This bill proposes a gross income tax exclusion for attorneys' fees and costs received by taxpayers in New Jersey in connection with claims related to unlawful discrimination, unlawful retaliation, and qui tam actions. Specifically, it states that gross income shall not include any amounts received or incurred for attorneys' fees and costs related to informal claims or legal actions for unlawful discrimination or retaliation. Additionally, it provides that amounts incurred for attorneys' fees and costs, as well as payments to other relators under a sharing agreement, will also be excluded when related to awards recovered under the federal False Claims Act, the New Jersey False Claims Act, or similar qui tam actions.

The bill aims to align New Jersey's tax treatment of these fees with the federal Civil Rights Tax Relief Act of 2004, which was designed to prevent double taxation on attorneys' fees for victims of discrimination or retaliation. Currently, New Jersey law does not exempt these fees from state gross income tax, resulting in taxation for both the victim and the attorney. By enacting this bill, the state seeks to eliminate this tax burden on victims, ensuring that they are not taxed on amounts they do not actually receive, while also providing clarity on the treatment of fees related to qui tam actions. The act is set to take effect immediately and will apply to taxable years beginning on or after January 1 of the year following its enactment.