Excludes deferred compensation of certain public school and federal tax-exempt organization employees from current taxation under gross income tax.

This bill (S 2565) changes New Jersey's gross income tax rules to exclude certain retirement savings contributions from current taxation for specific employees. It directly affects public school employees and workers at federally tax-exempt organizations (like hospitals, churches, and schools) who use retirement plans under federal Section 403(b). The key provision aligns New Jersey's tax treatment with federal rules, allowing these employees to defer income tax on retirement contributions - similar to private-sector workers using Section 401(k) plans - until funds are withdrawn. This creates a tax incentive for retirement savings that currently exists for for-profit business employees but not for these public and non-profit workers. The change applies to taxable years starting after the bill's enactment.