Legislation that would officially move New Jersey’s income tax-filing deadline to July 15 and lengthen the state’s fiscal year by three months has been formally introduced by lawmakers and is on course to make it to Gov. Phil Murphy’s desk on Monday.
Both fiscal policy changes have bipartisan support and are seen as crucial to helping the state and its residents navigate the severe economic fallout from the ongoing coronavirus pandemic.
While some other states have begun to disclose estimates of potential revenue losses caused by the pandemic, New Jersey’s Department of Treasury has yet to do so. But Gov. Phil Murphy said during a media briefing on Thursday that the state budget is getting “crushed” by dropping revenues and rising expenses related to the pandemic.
“The impact on the state budget is significant,” Murphy said. “There’s no other way to put it.”
In all, more than two dozen bills related to the coronavirus response were introduced during Assembly and Senate quorums that were held on Thursday.
Among the new measures is the legislation that will move the state’s April 15 tax deadline to July 15, and extend the close of the fiscal year 2020 from June 30 to Sept. 30. The same bill will also require Murphy to put forward a budget proposal by late August for a planned truncated fiscal “year” that would run from Oct. 1, 2020 until June 30, 2021.
Murphy had proposed a $40.85 billion spending plan for fiscal year 2021 in late February, but the pandemic has essentially rendered it obsolete within a matter of weeks.
More than 51,000 New Jersey residents have been reported as testing positive for COVID-19, Murphy said during Thursday’s media briefing. There has also been a total of 1,700 deaths caused by COVID-19 in New Jersey, the governor said.
Unemployment claims still on the rise
The filing of new claims for unemployment benefits also increased again last week, according to new figures released Thursday by the state Department of Labor and Workforce Development, bringing New Jersey’s three-week total for new claims up to 576,904. That comes as the governor has shuttered many businesses across the state to help slow the spread of the disease.
New Jersey has already frozen nearly $1 billion in FY2020 spending in response to the pandemic.
The hold on spending came after state government headed into the economic downturn caused by the pandemic with only a small percentage of budget reserves compared to total spending, leaving very little margin for error as the revenue losses and new expenses have started to pile up.
In fact, credit analysts say New Jersey is the only state in the country to propose delaying the end of its fiscal year as a way to help navigate the turbulence caused by the pandemic.
New Jersey is also the only state that levies a state income tax to have not already delayed the April 15 filing deadline with legislation or executive action. That has caused some confusion among taxpayers and accountants as the federal government had already announced a decision last month to use July 15 as the filing deadline for all U.S. income tax returns in response to the pandemic.
Under the bipartisan bill introduced on Thursday, the state deadline would be extended to July 15, for both filing state income-tax returns and making any payments owed to Treasury. State corporate-business tax returns originally due on April 15 would also be delayed for three months under the bill, according to a copy given to NJ Spotlight.
Tax changes will be immediate
The tax changes would go into effect immediately after Murphy enacts them, according to the bill’s language. The governor has already announced his support for delaying the April 15 deadline. No penalties or interest would be assessed on those who take advantage of the proposed three month-filing delay.
The same bill would also allow for the extension of FY2020 for three months, a virtually unprecedented fiscal-policy change that is designed to give Treasury more flexibility while the budget remains in flux during the pandemic. Moreover, the extra time will help the state provide the extension of the tax deadline without throwing the budget into disarray since April income-tax payments are a major source of revenue needed to keep spending in balance.
Under the state constitution, New Jersey is not allowed to carry over any deficits into a new fiscal year, and all short-term borrowing notes must also be paid off within the same fiscal year. The bill introduced on Thursday would only extend FY2020 for three months. It will take other legislative action to make any specific appropriations to cover the proposed July 1 to Sept. 30 fiscal-year add-on.
In addition, the measure also requires Treasury to produce by May 15 a revised forecast for FY2020 expenditures and revenues, and an assessment of the condition of the state economy. It also calls for Murphy to propose a new spending plan for the truncated FY2021 fiscal “year” by Aug. 25.
State Treasurer Elizabeth Maher Muoio was the first to publicly raise the notion of extending the current fiscal year for several months during a March 25 interview with NJTV business correspondent Rhonda Schaffler. Murphy and legislative leaders officially announced the decision to delay both the tax-filing deadline and the end of FY2020 on April 1.
Among the other bills introduced on Thursday, according to legislative staff, were measures seeking to make available new state funding for rental assistance and to allow small businesses to defer the payment and remittance of employment and other business-related taxes owed to the state.
Under the current legislative schedule, voting sessions in both the Assembly and Senate are slated for Monday. The voting sessions will be allowed to be held remotely under a measure that was passed last month in response to the pandemic.