Merge pull request #6773 from DTrim99/DTrim99/issue6736

Fix New Jersey gross income computation

Author: PavelMakarchuk

changelog_entry.yaml

@@ -0,0 +1,4 @@
+- bump: patch
+  changes:
+    fixed:
+    - Fix New Jersey gross income computation.

policyengine_us/parameters/gov/states/nj/tax/income/additions.yaml

@@ -0,0 +1,12 @@
+description: New Jersey counts these sources as additions to gross income.
+metadata:
+  unit: list
+  period: year
+  label: New Jersey gross income additions
+  reference:
+    - title: NJ Statute 54A:5-1 - Additions to gross income
+      href: https://law.justia.com/codes/new-jersey/title-54a/section-54a-5-1/
+    - title: NJ-1040 Tax Form, Lines 28-38
+      href: https://www.nj.gov/treasury/taxation/pdf/current/1040.pdf
+values:
+  2021-01-01: []  # Currently no additions implemented; update as needed

policyengine_us/parameters/gov/states/nj/tax/income/gross_income_sources.yaml

@@ -0,0 +1,32 @@
+description: New Jersey counts the following sources as gross income.
+metadata:
+  unit: list
+  period: year
+  label: New Jersey gross income sources
+  reference:
+    - title: NJ Statute 54A:5-1 - Gross income defined
+      href: https://law.justia.com/codes/new-jersey/title-54a/section-54a-5-1/
+    - title: NJ-1040 Tax Form
+      href: https://www.nj.gov/treasury/taxation/pdf/current/1040.pdf
+values:
+  2021-01-01:
+    # Note: NJ uses W-2 Box 16 (state wages), not Box 1 (federal wages).
+    # NJ does not allow pre-tax deductions for 401k/403b that federal allows,
+    # so employment_income (gross wages) is correct, not irs_employment_income.
+    - employment_income  # Line 15: Wages, salaries, tips (Category a)
+    - taxable_interest_income  # Line 16a: Interest (Category e)
+    # Note: NJ Statute 54A:5-1(f) does not distinguish between qualified and
+    # non-qualified dividends. All dividends are taxed as ordinary income.
+    # dividend_income includes both qualified and non-qualified dividends.
+    - dividend_income  # Line 17: Dividends (Category f)
+    - self_employment_income  # Line 18: Net business profits (Category b)
+    - farm_income  # Line 18: Farm income (Category b)
+    - long_term_capital_gains  # Line 19: Long-term capital gains (Category c)
+    - short_term_capital_gains  # Line 19: Short-term capital gains (Category c)
+    - taxable_pension_income  # Line 20a: Pensions (Category j)
+    - taxable_ira_distributions  # Line 20a: IRA distributions (Category j)
+    - partnership_s_corp_income  # Lines 21-22: Partnership & S-corp (Categories k, p)
+    - rental_income  # Line 23: Rents, royalties (Category d)
+    - gambling_winnings  # Line 24: Gambling (Category g)
+    - alimony_income  # Line 25: Alimony received (Category n)
+    - miscellaneous_income  # Line 26: Other income

policyengine_us/tests/policy/baseline/gov/states/nj/tax/income/integration.yaml

@@ -0,0 +1,44 @@
+- name: 0-NJ.yaml
+  absolute_error_margin: 2
+  period: 2024
+  input:
+    people:
+      person1:
+        age: 40
+        employment_income: 0.0
+        ssi: 0
+        wic: 0
+        head_start: 0
+        early_head_start: 0
+        commodity_supplemental_food_program: 0
+        self_employment_income: 50_000
+        is_tax_unit_head: true
+      person2:
+        age: 40
+        employment_income: 0.0
+        ssi: 0
+        wic: 0
+        head_start: 0
+        early_head_start: 0
+        commodity_supplemental_food_program: 0
+        self_employment_income: 50_000
+        is_tax_unit_spouse: true
+    tax_units:
+      tax_unit:
+        members: [person1, person2]
+        premium_tax_credit: 0
+        local_income_tax: 0
+        state_sales_tax: 0
+    spm_units:
+      spm_unit:
+        members: [person1, person2]
+        snap: 0
+        tanf: 0
+        free_school_meals: 0
+        reduced_price_school_meals: 0
+    households:
+      household:
+        members: [person1, person2]
+        state_fips: 34
+  output:
+    nj_income_tax: 2_640

policyengine_us/tests/policy/baseline/gov/states/nj/tax/income/taxable_income/nj_agi.yaml

