On Monday, the New Jersey Senate passed legislation sponsored by Senator Raj Mukherji to strengthen municipal payroll tax administration and improve enforcement and collections. The bill, S-4219, updates the payroll tax law for certain municipalities by requiring State agencies to share relevant information with local governments, requiring employers to provide additional payroll information to support administration of the tax, and establishing a funding mechanism to bolster municipal enforcement efforts.
In practice, the bill aligns State and municipal data systems so local governments like Jersey City—which relies on payroll taxes on employers to help fund its schools—can enforce existing obligations more efficiently and fairly, without shifting the burden onto property taxpayers when employers fail to comply.
“In Jersey City, every dollar for our public schools matters. By letting cities have access to the State’s existing wage and withholding data, S-4219 helps protect school funding by ensuring local payroll taxes are collected fairly and consistently,” said Senator Mukherji (D-Hudson). “This bill will help Jersey City verify compliance with the municipal payroll tax on companies and identify those employers who are not reporting at all. That equals more reliable and predictable revenue for our classrooms, less volatility in school budgets, and a lower property tax burden on residents. I will always fight for equal educational opportunity for students in Abbott districts like Jersey City and Hoboken, and I want to thank Mayor-elect Solomon – while serving as a City Councilman – for sharing concerns which inspired this bill in the first place.”
“This is a win for Jersey City taxpayers and our public schools. I want to thank Senator Mukherji for sponsoring this bill and urge swift action in the Assembly,” said Mayor-elect James Solomon of Jersey City. “When I served on the City Council, we audited major businesses and found widespread failure to pay their payroll tax—depriving our schools of hundreds of millions of dollars in funding. Senator Mukherji worked closely with the Board of Education and my office to craft a law that gives the payroll tax teeth and the tools needed to identify employers dodging what they owe and verify that those reporting are telling the truth.”
Under the “Local Tax Authorization Act,” a municipality with a population in excess of 200,000 residents is authorized to enact an ordinance imposing an employer payroll tax on certain employers within the municipality. Under current law, however, the Director of the Division of Taxation in the Department of the Treasury is generally prohibited from disclosing certain State tax return information, which includes significant portions of the payroll tax used in municipalities like Jersey City and Newark. The disclosure of information is presently in the Director’s discretion and limited to employer-provided wage and tax withholding information contained in tax reports or returns filed under the New Jersey gross income tax.
The bill would work to expand transparency by requiring the report and payment of the payroll tax imposed for the preceding calendar quarter on or before the last day of April, July, October, and January. Local ordinances would have to provide methods of enforcement of the tax and provide what penalties are imposed for failure of payment. If employers fail to make payroll tax payments on time, municipal ordinances are allowed to add interest up to eight percent per year on the first $1,500 of delinquency and 18 percent per year when the number exceeds $1,500.
Finally, the bill would expand the information the Director of the Division of Taxation shall disclose to a municipality to include the employers subject to the payroll tax that did and did not report payroll information for a preceding calendar quarter.