allowed.�
���� e.���� An eligible employer
taxpayer that is a business entity that is classified as a partnership for
federal income tax purposes shall not be allowed a credit directly under the �New
Jersey Gross Income Tax Act,� N.J.S.54A:1-1 et seq., but the amount of credit
of a taxpayer in respect of a distributive share of partnership income, shall
be determined by allocating to the taxpayer that proportion of the credit
acquired by the partnership that is equal to the taxpayer's share, whether or
not distributed, of the total distributive income or gain of the partnership
for its taxable year ending within or with the taxpayer's taxable year, except
as otherwise provided by law.
���� An eligible employer taxpayer
that is a New Jersey S Corporation shall not be allowed a credit directly under
the �New Jersey Gross Income Tax Act,� N.J.S.54A:1-1 et seq., but the amount of
credit of a taxpayer in respect of a pro rata share of S Corporation income,
shall be determined by allocating to the taxpayer that proportion of the credit
acquired by the New Jersey S Corporation that is equal to the taxpayer's share,
whether or not distributed, of the total pro rata share of S Corporation income
of the New Jersey S Corporation for its privilege period ending within or with
the taxpayer's taxable year, except as otherwise provided by law.
���� f.���� As used in this
section:
���� �Eligible employer taxpayer�
means a taxpayer with one or more qualified employees.
���� �Lifelong learning account� means
an account created or organized, for the exclusive benefit of the qualified
employee, in New Jersey as a lifelong learning account, which designation means
that the account is to be used exclusively for the purpose of making qualified
distributions.� To qualify as a lifelong learning account the account shall be
administered in adherence to the following requirements: all contributions
shall be made in an amount of money; all contributions to lifelong learning
accounts of a qualified employee for a taxable year shall not exceed $2,500, except
as to contributions which are made from funds distributed from a lifelong
learning account of the qualified employee within 60 days of the contribution,
provided that the distribution is not occurring within 365 days of a prior
distribution excluded from gross income pursuant to subparagraph (b) of
paragraph (2) of subsection c. of section 1 of P.L.������ , c.����� (C.�������
) (pending before the Legislature as this bill); the trustee of the lifelong
learning account shall be a bank or other entity that demonstrates to the
satisfaction of the director that the lifelong learning account shall be
administered in adherence to the requirements of this section; a qualified
employee�s interest in the account balance is nonforfeitable; the trustee of
the lifelong learning account shall not invest the account�s assets in life
insurance contracts or �collectibles,� as that term is defined pursuant to
subsection (m) of section 408 of the federal Internal Revenue Code of
1986 (26 U.S.C. s.408); lifelong learning account assets
shall not be commingled with other property except in a common trust fund or
common investment fund; and requirements that the director deems to be necessary
to implement� P.L.������ , c.����� (C.������� ) (pending before the Legislature
as this bill), which the director shall adopt by regulation in accordance with
the �Administrative Procedure Act,� P.L.1968, c.410 (C.52:14B-1 et seq.).
���� �Qualified distribution� means
a distribution from a lifelong learning account that is used for qualified
education expenses.
���� �Qualified education expense�
means an amount paid by an eligible taxpayer for expenses incurred and required
for instructional courses, training courses, and apprenticeship programs for
the eligible taxpayer or the eligible taxpayer�s spouse. Qualified education
expenses shall include, but are not limited to, expenses incurred and required
for instructional courses, training courses, and apprenticeship programs which
are paid on account of books, equipment, fees, information technology devices,
supplies, tools, and tuition.� Qualified education expenses shall not include
amounts paid for any course or program taken for recreational or leisure
purposes.
���� �Qualified employee� means an
individual that as of the first day of the taxable year has attained the age of
18 but not yet attained the age of 71 and is the beneficiary for whom the
lifelong learning account has been established.
���� �Small business� means a
taxpayer that for the taxable year has no more than 100 employees, each of
which receives no less than $5,000 of annual compensation.
���� 5.��� This act shall take
effect immediately and apply to privilege periods and taxable years beginning
on or after the January 1 next following the date of enactment.
