By James Nani

Law360 (March 24, 2020, 6:43 PM EDT) -- New Jersey's Republican lawmakers called on the governor Tuesday to extend the state tax return filing deadline, even with the state facing big revenue declines from the efforts to help mitigate the effects of the novel coronavirus.

Assemblyman Ryan Peters, R-Lumberton, and Sen. Anthony M. Bucco, R-Denville, called on Democratic Gov. Phil Murphy to extend the filing deadline for state tax returns for individuals and businesses. The GOP lawmakers asked the governor to sign legislation passed last week, A.B. 3841 and its companion, S.B. 2300, that would give New Jersey residents and corporations extra time to file their state tax income returns if a federal extension is offered in response to the novel coronavirus pandemic.

"With the disruptions caused by the coronavirus outbreak and Gov. Murphy's subsequent executive orders, it is only right and fair that the tax filing deadline be extended," Peters said in a statement. "Taxpayers in New Jersey should not be penalized by their government over the imposition of stay-at-home orders and business closures that they have no power to change."

Bucco, one of the sponsors of the legislation, said with April 15 just three weeks away, the bill would extend personal income and corporate income tax deadlines to whatever the federal deadline were to change to, but no later than the last day of New Jersey's fiscal year, June 30. U.S. Treasury Secretary Steven Mnuchin announced last week the department would push back national tax filing deadlines to July, which would set New Jersey's deadline to June 30 if the bill became law. 

"The extension is warranted and necessary, especially for taxpayers who may end up owing a tax payment to the state," Bucco said. 

Alyana Alfaro, a Murphy spokeswoman, told Law360 on Tuesday that the governor's office doesn't comment on specific or pending legislation.

Richard McGrath, a spokesman for Senate President Steve Sweeney, D-West Deptford, said the state Senate and Assembly both voted to approve the bill but deferred comment to the governor's office on whether Murphy would sign it. McGrath declined further comment.

Danielle DeSisto, a spokeswoman for Assembly Speaker Craig Coughlin, D-Woodbridge, said the purpose of the legislation is to support people who may be facing financial challenges as a result of COVID-19. She deferred further comment to the governor's office.

Pressure on Murphy to sign the legislation comes as his administration said Monday that it expects to freeze more than $900 million in spending because of "precipitous declines" in tax revenue, including drops in gross income tax revenues, corporate business tax revenues and sales and use tax revenues due to required business shutdowns. The state Division of Budget and Accounting on Friday placed the appropriation funds into a reserve, according to a letter from the state Department of the Treasury.

The state expects negative impacts in state liquidity in the 2020 fiscal year because of an expected extension of the state tax filing deadline, according to the letter. Because of orders to stay at home, the state could see decreases in motor fuel taxes, casino closures could decrease casino-related taxes and lottery sales have already begun to decline, the letter said.

The choice to push back the tax filing deadline for New Jersey comes as even more governors said Monday their states would conform with the federal government despite state officials sounding the alarm about the resulting budget and cash crunch. New York and New York City are expecting billions of dollars less in tax revenue. 

Jared Walczak, director of state tax policy for the right-leaning Tax Foundation, told Law360 on Tuesday that states have to balance concerns about cash flow with the burden imposed on taxpayers by requiring them to collect receipts, visit tax preparers and make payments during a public health and economic crisis.

"To the extent that states can match the extended federal filing and payment deadlines, they should," Walczak said. "If states fail to adjust their own tax deadlines, they eliminate the benefit of the federal extension for their taxpayers, who must do most of the work on their federal returns to be able to file in their own state by an earlier deadline."

Timing changes could help states make tough choices by prioritize spending, Walczak said, although he admitted the choice puts states such as New Jersey in a difficult position. 

"Still, New Jersey needs to pay its bills," Walczak said. "Most states believe they can do this while aiding taxpayers by moving the filing deadline. For New Jersey, that is a question the governor will now have to answer."

Tom Bracken, president and CEO of the New Jersey Chamber of Commerce, told Law360 he supports pushing back the state deadlines to make it consistent with the federal government, despite the fiscal consequences.

"Paying their taxes is the furthest thing on the minds of people," Bracken said. "And quite frankly, it would kind of pour a little salt in the wound right now to make tax payments when a lot of people are concerned about their own personal or business cash flow."

Brandon McKoy, president of the left-leaning research institute New Jersey Policy Perspective, told Law360 that he thinks the state could be in a better position than other states to push back its deadlines because it doesn't make one major lump sum payment for pensions and schools.

But he said there could be unintended consequences the state Treasury may understand that aren't apparent to all. He also said applying for things such as earned income tax credits could be more difficult if state and federal deadlines aren't aligned. 

"Everything is going to be disrupted right now, no matter what, but you don't want to disrupt things more than they need to be, right?" McKoy said. "And so this is really a question at the end of the day for the Treasury."

--Additional reporting by Maria Koklanaris, Paul Williams and Abraham Gross. Editing by Neil Cohen.

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