Bill Text: NJ S1451 | 2024-2025 | Regular Session | Introduced
Bill Title: Establishes gross income tax credit and corporation business tax credit for student loan payments.
Spectrum: Partisan Bill (Democrat 2-0)
Status: (Introduced) 2024-01-09 - Introduced in the Senate, Referred to Senate Higher Education Committee [S1451 Detail]
Download: New_Jersey-2024-S1451-Introduced.html
STATE OF NEW JERSEY
221st LEGISLATURE
PRE-FILED FOR INTRODUCTION IN THE 2024 SESSION
Sponsored by:
Senator JOSEPH A. LAGANA
District 38 (Bergen)
Senator JAMES BEACH
District 6 (Burlington and Camden)
SYNOPSIS
Establishes gross income tax credit and corporation business tax credit for student loan payments.
CURRENT VERSION OF TEXT
Introduced Pending Technical Review by Legislative Counsel.
An Act providing tax credits for student loan payments, supplementing P.L.1945, c.162 (C.54:10A-1 et seq.) and Title 54A of the New Jersey Statutes.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. a. (1) A qualified taxpayer shall be allowed a credit against the tax otherwise due for the taxable year pursuant to the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq. in an amount equal to a portion of any payments made by the qualified taxpayer, during that part of the taxable year the qualified taxpayer was employed in the State, on a loan which is: (1) secured through a State student loan program, a federal student loan program, or a commercial lender, and which is (2) obtained and expended exclusively for purpose of paying the tuition and fees and other expenses such as room and board and books and supplies, related directly to the enrollment of the qualified taxpayer at an institution of higher education. A qualified taxpayer shall be allowed a credit notwithstanding any periods of loan forbearance or loan deferment.
b. The amount of the credit shall be in an amount equal to the lesser of:
(1) the benchmark loan payment multiplied by the number of months during the taxable year in which a taxpayer made loan payments; or
(2) the monthly loan payment amount multiplied by the number of months during which the taxpayer made loan payments.
c. The amount of the tax credit applied under this section against the tax otherwise due under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., for a taxable year, when taken together with any other payments, credits, deductions, and adjustments allowed by law shall not reduce the tax liability of the qualified taxpayer to an amount less than zero. The amount of the tax credit otherwise allowable under this section which cannot be applied for the taxable year due to the limitations of this subsection or under other provisions of N.J.S.54A:1-1 et seq. may be carried forward, if necessary, to the seven taxable years following the taxable year for which the tax credit was allowed.
d. If the tax credit allowed pursuant to this section, together with any payments, credits, deductions, and adjustments allowed by law, reduces the tax liability otherwise due for the taxable year under N.J.S.A.54A:1-1 et seq. to zero for a qualified taxpayer who has earned an associate's degree or a bachelor's degree in science, technology, engineering, or mathematics, the amount of credit remaining shall be paid to the taxpayer as a refund of an overpayment of tax in accordance with N.J.S.54A:9-7 provided however, that subsection (f) of that section, concerning the allowance of interest shall not apply.
e. As used in this section:
"Benchmark loan payment" means the monthly loan payment for the amount of principal cap paid over 10 years at the interest rate for federally subsidized Stafford loans pursuant to section 1077a of Title 20 of the United States Code (20 U.S.C. s.1077a) applicable during the qualified taxpayer's final year of enrollment at a college, university, or county college.
"Institution of higher education" means a public or private university, college, technical college, or a community or county college.
"Principal cap" means: (1) for an individual who has received a bachelor's degree, the average in-State tuition and fees for attendance at a public institution of higher education during the academic year ending during the calendar year prior to graduation multiplied by four; (2) for an individual who has received an associate's degree, the average in-State tuition and fees at a county college for the academic year ending during the calendar year prior to graduation multiplied by two; and (3) for an individual obtaining a graduate degree and graduating from an institution of higher education, the average in-State tuition and fees at a public institution of higher education for the academic year ending during the calendar year prior to graduation multiplied by four.
"Public institution of higher education" means Rutgers, The State University, the State colleges or universities established pursuant to chapter 64 of Title 18A of the New Jersey Statutes, the New Jersey Institute of Technology, Rowan University, and Montclair State University, the county colleges and any other public university or college now or hereafter established or authorized by State law.
