Increases amount of allowable New Jersey earned income tax credit from 40 percent to 50 percent of federal benefit amount.

S4211

SENATE, No. 4211

STATE OF NEW JERSEY

222nd LEGISLATURE

�

INTRODUCED MAY 11, 2026

Sponsored by:

Senator� RAJ MUKHERJI

District 32 (Hudson)

Senator� BRITNEE N. TIMBERLAKE

District 34 (Essex)

SYNOPSIS

���� Increases amount of allowable New Jersey earned
income tax credit from 40 percent to 50 percent of federal benefit amount.

CURRENT VERSION OF TEXT

���� As introduced.

��

An Act

increasing the amount of the New Jersey earned income
tax credit and amending P.L.2000, c.80.

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

���� 1.��� Section 2 of P.L.2000,
c.80 (C.54A:4-7) is amended to read as follows:

���� 2.��� There is established the
New Jersey Earned Income Tax Credit program in the Division of Taxation in the
Department of the Treasury.

���� a.���� (1) A resident
individual who is eligible for a credit under section 32 of the federal
Internal Revenue Code of 1986 (26 U.S.C. s.32) shall be allowed a credit for
the taxable year equal to a percentage, as provided in paragraph (2) of this
subsection, of the federal earned income tax credit that would be allowed to
the individual or the married individuals filing a joint return under section
32 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.32) for the same
taxable year for which a credit is claimed pursuant to this section, subject to
the restrictions of this subsection and subsections b., c., d. and e. of this
section and the modifications of paragraph (4) of this subsection.

���� (2) For the purposes of the
calculation of the New Jersey earned income tax credit, the percentage of the
federal earned income tax credit referred to in paragraph (1) of this
subsection shall be:

���� (a) 10% for the taxable year
beginning on or after January 1, 2000, but before January 1, 2001;

���� (b) 15% for the taxable year
beginning on or after January 1, 2001, but before January 1, 2002;

���� (c) 17.5% for the taxable year
beginning on or after January 1, 2002, but before January 1, 2003;

���� (d) 20% for taxable years
beginning on or after January 1, 2003, but before January 1, 2008;

���� (e) 22.5% for taxable years
beginning on or after January 1, 2008 but before January 1, 2009;

���� (f) 25% for taxable years
beginning on or after January 1, 2009 but before January 1, 2010;

���� (g) 20% for taxable years
beginning on or after January 1, 2010, but before January 1, 2015;

���� (h) 30% for taxable years
beginning on or after January 1, 2015, but before January 1, 2016;

���� (i) 35% for taxable years
beginning on or after January 1, 2016, but before January 1, 2018;

���� (j) 37% for the taxable year
beginning on or after January 1, 2018, but before January 1, 2019;

���� (k) 39% for the taxable year
beginning on or after January 1, 2019, but before January 1, 2020;
[
and
]

���� (l) 40% for taxable years
beginning on or after January 1, 2020
, but before January 1, 2026; and

����
(m)� 50% for taxable years
beginning on or after January 1, 2026
.

���� (3) To qualify for the New
Jersey earned income tax credit, if the claimant is married, except for a
claimant who files as a head of household or surviving spouse for federal
income tax purposes for the taxable year, the claimant shall file a joint return
or claim for the credit.

���� (4) A resident individual who
is at least 18 years of age or older, but cannot claim a qualifying child as
defined under section 152 of the federal Internal Revenue Code of 1986 (26
U.S.C. s.152) for the federal earned income tax credit, shall be eligible for
the New Jersey earned income tax credit if that resident individual is
ineligible to claim the federal earned income tax credit due to� age
requirements.� The resident individual shall meet all qualifications, except
for the minimum or maximum age, for the federal earned income tax credit in
order to be eligible for the New Jersey earned income tax credit.� Calculation
of the New Jersey earned income tax credit available to individuals pursuant to
this paragraph shall be predicated on the federal maximum amount for taxpayers
with no qualifying child for each taxable year beginning on and after January
1, 2020.

���� b.��� In the case of a
part-year resident claimant, the amount of the credit allowed pursuant to this
section shall be pro-rated, based upon that proportion which the total number
of months of the claimant's residency in the taxable year bears to 12 in that
period. For this purpose, 15 days or more shall constitute a month.

���� c.���� The amount of the
credit allowed pursuant to this section shall be applied against the tax
otherwise due under N.J.S.54A:1-1 et seq., after all other credits and
payments. If the credit exceeds the amount of tax otherwise due, that amount of
excess shall be an overpayment for the purposes of N.J.S.54A:9-7; provided
however, that subsection (f) of N.J.S.54A:9-7 shall not apply. The credit
provided under this section as a credit against the tax otherwise due and the
amount of the credit treated as an overpayment shall be treated as a credit
towards or overpayment of gross income tax, subject to all provisions of
N.J.S.54A:1-1 et seq., except as may be otherwise specifically provided in
P.L.2000, c.80 (C.54A:4-6 et al.).

���� d.��� The Director of the
Division of Taxation in the Department of the Treasury shall establish a
program for the distribution of earned income tax credits pursuant to the
provisions of this section.

���� e.���� Any earned income tax
credit pursuant to this section shall not be taken into account as income or
receipts for purposes of determining the eligibility of an individual for
benefits or assistance or the amount or extent of benefits or assistance under
any State program and, to the extent permitted by federal law, under any State
program financed in whole or in part with federal funds.

(cf: P.L.2021, c.130, s.1)

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

STATEMENT

���� This bill increases the amount
of the allowable New Jersey earned income tax credit from 40 percent to 50
percent of the federal benefit amount beginning in tax year 2026.�

���� Currently, federal law allows
taxpayers who meet certain income and age requirements to claim a refundable earned
income tax credit for federal tax purposes.� The amount of the authorized
federal tax credit varies depending on several factors, including the
taxpayer�s income, qualifying dependents, and filing status. �Similarly, State
residents may also claim a refundable earned income tax credit under the New
Jersey gross income tax based on a percentage of the taxpayer�s authorized federal
tax credit.� Since tax year 2020, this percentage has been set at 40 percent of
the federal benefit amount.�

���� It is the sponsor's intent to assist
working families through an increased earned income tax credit. Historically,
the earned income tax credit has been highly effective at reducing childhood poverty
rates throughout the country, especially in states which offer the highest benefit
rates.