Excludes certain retirement savings plan contributions, withdrawals, and rollovers from gross income tax.
Summary
S4106 would expand New Jersey gross income tax exclusions for retirement-related savings transactions. The bill amends the Gross Income Tax Act to exclude from taxable income certain contributions to, qualified withdrawals from, and rollovers among retirement savings vehicles, including 401(k) and 401(a) plans, 403(b) annuities, 457 deferred compensation plans, the federal Thrift Savings Plan, and IRAs. It also defines a “qualified withdrawal” as a withdrawal permitted under federal tax law that is not subject to federal penalties or additional taxes for nonqualifying withdrawals.
The bill also revises related statutory provisions governing pensions and annuities to align with these new exclusions. In particular, it removes references to some prior rollover treatment and adds language ensuring that qualified withdrawals from the listed retirement accounts are not included in gross income. The measure is intended to make retirement saving more tax-favored under New Jersey law and to apply prospectively to taxable years beginning on or after January 1 following enactment.
Impact
If enacted, the bill would amend N.J.S.54A:5-1, N.J.S.54A:6-21, and N.J.S.54A:6-10 to broaden the categories of retirement savings income excluded from New Jersey gross income tax. This would affect taxpayers who contribute to, withdraw from, or roll over funds among qualifying retirement plans and accounts, and it would reduce taxable income for those transactions under state law. The bill would also conform state treatment more closely to federal retirement-account rules by tying the exclusion to withdrawals that are permitted under the Internal Revenue Code and not penalized federally.
Sentiment
The available materials show generally favorable intent and no recorded opposition in committee transcripts or votes, though no committee discussion or voting history was provided. The sponsor’s statement frames the bill as a retirement-savings incentive designed to remove tax-related deterrents and improve financial security for New Jersey residents approaching retirement. Overall, the bill appears to be presented as a pro-savings, taxpayer-relief measure.
Contention
No specific points of contention are documented in the provided record, but the likely policy issue is revenue impact versus retirement-savings incentives. Supporters would emphasize that excluding more retirement contributions, withdrawals, and rollovers encourages saving and simplifies tax treatment, while critics could question the loss of gross income tax revenue and whether the exclusions disproportionately benefit higher-income taxpayers with greater access to retirement accounts. The bill text itself does not indicate any formal disagreement, amendments, or recorded objections.