"Qualified taxpayer" means any resident taxpayer who: (1) obtained an associate's degree or a bachelor's degree from an accredited institution of higher education or a graduate degree from an accredited institution of higher education who was employed in this State during the tax year; and (2) was employed in New Jersey on a full-time or part-time basis by an employer, was a self-employed individual, or was an active duty member of the United States Armed Forces, New Jersey National Guard, or the Reserve Component of the United States Armed Forces.
2. a. A taxpayer who is an employer shall be allowed a credit against the tax otherwise due for the taxable year pursuant to the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq. in an amount equal to any payment or payments made by the taxpayer directly to a lender or loan servicer on behalf of a qualified employee, during that part of the taxable year the qualified employee was employed in the State, on a loan which is: (1) secured through a State student loan program, a federal student loan program, or a commercial lender, and which is (2) obtained and expended exclusively for purpose of paying the tuition and fees and other expenses such as room and board and book and books and supplies, related directly to the enrollment of the qualified employee at an institution of higher education.
b. The amount of the credit shall be in an amount equal to the monthly loan payment made by the taxpayer directly to a lender or loan servicer multiplied by the number of months during the taxable year the taxpayer made payments on behalf of a qualified employee during the term of employment. If a qualified employee is employed on a part-time basis, the amount of the credit shall be in an amount equal to 50 percent of the monthly loan payment made by the taxpayer directly to a lender or loan servicer multiplied by the number of months during the taxable year the taxpayer made payments on behalf of a qualified employee during the term of employment.
c. The amount of the tax credit applied under this section against the tax otherwise due under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., for a taxable year, when taken together with any other payments, credits, deductions, and adjustments allowed by law shall not reduce the tax liability of the taxpayer to an amount less than zero. The amount of the tax credit otherwise allowable under this section which cannot be applied for the taxable year due to the limitations of this subsection or under other provisions of N.J.S.54A:1-1 et seq. may be carried forward, if necessary, to the seven taxable years following the taxable year for which the tax credit was allowed.
d (1) A business entity that is classified as a partnership for federal income tax purposes shall not be allowed a tax credit pursuant to this section directly, but the amount of tax credit of a taxpayer in respect of a distributive share of entity income, shall be determined by allocating to the taxpayer that proportion of the tax credit acquired by the entity that is equal to the taxpayer's share, whether or not distributed, of the total distributive income or gain of the entity for its taxable year ending within or with the taxpayer's taxable year.
(2) A New Jersey S Corporation shall not be allowed a tax credit pursuant to this section directly, but the amount of tax credit of a taxpayer in respect of a pro rata share of S Corporation income shall be determined by allocating to the taxpayer that proportion of the tax credit acquired by the New Jersey S Corporation that is equal to the taxpayer's share, whether or not distributed, of the total pro rata share of S Corporation income of the New Jersey S Corporation for its privilege period ending within or with the taxpayer's taxable year.
e. As used in this section:
"Employer" means any person, firm, business, educational institution, nonprofit agency, corporation, limited liability company, or other entity that employs employees in the State
"Full-time employment" means employment that is 32 hours or more of work per week.
"Part-time employment" means employment that is between 16 hours of work per week and 32 hours of work per week.
"Qualified employee" means: any resident taxpayer who: (1) obtained an associate's degree or a bachelor's degree from an accredited institution of higher education or a graduate degree from an accredited institution of higher education who was employed in this State during the tax year; and (2) was employed in New Jersey on a full-time or part-time basis by an employer.
