Probably, but New Jersey's rule is stricter than every guide assumes, and the usual evidence does not prove it. New Jersey does not use the 50% test California, New York and Connecticut use. It requires the fund to be a New Jersey qualified investment fund: 80% or more of its holdings in securities exempt from New Jersey tax, plus a completed Form IF-1. SGOV holds essentially nothing but Treasury bills, so it almost certainly clears 80% on substance. What it does not have is the certification that the 50% states accept, because iShares publishes the 50% attestation and not an 80% one.
Every article about SGOV and state tax says the same thing: Treasury interest is exempt under 31 U.S.C. 3124, so you can exclude it. For most states that is the end of it. New Jersey wrote its rule differently, and if you live there the usual answer does not quite apply to you.
New Jersey's rule is 80%, not 50%
California, New York and Connecticut all gate the exclusion on the same thing: a fund must hold at least 50% of its assets in qualifying US obligations at the close of each quarter. Funds know this, and fund companies publish an annual attestation for exactly that test.
New Jersey uses a different mechanism entirely. Its Division of Taxation publication GIT-5, Exempt (Nontaxable) Income, sets out three conditions. Quoting it directly, a qualified investment fund must:
“Be a regulated investment company; Invest 80% or more of its funds (other than cash or receivables) in securities that are exempt from New Jersey Income Tax; and Complete and retain Form IF-1, Certification of Qualified Investment Fund, to document its status.”
Three differences from the 50% states, and each one matters.
| CA, NY, CT | New Jersey | |
|---|---|---|
| Threshold | 50% of assets | 80% of funds |
| Measured | At the close of each quarter | Of funds other than cash or receivables |
| Paperwork | None required of the fund | Form IF-1, retained by the fund |
| Published attestation | Yes, annually by iShares | Not in that document |
What that means for SGOV specifically
Take the substance and the paperwork separately, because they give different answers.
On substance, SGOV should clear 80% comfortably. The fund holds US Treasury bills maturing in zero to three months and essentially nothing else. Treasury interest is exempt from New Jersey tax, so the overwhelming majority of its holdings are the kind of security the 80% test is asking about. For tax year 2025, iShares reported 95.14% of SGOV's income came from US government obligations, and while that figure measures income rather than assets, a fund does not earn 95% of its income from Treasuries while holding a fifth of its assets in something else.
On paperwork, the usual evidence does not reach. In its annual US Government Source Income Information document, iShares marks SGOV with a double asterisk, and the legend defines that as “At least 50% of the assets of the fund were invested in Federal Obligations at the end of each quarter of the fiscal year.” That is the 50% test. It is the right evidence for California, New York and Connecticut. It is not an 80% attestation and it says nothing about Form IF-1.
So a New Jersey resident is in an unusual position: the economics are almost certainly fine, and the document everyone cites proves a different thing than New Jersey asks for.
What to do about it
- Ask iShares directly whether SGOV is a New Jersey qualified investment fund. GIT-5 says Form IF-1 is retained by the fund rather than filed, and must be made available on request. The fund is the only party that can answer.
- Check your broker's state tax supplement. Some brokers publish a New Jersey-specific breakdown separate from the federal government-source percentages.
- Keep whatever you rely on. If you exclude the income, the support for that position should be something more specific than a general article, this one included.
- Ask a tax professional if the amount is material. New Jersey's top rate is 10.75%, so on a large cash position the difference is real money rather than a rounding item.
The part that is not in doubt
Two things are clear regardless of how the qualified investment fund question lands.
If you hold Treasury bills directly rather than through a fund, the interest is exempt from New Jersey tax and no fund-level test applies. The entire 80% question exists because a fund sits between you and the Treasury. Buying bills at auction through your broker sidesteps it.
And none of this touches federal tax. SGOV's distributions are fully taxable federally in every state, including the nine that levy no income tax at all. The state exemption is a state matter only.
SGOV and New Jersey state tax
- New Jersey requires a qualified investment fund: 80% or more of holdings in NJ-exempt securities, not the 50% other states use.
- It also requires the fund to complete and retain Form IF-1, which the fund keeps rather than files.
- SGOV holds only short Treasury bills, so it should clear 80% on substance.
- The iShares attestation everyone cites certifies the 50% test, which is the wrong test for New Jersey.
- Holding T-bills directly avoids the question entirely, because no fund-level test applies.
- Federal tax applies to all of it either way.
Common questions
Most likely, but New Jersey applies a stricter test than other states and the usual documentation does not address it. New Jersey exempts distributions from a qualified investment fund, which it defines as a regulated investment company investing 80% or more of its funds, other than cash or receivables, in securities exempt from New Jersey Income Tax, and which completes and retains Form IF-1. SGOV holds only short-dated Treasury bills and should clear the 80% threshold on substance, but the annual iShares tax document attests to a 50% threshold rather than an 80% one. Confirm with the fund or a tax professional before relying on the exclusion. This is general information, not tax advice.
New Jersey publication GIT-5 states that a qualified investment fund must be a regulated investment company, invest 80% or more of its funds other than cash or receivables in securities exempt from New Jersey Income Tax, and complete and retain Form IF-1, the Certification of Qualified Investment Fund. A fund may hold up to 20% of its investments in taxable debt obligations, and the portion of distributions derived from those taxable investments must be reported on your New Jersey return.
California, New York and Connecticut each condition the exclusion on a fund holding at least 50% of its assets in qualifying US obligations at the close of each quarter. New Jersey instead uses its qualified investment fund definition, which sets the bar at 80% of funds and adds a certification requirement. Fund companies routinely publish an attestation for the 50% test because three large states use it, so that is the document in circulation, and it does not speak to New Jersey's test.
Yes. The qualified investment fund rules exist because a fund sits between you and the Treasury. Interest on Treasury bills you hold directly is exempt from New Jersey Income Tax without any fund-level test, so buying bills at auction or on the secondary market through a broker sidesteps the 80% question. The tradeoff is the manual work of reinvesting as each bill matures, which is the convenience SGOV charges its expense ratio for.
No. SGOV's distributions are fully taxable at the federal level regardless of where you live. The exemption under 31 U.S.C. 3124 bars states from taxing federal obligations; it does not affect federal income tax. This is also why SGOV's state tax treatment is irrelevant in the nine states that levy no income tax at all.