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BAR REPORT - Capitol Report

This is a status report provided by the New Jersey State Bar Association on recently passed and pending legislation, regulations, gubernatorial nominations and/or appointments of interest to lawyers, as well as the involvement of the NJSBA as amicus in appellate court matters. To learn more, visit njsba.com.

NJSBA-drafted double taxation bill heads to a full Assembly vote

The Assembly Appropriations Committee unanimously voted to move A-3614 (Burzichelli)/S-784 (Sarlo) out of committee, and it heads to a full vote in the Assembly today. The bill, which ends the double taxation of attorneys’ fees awarded in civil rights and employment discrimination and retaliation cases, was drafted by New Jersey State Bar Association Labor and Employment Law Section members Bruce McMoran and Justin Burns, of McMoran, O’Connor, Bramley & Burns, P.C. Burns testified on the bill earlier this year.

“This bill ends the unfair treatment of victims who are taxed on fees that they never see or receive,” said McMoran. “It aligns New Jersey tax laws with the federal laws that only tax the attorney or law firm on fees. It also fixes an anomaly in New Jersey tax law that taxes qui tam plaintiffs on the entire recovery, even if that recovery is shared with other qui tam plaintiffs who later filed claims.”

Under current New Jersey law, both the attorney or law firm that receives the fee and the plaintiff are taxed on the fee itself, even though the plaintiff never receives the fee. In the case of qui tam plaintiffs, the bill was amended earlier this year following a controversial Appellate Division decision in Kite v. Division of Taxation, Docket No. A-3349-15T3. In Kite, the Appellate Division held that despite the fact that there were three qui tam relators, the imposition on taxes on the first filed relator for the entire recovery was appropriate even though the recovery was split three ways. The other two relators were not taxed on their recovery.

The Senate passed the bill in April. The bill awaits a full vote in the Assembly before it heads to the governor’s desk for his signature. The NJSBA is closely monitoring the bill.

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