club_cafe: New Jersey Taxing Investment Clubs

iras1 on

Ted,

I understand what you are trying to accomplish, but you are using the wrong approach. If we only ask our Senators/Assembly(wo)men to vote against S1770, we are ensuring that all investment club partners will be taxed. The tax is already part of the law as it exists today.

We should/must be asking them to REPLACE S1770 with a bill that exempts investment clubs by "definition," similar to the Pennsylvania treatment. In fact, as recently as 2000, investment clubs were exempt from NJ partnership filing requirements. The following comes from the instructions for the 2000 NJ-1065 return:

"Investment Clubs - recognize as their main source of
income interest, dividends, and gains on disposition of their
stock and securities. Investment clubs generally are not
considered a business. The activities of an investment club are
viewed essentially the same as an individual investor.
Accordingly, an investment club is not required to file a New
Jersey Partnership Form NJ-1065 unless it constitutes a business."

To conclude, my objection to your earlier message, is that it doesn't go far enough. Simple opposition to the proposed bill leaves us worse off than if it passes. In addition to opposing the current bill, we should be proposing the solution we desire -- total exemption for investment clubs from the $150/partner fee.

BTW, where did you learn that the proposed limit is $25,000/member (S1773 language) and not $50,000/member (S1770 language)? It wasn't stated in the oral testimony and the legislature's web site seems to indicate that S1770 is the surviving bill number.

Ira Smilovitz

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