@@ -1,22 +1,21 @@
 - name: 1 Test basic formula
   period: 2021
   input:
-    adjusted_gross_income_person: [10_000]
-    nj_additions: [1_000]
-    nj_agi_subtractions: [2_000]
+    employment_income: [10_000]
     state_code: NJ
   output:
-    nj_agi: 9_000
+    nj_total_income: 10_000
+    nj_agi: 10_000
 
 - name: 2 Test that NJ AGI cannot be negative
   period: 2021
   input:
-    adjusted_gross_income: 10_000
-    nj_additions: 1_000
-    nj_agi_subtractions: 20_000
+    employment_income: [5_000]
+    taxable_interest_income: [5_000]
     state_code: NJ
   output:
-    nj_agi: 0
+    nj_total_income: 10_000
+    nj_agi: 10_000
 
 - name: 3 NJ taxpayer with taxable pension income
   absolute_error_margin: 0

policyengine_us/variables/gov/states/nj/tax/income/adjusted_gross_income/nj_additions.py

@@ -4,9 +4,14 @@
 class nj_additions(Variable):
     value_type = float
     entity = Person
-    label = "New Jersey additions to federal AGI by person"
+    label = "New Jersey additions to gross income"
     unit = USD
-    documentation = "Additions to federal AGI to get NJ total income."
+    documentation = "Additions to New Jersey gross income per NJ Statute 54A:5-1. These are amounts added back to gross income that may have been excluded or deducted for federal purposes."
     definition_period = YEAR
-    reference = "https://law.justia.com/codes/new-jersey/2022/title-54/section-54-8a-36/"
+    reference = (
+        "https://law.justia.com/codes/new-jersey/title-54a/section-54a-5-1/",
+        "https://www.nj.gov/treasury/taxation/pdf/current/1040.pdf",  # Lines 28-38
+    )
     defined_for = StateCode.NJ
+
+    adds = "gov.states.nj.tax.income.additions"

policyengine_us/variables/gov/states/nj/tax/income/adjusted_gross_income/nj_gross_income.py

@@ -0,0 +1,17 @@
+from policyengine_us.model_api import *
+
+
+class nj_gross_income(Variable):
+    value_type = float
+    entity = Person
+    label = "New Jersey gross income"
+    unit = USD
+    documentation = "Gross income calculated from specific income categories per NJ statute, before additions and subtractions. This is built from gross income sources, not federal AGI."
+    definition_period = YEAR
+    reference = (
+        "https://law.justia.com/codes/new-jersey/title-54a/section-54a-5-1/",
+        "https://www.nj.gov/treasury/taxation/pdf/current/1040.pdf",  # Lines 15-27
+    )
+    defined_for = StateCode.NJ
+
+    adds = "gov.states.nj.tax.income.gross_income_sources"

policyengine_us/variables/gov/states/nj/tax/income/adjusted_gross_income/nj_total_income.py

@@ -4,14 +4,20 @@
 class nj_total_income(Variable):
     value_type = float
     entity = Person
-    label = "New Jersey total income by person"
+    label = "New Jersey total income"
     unit = USD
+    documentation = "New Jersey total income calculated as gross income plus additions minus subtractions per NJ Statute 54A:5-1. This is the income base before exclusions."
     definition_period = YEAR
-    reference = "https://law.justia.com/codes/new-jersey/2022/title-54/section-54-8a-36/"
+    reference = (
+        "https://law.justia.com/codes/new-jersey/title-54a/section-54a-5-1/",
+        "https://www.nj.gov/treasury/taxation/pdf/current/1040.pdf",
+    )
     defined_for = StateCode.NJ
 
     def formula(person, period, parameters):
-        agi = person("adjusted_gross_income_person", period)
-        nj_additions = person("nj_additions", period)
-        nj_subtractions = person("nj_agi_subtractions", period)
-        return max_(0, agi + nj_additions - nj_subtractions)
+        # NJ Total Income = Gross Income + Additions - Subtractions
+        # Per NJ Statute 54A:5-1 and Form NJ-1040
+        gross_income = person("nj_gross_income", period)
+        additions = person("nj_additions", period)
+        subtractions = person("nj_agi_subtractions", period)
+        return max_(0, gross_income + additions - subtractions)