fix: implement NJ same-category loss rule for gross income

[MaxGhenis]

Summary

• Implements New Jersey's "same category rule" (N.J.S. 54A:5-1) for gross income calculation
• Under this rule, if any income category has a net loss, that loss is disregarded (treated as $0) and cannot offset income from other categories
• Applies max_(0, category_total) to capital gains, partnership/S-corp income, self-employment income, farm income, and rental income

Fixes #7017

Test plan

• Added YAML tests covering the same-category loss rule scenarios
• Verified existing NJ integration tests still pass
• Ran make format to ensure code style compliance

🤖 Generated with Claude Code

[codecov]

Codecov Report

✅ All modified and coverable lines are covered by tests.
✅ Project coverage is 100.00%. Comparing base (f073b57) to head (580c0a8).
⚠️ Report is 102 commits behind head on main.

Additional details and impacted files

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##              main     #7280   +/-   ##
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  Coverage   100.00%   100.00%           
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  Files            4         1    -3     
  Lines           76        16   -60     
  Branches         1         1           
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- Hits            76        16   -60     

Flag	Coverage Δ
unittests	100.00% <100.00%> (ø)

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[hua7450]

State Tax Parameter Audit

Source

• Statute: N.J.S. 54A:5-1 — New Jersey gross income defined
• Form: 2025 NJ-1040 Resident Income Tax Return
• Instructions: 2025 NJ-1040 Instructions (70 pages)
• Exempt Income: NJ Division of Taxation — Exempt (Nontaxable) Income
• Scope: PR changes only

---

Issues Found

ISSUE 1 (HIGH): unemployment_compensation incorrectly added to NJ gross income

File: parameters/gov/states/nj/tax/income/gross_income/non_negative_sources.yaml

The PR adds unemployment_compensation to the non-negative sources list with the comment:

- unemployment_compensation  # Line 20b: Unemployment compensation (Category o)

This is wrong on three counts:

1. NJ does NOT tax unemployment compensation. It is explicitly exempt per N.J.S. 54A:6-13 and listed as nontaxable on the NJ Division of Taxation exempt income page. The NJ-1040 instructions state: "Do not include the following income... Unemployment Compensation received from the state."

2. Line 20b is NOT unemployment. Line 20b on the NJ-1040 is "Excludable Pension, Annuity, and IRA Distributions/Withdrawals" — the return-of-contributions portion of retirement distributions. There is no NJ-1040 line for unemployment compensation. (NJ-1040 Instructions, p.16 of booklet)

3. Category (o) is NOT unemployment. Per N.J.S. 54A:5-1(o), category (o) is "income, gain or profit derived from acts or omissions defined as crimes or offenses" — i.e., criminal income.

4. This is a new addition, not a refactor. The old gross_income_sources.yaml on master did NOT include unemployment_compensation. The PR introduces this error.

Impact: Overstates NJ gross income for anyone receiving unemployment benefits.

Fix: Remove unemployment_compensation from non_negative_sources.yaml.

ISSUE 2 (HIGH): Test incorrectly asserts unemployment is included

File: tests/policy/baseline/gov/states/nj/tax/income/taxable_income/nj_gross_income.yaml

- name: NJ gross income includes unemployment compensation
  period: 2024
  input:
    employment_income: 60_000
    unemployment_compensation: 12_000
    state_code: NJ
  output:
    nj_gross_income: 72_000

Expected output should be 60_000, not 72_000. Unemployment compensation is exempt from NJ income tax.

Fix: Either remove this test or change expected output to 60_000.

---

Confirmed Correct

Component	Verification	Status
Same-category loss rule logic	Instructions for Lines 18, 19, 21, 22, 23, 24 all say "if net is a loss, make no entry"	✅
category_b (self-employment + farm)	Maps to Line 18 / N.J.S. 54A:5-1(b)	✅
category_c (capital gains)	Maps to Line 19 / N.J.S. 54A:5-1(c)	✅
category_d (rental)	Maps to Line 23 / N.J.S. 54A:5-1(d)	✅
category_k_p (partnership + S-corp)	Maps to Lines 21-22 / N.J.S. 54A:5-1(k,p)	✅
employment_income	Line 15 / Category (a)	✅
taxable_interest_income	Line 16a / Category (e)	✅
dividend_income	Line 17 / Category (f)	✅
taxable_pension_income	Line 20a / Category (j)	✅
taxable_ira_distributions	Line 20a / Category (j)	✅
gambling_winnings	Line 24 / Category (g)	✅
alimony_income	Line 25 / Category (n)	✅
miscellaneous_income	Line 26 (other)	✅
6 of 7 YAML tests	Verified against NJ-1040 form and instructions	✅

---

Pre-existing Issues (not introduced by this PR)

1. Categories (k) and (p) combined: The statute defines partnership (k) and S-corp (p) as separate categories with separate NJ-1040 lines (21 and 22). Under the same-category rule, a partnership loss should NOT offset S-corp gain. But PolicyEngine uses a single partnership_s_corp_income variable, making separate clamping impossible. This is a data model limitation.

2. Gambling losses not netted for NJ: NJ-1040 Line 24 is "Net Gambling Winnings" — gambling losses can offset winnings in the same year. The code uses gambling_winnings without subtracting gambling_losses. Since gambling_winnings can't go negative this doesn't overstate income, but misses a legitimate NJ-specific deduction.

3. Estate/trust income not modeled: Category (h) uses "net gains" language and could have losses, but PolicyEngine doesn't have a dedicated variable for this.

4. Alternative Business Calculation Adjustment (ABCA) not implemented: Per P.L. 2011 c.60, NJ allows limited cross-category netting (50%) between business categories (b, d, k, p) with 20-year carryforward. Out of scope for this PR.

---

Summary

The core same-category loss rule implementation is correct and well-structured. The parameter-driven refactoring is an improvement over the hardcoded version. The one actionable fix is removing unemployment_compensation from non_negative_sources.yaml and correcting the associated test — NJ has exempted unemployment from state income tax since 1976.

[PavelMakarchuk]

@hua7450 ready for re-review