Increases interest rate paid on certain overdue refunds of tax overpayments.

A4411

ASSEMBLY, No. 4411

STATE OF NEW JERSEY

222nd LEGISLATURE

�

INTRODUCED FEBRUARY 19, 2026

Sponsored by:

Assemblyman� JAY WEBBER

District 26 (Morris and Passaic)

SYNOPSIS

���� Increases interest rate paid on certain overdue
refunds of tax overpayments.

CURRENT VERSION OF TEXT

���� As introduced.

��

An Act

increasing the interest rate applied to certain overdue refunds of tax
overpayments, amending P.L.1992, c.175 and N.J.S.54A:9-7.

����
Be It
Enacted
by the Senate and General Assembly of
the State of New Jersey:

���� 1.��� Section 7 of P.L.1992,
c.175 (C.54:49-15.1) is amended to read as follows:

���� 7.��� For tax paid with
respect to reports or returns due on and after the first day of the sixth month
following the July 1 next following enactment of this section,
but before
July 1, 2026,
interest shall be allowed and paid on every overpayment of
tax at a rate determined by the director to be equal to the prime rate,
determined for each month or fraction thereof, compounded annually at the end
of each year, from the date that such interest commences to accrue to the date
of refund.

����
For tax paid with respect
to reports or returns due on and after July 1, 2026, interest shall be allowed
and paid on every overpayment of tax at a rate determined by the director to be
equal to the rate of three percentage points above the prime rate determined
for each month or fraction thereof, compounded annually at the end of each
year, from the date that such interest commences to accrue to the date of
refund.

���� Interest
allowed or paid
pursuant to this section
shall commence to accrue on the later of the date
of the filing by the taxpayer of a claim for refund or requested adjustment,
the date of the payment of the tax, or the due date of the report or the return
thereof; but no interest shall be allowed or paid on an overpayment of less
than $1.00, nor upon any overpayment refunded within six months after the last
date prescribed, or permitted by extension of time, for filing the return or
within six months after the return is filed, whichever is later.

(cf: P.L.1993, c.331, s.4)

���� 2.��� N.J.S.54A:9-7 is amended
to read as follows:

���� 54A:9-7.���� Overpayment.�� (a)�� General.�
The director, within the applicable period of limitations may credit an
overpayment of income tax against any liability in respect of any tax imposed
by the tax law on the person who made the overpayment, and the balance shall be
refunded by the comptroller out of the proceeds of the tax retained by him for
such general purpose.� Any refund under this section shall be made only upon
the filing of a return and upon a certificate of the director approved by the
comptroller.� The State Treasurer, as a condition precedent to the approval of
such a certificate, may examine into the facts as disclosed by the return of
the person who made the overpayment and other information and data available in
the files of the director.

���� (b)�� Excessive withholding.�
If the amount allowable as a credit for tax withheld from the taxpayer exceeds
his tax to which the credit relates, the excess shall be considered an
overpayment.

���� (c)�� Overpayment by
employer.� If there has been an overpayment of tax required to be deducted and
withheld under N.J.S.54A:7-4, refund shall be made to the employer only to the
extent that the amount of the overpayment was not deducted and withheld by the
employer.

���� (d)�� Credits against
estimated tax.� The director may prescribe regulations providing for the
crediting against the estimated income tax for any taxable year of the amount
determined to be an overpayment of the income tax for a preceding taxable
year.� If any overpayment of income tax is so claimed as a credit against
estimated tax for the succeeding taxable year, such amount shall be considered
as a payment of the income tax for the succeeding taxable year (whether or not
claimed as a credit in the declaration of estimated tax for such succeeding
taxable year), and no claim for credit or refund of such overpayment shall be
allowed for the taxable year for which the overpayment arises.

���� (e)�� Rule where no tax
liability.� If there is no tax liability for a period in respect of which an
amount is paid as income tax, such amount shall be considered an overpayment.

���� (f)�� Under regulations
prescribed by the director with approval of the State Treasurer interest shall
be allowed and paid at the rate determined by the director
according
to
the
following schedule:

����
For overpayments allowed or
paid on or after July 1, 1993, but before July 1, 2026, the rate shall
be
equal to the prime rate pursuant to R.S.54:48-2
;

����
For overpayments allowed or
paid on or after July 1, 2026, the rate shall be equal to three percentage
points above the prime rate pursuant to R.S.54:48-2.

����
Interest allowed and paid

upon any overpayment in respect of the tax imposed by this act
[
,
]

according
to the schedule of this subsection shall be
determined for each month or
fraction thereof, compounded annually at the end of each year, from the date
that such interest commences to accrue to the date of refund; but no interest
shall be allowed or paid on an overpayment of less than $1.00, nor upon any
overpayment refunded within six months after the last date prescribed, or
permitted by extension of time, for filing the return or within six months
after the return is filed, whichever is later.

(cf: P.L.1993, c.331, s.5)

���� 3.��� (New section)��� Notwithstanding
any provision of the �Administrative Procedure Act,� P.L.1968, c.410
(C.52:14B-1 et seq.) to the contrary, the director may adopt
immediately upon filing with the Office of Administrative Law such regulations
as the director deems necessary to implement the provisions of
P.L , c.��� (C.���� )
(pending before the Legislature as this bill), which regulations shall be
effective for a period not to exceed 180 days following the date of enactment
of P.L.��� , c.��� (C.������ ) (pending before the Legislature as this bill)
and may thereafter be amended, adopted, or readopted by the director in
accordance with the �Administrative Procedure Act,� P.L.1968, c.410
(C.52:14B-1 et seq.).

���� 4.��� This act shall take
effect immediately and apply to overpayments with respect to reports or returns
due on and after July 1, 2026.

STATEMENT

���� This bill increases the
interest paid on overdue tax refunds subject to the State Uniform Tax Procedure
Law and New Jersey Gross Income Tax Act. The purpose of this bill is to
make the interest rate paid on tax refunds the same as the interest rate paid
on tax deficiencies.

���� While the interest rate
imposed on back taxes accrues at three percentage points above the Federal
Reserve�s Bank Prime Loan Rate, the interest rate allowed on overdue refunds is
paid without the benefit of a three-point adjustment. In recent practice,
this has meant that tax deficiency interest has been imposed at 10 percent and
tax refund interest has been allowed at just 7 percent.

���� This bill imposes a measure of
equity and symmetry to the State�s tax system by making the interest rate owed
by tax collectors on refunds identical to the interest rate owed by taxpayers
on deficiencies.

���� The bill also includes
emergency regulatory authority for the Director of the Division of Taxation to
implement the bill.