Businesses and individuals that owe back New Jersey state taxes now can take advantage of a reduction of interest owed under a new state tax amnesty. On March 17, New Jersey Governor Jon Corzine signed into law a bill (A. 3819) creating a 45-day state tax amnesty.

Under this amnesty, taxpayers who owe back state taxes can pay the tax and one-half of the balance of the interest that is due as of May 1, 2009, without the imposition of the remaining one-half of the balance of interest that is due as of May 1, 2009, recovery fees, civil penalties and criminal penalties arising out of the late payment.

Taxpayers eligible for the amnesty that do not pay back taxes owed will be subject to a 5 percent penalty which may not be waived or abated, and is in addition to all other penalties, interest or collection costs otherwise authorized by law.

The amnesty applies only to state tax liabilities for tax returns due on and after January 1, 2002 (the day following termination of the most recent amnesty period) and before February 1, 2009. While it is not certain when the amnesty period will begin or end, the statute provides that the period will end no later than June 15, 2009. Taxpayers who at the time of payment are under criminal investigation or charge for any state tax matter are ineligible for the amnesty.

The amnesty comes as the state is trying to close the gap on a projected $3.5 billion budget deficit for the current fiscal year. Similar tax amnesties have yielded sizable returns for the state during years of budget deficits. A 2002 amnesty generated gross revenues of $276.9 million. Other amnesties in 1987 and 1996 generated net incomes of $68 million and $244 million, respectively.

The bill appropriates up to $10 million of the proceeds to pay for administration of the tax amnesty program