The future of hundreds of investment clubs in New Jersey has been thrown into doubt because of changes to the state tax code.

Legislation passed earlier this month means thousands of small- time investors who play the stock market as members of social investment clubs will be slapped with a $150 partnership fee.

The fee is a small part of the huge corporate tax overhaul designed to raise an extra $1 billion in business taxes and plug the state budget deficit. It was aimed at professionals -- doctors, lawyers, accountants -- and businesses.

But it is also providing a lesson in the unintended consequences of law making.

"There are 12 of us, and we each put in $5 a week," said Former State Treasurer James DiEleuterio, one of thousands of club members in New Jersey who will be affected by the law. "The whole thing is probably worth about $4,000, and we only distribute about $5 a year to the members."

New Jersey has about 800 clubs registered with the National Association of Investors and probably hundreds more that are not.

They tend to be groups of friends who pool a little cash, invest it in the market and share equally in the profits and losses. They don't consider themselves businesses. In the eyes of New Jersey's tax collectors, though, they are partnerships.

State taxation officials could not be reached for comment.

Some clubs say they will disband rather than force their members to pay, as participants may not even earn $150 a year on their investments. If they do turn a profit, they must pay personal income tax on their gains, in addition to the $150 fee.

Sen. Robert Singer (R-Ocean) said he will introduce legislation in September that will have the effect of exempting investment clubs from the fee. Singer said he would eliminate the $150 for partnerships with assets of $60,000 or less, but he conceded that cap might need to be higher.

"Maybe the cap will have to be $100,000," Singer said. "We don't want to create a new loophole that will shelter big investment firms. But the tax law was never intended to hit investment clubs."

Phil Crocker of Colonia, a New Jersey director of the Madison Heights, Mich.-based National Association of Investors (better-investing.org), said he belongs to three clubs and would be on the hook for $450 a year.

"And each year, every one of us is paying taxes on our dividends and our capital gains," Crocker said. "We have to claim this on our personal income tax return every year. This is strictly above board."

DiEleuterio, the former state Treasurer, said his club will disband if the $150 fee isn't rolled back.

"But I'm going to try to get this changed," he said. "I know a few legislators, and I can get their attention. It was never their intent to do anything like this."

East Brunswick accountant Martin Davidoff testified before the legislature in opposition to the new fee before the new state budget was adopted in early July, but to no avail.

"Taxes should be assessed on some theory of ability to pay. This 'processing fee' clearly violated that premise," he said.