STATEMENT
���� This bill establishes certain tax
exclusions and credits for the use of lifelong learning accounts (account) in
order to finance worker training and education.� Generally, the bill consists
of four parts: gross income tax (GIT) exclusions for employer-provided account
contributions and account earnings; a GIT credit for personal account
contributions; GIT and corporation business tax (CBT) credits for employers
making account contributions for their employees; and administrative provisions
concerning the maintenance of the accounts.�
���� The bill allows a taxpayer to
exclude from taxable gross income, employer contributions to the taxpayer�s
account of up to $2,500 per year and earnings on account balances.� Generally,
distributions from an account are treated as taxable income under the GIT,
except in the case of certain account rollovers and account adjustments made
due to excess contributions.�
���� The bill provides a GIT credit
for a taxpayer�s own contributions to the taxpayer�s account.� Generally, the
credit is for 50 percent of a taxpayer�s first $500 of account contributions,
or $1,000 for taxpayers filing jointly, and 25 percent for the taxpayer�s
account contributions exceeding $500, or $1,000 for taxpayers filing jointly.�
The maximum creditable contribution amount varies based on the taxpayer�s
filing status and annual income level. Generally, individual filers are allowed
a maximum creditable contribution of $2,500, which is reduced by $1 for each $8
earned over $100,000.� Creditable contributions are not allowed for individual
filers with $120,000 of annual income or more. Generally, joint filers are
allowed a maximum creditable contribution of $5,000 in the case of married
individuals each of whom contributes to a lifelong learning account, which is
reduced by $1 for each $8 earned over $200,000.� Creditable contributions are
not allowed for joint filers with $240,000 of annual income or more. Maximum
creditable contributions are reduced by the amount of any employer-provided
account contributions, which are excluded from the taxpayer�s taxable income by
this bill.� Generally, the maximum credit amount is $750 for individuals and
$1,500 for joint filers. Depending upon a taxpayer�s liability and order of
application of other potential credits, the GIT credit for taxpayer account
contributions is refundable.� The bill grants the Director of the Division of
Taxation the authority to preclude rollovers between accounts from qualifying
for credit.
���� The bill allows GIT and CBT
credits for employers making account contributions for their employees in an
amount equal to 25 percent of account contributions.� Per employee and per tax
year, annual account contributions may not exceed $2,500.�
���� Small business employers are
allowed an additional credit amount for 50 percent of the administrative costs
associated with the credit for the tax year, but not exceeding $500 of credit
for the tax year.� The bill defines a small business as a taxpayer with no more
than 100 employees, each with no less than $5,000 of annual compensation. The
small business administrative cost credit is allowed only for the first and
second tax years for which the employer is allowed the employer-provided
employee account contribution credit. Both the employer-provided employee
account contribution credit and the small business administrative cost credit
are nonrefundable, but the amount of an unused credit may be carried forward
one tax year and used as a deduction.
���� The bill establishes certain
requirements for the maintenance and use of the accounts.� Accounts must be
created or organized in New Jersey and for the exclusive benefit of the account
beneficiary.� For a tax year, total contributions, from whatever source, to
lifelong learning accounts of a taxpayer may not exceed $2,500, except as to
account rollovers.� Account trustees must be a bank or other entity that
demonstrates to the Director of the Division of Taxation that accounts will be
maintained in accordance with the bill.� An account beneficiary�s interest in
the account balance is nonforfeitable. The bill prohibits a trustee from
investing account assets in life insurance contracts or collectibles and
prohibits account assets from being commingled with other property, except as
to common trust or investment funds.� The bill gives the Director of the
Division of Taxation rulemaking authority with regard to further account
requirements.�
���� Generally, the bill restricts
qualified use of accounts to taxpayers that are 18 to 70 years of age. �Account
funds are to be distributed for qualified education expenses incurred by the
taxpayer or the taxpayer�s spouse.� Qualified education expenses are amounts
paid and required for instructional courses, training courses, and
apprenticeship programs, which include, but are not limited to, books,
equipment, fees, information technology devices, supplies, tools, and tuition.�
Qualified education expenses do not include amounts paid for courses or
programs taken for recreational or leisure purposes.
���� The bill includes a penalty
for nonqualified distributions in the form of additional tax liability in the
amount of five percent of the nonqualified distribution.� The bill�s
nonqualified distribution penalty does not apply to distributions on account of
death, disability, divorce, or attaining the age of 71 as of the first day of
the taxable year. The bill also contains exemptions from the nonqualified
distribution penalties for distributions that are rollovers between accounts
and account adjustments made due to excess annual account contributions.