Authorizes withholding of funds due to federal government if federal government withholds funds from State in contravention of a court decision.

S3940

SENATE, No. 3940

STATE OF NEW JERSEY

222nd LEGISLATURE

�

INTRODUCED MARCH 12, 2026

Sponsored by:

Senator� BRITNEE N. TIMBERLAKE

District 34 (Essex)

SYNOPSIS

���� Authorizes withholding of funds due to federal
government if federal government withholds funds from State in contravention of
a court decision.

CURRENT VERSION OF TEXT

���� As introduced.

��

An Act
authorizing the withholding of funds due to the federal
government and supplementing Title 52 of the Revised Statutes.

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

���� 1.� a.� As used in P.L.��� ,
c.��� (C.������ ) (pending before the Legislature as this bill):

���� �Department� means the
Department of the Treasury.

���� �Federal government� means the
United States of America, and any office, department, board, commission,
bureau, division, corporation, agency, or instrumentality thereof.�

���� �State agency� means any of
the principal departments in the Executive Branch of State government, and any
division, board, bureau, office, commission, or other instrumentality within or
created by such department, the Legislature of the State and any office, board,
bureau, or commission created by the Legislative Branch, the Judicial Branch of
the State Government, and any independent State authority, commission,
instrumentality or agency.

���� �State Treasurer� means the
Treasurer of the State of New Jersey.����� b.� Not more than 15 days following
the enactment of P.L.��� , c.��� (C.������ ) (pending before the Legislature as
this bill), and on the first day of each month thereafter, the chief executive
officer of every State agency shall submit a report to the State Treasurer, in
such form and manner as determined by the State Treasurer, setting forth:�

���� (1) �any federal funds owed to
the State agency by the federal government and for which the nonpayment of
those funds by the federal government is in contravention of a decision or
order issued by a court of competent jurisdiction; and

���� (2) �any funds the State
agency anticipates will be due and owing by the State agency to the federal
government in the 12 months next following the date of enactment of P.L.��� ,
c.��� (C.������ ) (pending before the Legislature as this bill), including, but
not limited to:

���� (a) �employer taxes owed to
the federal government by the State;

���� (b) �federal employment taxes
withheld by the State on behalf of the federal government;

���� (c) �offsets for federal
debts;

���� (d) �backup withholding of
federal taxes; and

���� (e) �federal grant repayments.

���� c.� Not more than 30 days
following the deadline for the submission of each report required pursuant to
subsection b. of this section, the State Treasurer shall prepare and submit to
the Governor and, pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), to
the Legislature, a report containing all of the information submitted by each
State agency, including any such information applicable to the department.� All
State agencies shall cooperate with the department and make available to the
department such information and assistance necessary to effectuate the purposes
of P.L.��� , c.��� (pending before the Legislature as this bill).

���� d.� Following the submittal of
any report required pursuant to subsection c. of this section that indicates
any federal funds are owed to the State in contravention of a decision or order
issued by a court of competent jurisdiction, the Governor may direct the State
Treasurer, in consultation with the Director of the Division of Budget and
Accounting in the Department of the Treasury, to withhold payments to the
federal government.� The total amount withheld shall not exceed the amount of
federal funds owed to the State in contravention of a decision or order issued
by a court of competent jurisdiction, specified in the report submitted by the
State Treasurer pursuant to subsection c. of this section.

���� e.� Any moneys appropriated
for payments to the federal government that are withheld pursuant to subsection
d. of this section shall be held in reserve and lapse to the General Fund upon
the conclusion of the State fiscal year in which the monies are appropriated,
provided, however, that the total amount of reserved and lapsed moneys shall
not exceed amount of federal funds owed to the State in contravention of a
decision or order issued by a court of competent jurisdiction, as described in
the report submitted by the State Treasurer pursuant to subsection c. of this
section.

���� 2.� This act shall take effect
immediately.

STATEMENT

���� This bill authorizes the State
to withhold State payments to the federal government when the federal
government is found by a court of competent jurisdiction to be in noncompliance
with an order or decision requiring the federal government to make payments to
the State.�

���� The bill requires all State
agencies, including agencies in the legislative and judicial branches of State
government, to submit a report to the State Treasurer, not more than 15 days
following enactment of bill, and on the first day of each month thereafter,
setting forth:� (1) any federal funds owed to the State by the federal
government and for which the nonpayment of those funds by the federal
government is in contravention of a decision or order issued by a court of
competent jurisdiction; and (2) any funds the State agency anticipates will be
due and owing by the State agency to the federal government in the 12 months
following enactment of the bill.�

���� The bill requires the State
Treasurer to submit, to the Governor and the Legislature, a report containing
all of the information submitted by State agencies not more than 30 days
following the deadline for submittal of the report by State agencies.� The bill
directs the State Treasurer to provide updated information to the Governor and
the Legislature on a monthly basis.

���� Following submittal of the
report, the Governor may direct the State Treasurer, in consultation with the
Director of the Division of Budget and Accounting, now also known as the Office
of Management and Budget, to withhold payments to the federal government.� The
total amount withheld shall not exceed the amount of federal funds owed to the
State in contravention of a decision or order issued by a court of competent
jurisdiction.� The bill requires any moneys withheld from the federal
government to be held in reserve and lapse to the General Fund upon the
conclusion of the State fiscal year in which the moneys are appropriated.� The
total amount cannot exceed the total amount of funding owed to the State by the
federal government.