By Paul Williams

Law360 (April 1, 2020, 7:53 PM EDT ) New Jersey will extend its income tax filing deadlines by three months, Gov. Phil Murphy announced Wednesday, but he is working with lawmakers to provide a matching extension for tax payment deadlines, a source at his office told Law360.

New Jersey will automatically extend its April 15 filing deadlines for the state's individual gross income tax and corporation business tax to July 15, following the federal filing extension in the wake of the novel coronavirus pandemic, Murphy, a Democrat, said at a news conference. Murphy did not mention whether the April 15 income tax payment dates will also be moved, and a source at his office told Law360 that the governor was "actively working with the Legislature to address" a coinciding payment extension.

In March, the Legislature unanimously passed a bill, A.B. 3841, to extend the tax filing and payment deadlines to June 30. Murphy has not yet signed that bill, and the source did not respond to a question asking whether the governor would still act on it and then seek another extension to July 15. His office has previously told Law360 that it doesn't comment on specific or pending legislation.

However, the governor signaled that he intended to extend the income tax payment deadlines to July 15, saying he and top lawmakers agreed to also extend the state's current fiscal year from June 30 to Sept. 30 to account for a delay in receiving this year's tax payments.

Moving the fiscal year's end date will mitigate some revenue disruptions that would result from taxes normally due in the current fiscal year being paid in the next fiscal year, Murphy, Senate President Steve Sweeney, D-West Deptford, and Assembly Speaker Craig Coughlin, D-Woodbridge, said in a joint statement.

"This will allow the administration and the Legislature to focus fully on leading New Jersey out of this crisis, and to allow for a robust, comprehensive and well-informed budget process later in the year," Murphy and the lawmakers said in a joint statement.

Murphy told reporters that providing taxpayers more time to file their taxes amid the spread of COVID-19, the respiratory disease caused by the virus, was "overwhelmingly the smart thing to do." Most states have already agreed to extend their income tax filing and payment dates as the virus spreads. By also pushing back the start of the next fiscal year, the state would have a sharper outlook on what its coffers will look like before the next spending plan is finalized, Murphy said.

"We will need a little time to emerge from this emergency and take full stock of the pace of our economic recovery so we can make smart decisions and enact a well-informed budget," Murphy said.

He added that the extension would apply only to the current fiscal year, and that the upcoming fiscal year would end on June 30, 2021.

In March, the Federation of Tax Administrators, which represents tax agencies, said states that extend their tax payment deadlines beyond the end of their fiscal years would create cash-flow issues that could complicate attempts to set budgets for fiscal year 2021.

New Jersey's proposed extension of its fiscal year is unprecedented, Verenda Smith, deputy director of the FTA, told Law360 on Wednesday.

"If a state ever has moved its fiscal year before, no one involved with it is still around, and it has never showed up in any of our historical archives," Smith said. "It will certainly be interesting to see the details."

Kevin McArdle, a spokesman for the Assembly majority office, told Law360 that the state constitution "expressly allows for a change in the fiscal year," but that the fiscal year dates would need to be adjusted via legislation.

New Jersey would fund its government operations for the extra three months of the fiscal year with "ongoing state revenue" through supplemental appropriations legislation, Richard McGrath, a Sweeney spokesman, told Law360.

The National Association of State Budget Officers is gathering information on New Jersey's fiscal year extension, but prolonging the budget deadline would provide the Garden State with a clearer revenue and expenditure picture for its spending plan, Shelby Kerns, executive director of the association, told Law360.

Although the expectation is that New Jersey lawmakers and the governor will hammer out the details of an extension for the income tax payment deadline and the fiscal year, it's unclear when the Legislature will meet. As of Wednesday, the Legislature's online calendar was blank for April, and McGrath told Law360 it's unknown when a potential bill pertaining to the tax payment extensions would be considered.

A representative of the New Jersey Division of Taxation did not respond to questions from Law360 on Wednesday asking if the payment deadline extension could be provided administratively. The division's website posted a notice saying that Murphy and lawmakers pledged to provide an extension but asked the public to check back later for more information.

Ralph Albert Thomas, the chief executive officer and executive director of the New Jersey Society of Certified Public Accountants, told Law360 via a representative that he thanked the group's members, the governor and lawmakers for their roles in the tax extension agreement. But he said that whether the filing extension will also apply to payments was "the number one question" of the organization and its members.

"The way the governor positioned it during his press conference, one would like to assume that the extension will apply to both filing and payments," Thomas said. "But CPAs don't like to rely on assumptions."

--Additional reporting by James Nani and Maria Koklanaris. Editing by Robert Rudinger.

For a reprint of this article, please contact reprints@law360.com.