3. a. A taxpayer shall be allowed a credit against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5) in an amount equal to any payment or payments made by the taxpayer directly to a lender or loan servicer on behalf of a qualified employee, during that part of the privilege period the qualified employee was employed in the State, on a loan which is: (1) secured through a State student loan program, a federal student loan program, or a commercial lender and which is (2) obtained and expended exclusively for purpose of paying the tuition and fees and other expenses such as room and board and books and supplies, related directly to the enrollment of the qualified employee at an institution of higher education.
b. The amount of the credit shall be in an amount equal to the monthly loan payment made by the taxpayer directly to a lender or loan servicer multiplied by the number of months during the privilege period the taxpayer made payments directly to a lender or loan servicer on behalf of a qualified employee during the term of employment. If a qualified employee is employed on a part-time basis, the amount of the credit shall be in an amount equal to 50 percent of the monthly loan payment made by the taxpayer multiplied by the number of months during the privilege period the taxpayer made payments on behalf of a qualified employee during the term of employment.
c. The amount of the tax credit applied under this section against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), for a privilege period, when taken together with any other payments, credits, deductions, and adjustments allowed by law shall not reduce the tax liability of the taxpayer to an amount less than the statutory minimum provided in subsection (e) of section 5 of P.L.1945, c.162 (C.54:10A-5). The amount of the tax credit otherwise allowable under this section which cannot be applied for the privilege period due to the limitations of this subsection or under other provisions of P.L.1945, c.162 (C.54:10A-1 et seq.) may be carried forward, if necessary, to the ten privilege period following the privilege period for which the tax credit was allowed.
d. As used in this section:
"Employer" means any person, firm, business, educational institution, nonprofit agency, corporation, limited liability company, or other entity that employs employees in the State.
"Full-time employment" means employment that is 32 hours or more of work per week.
"Part-time employment" means employment that is between 16 hours of work per week and 32 hours of work per week.
"Qualified employee" means: any resident employee who: obtained an associate's degree or a bachelor's degree from an accredited institution of higher education or a graduate degree from an accredited institution of higher education who was employed in this State during the privilege period; and (2) was employed in New Jersey on a full-time or part-time basis by an employer.
4. The Director of the Division of Taxation in the Department of the Treasury, in consultation with the Secretary of Higher Education, shall adopt rules and regulations pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) to effectuate the purposes of this act.
5. This act shall take effect immediately and shall apply to taxable years and privilege periods beginning on or after January 1 next following enactment.
STATEMENT
This bill establishes an incentive for New Jersey residents who have graduated from a community college, college or university, or graduate school to stay, or return to, New Jersey after their graduation and for employers to hire college graduates to work in this State and subsidizes their loan payments. The bill provides qualified taxpayers and businesses with a credit against the gross income tax (GIT) or the corporation business tax (CBT) for certain educational loan payments.
The tax credit is allowed for any payments made by a taxpayer or on behalf of a taxpayer during the taxable or privilege period on a loan which is: (1) secured through a State student loan program, a federal student loan program, or a commercial lender and which is (2) obtained and expended exclusively for purpose of paying the tuition and fees and other expenses such as room and board and book and books and supplies, related directly to the enrollment of the qualified taxpayer at an institution of higher education.
Under the bill, the GIT credit is equal to payments made by a qualified taxpayer, during that part of the taxable year they were employed in the State. The GIT credit for an individual taxpayer is equal to the lesser of: (1) the taxpayer's monthly loan payments multiplied by the number of months the taxpayer made loan payments; or (2) the benchmark loan payment multiplied by the number of months during the taxable year in which a taxpayer made loan payments. The GIT credit is refundable if an individual taxpayer earned an associate's degree or a bachelor's degree in science, technology, engineering, or mathematics. The refundable GIT credit is available only to individual taxpayers and is not available to a business that makes loan payments on behalf of an employee.
A gross income taxpayer who is an employer or a business subject to the CBT may receive a tax credit equal to any payments made on behalf of a qualified employee who graduated from an accredited institution of higher education and was employed in New Jersey during the tax year. The GIT credit for a taxpayer who is an employer and the CBT credit are equal to the monthly loan payment made by the employer multiplied by the number of loan payments made by a taxpayer on behalf of a qualified employee during a taxable year or privilege period. The credit is reduced to 50 percent if a qualified employee is employed on a part-time basis.
The bill defines a qualified employee as a resident taxpayer who (1) obtained an associate's degree or a bachelor's degree from an accredited institution of higher education or a graduate degree from an accredited institution of higher education who was employed in this State during the privilege period; and (2) was employed in New Jersey on a full-time or part-time basis by an employer, was a self-employed individual, or was an active duty member of the United States Armed Forces, New Jersey National Guard, or the Reserve Component of the United States Armed Forces.
