Bill Text: NJ S2223 | 2018-2019 | Regular Session | Introduced
Bill Title: Allows gross income tax deductions for contributions to the New Jersey Better Educational Savings Trust (NJBEST) Program.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2018-03-08 - Introduced in the Senate, Referred to Senate Higher Education Committee [S2223 Detail]
Download: New_Jersey-2018-S2223-Introduced.html
Sponsored by:
Senator SHIRLEY K. TURNER
District 15 (Hunterdon and Mercer)
SYNOPSIS
Allows gross income tax deductions for contributions to the New Jersey Better Educational Savings Trust (NJBEST) Program.
CURRENT VERSION OF TEXT
As introduced.
An Act allowing gross income tax deductions for contributions to the New Jersey Better Educational Savings Trust (NJBEST) Program, supplementing Title 54A of the New Jersey Statutes and amending P.L.1997, c.237.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. (New section) A taxpayer shall be allowed a deduction from the taxpayer's gross income for the taxable year in the amount of the taxpayer's contribution for the taxable year to one or more accounts established pursuant to the "New Jersey Better Educational Savings Trust (NJBEST) Program," (N.J.S.18A:71B-35 et seq.); provided however, that the deduction allowed for a taxable year shall not exceed $10,000 for a taxable year for married individuals filing a joint return for federal tax purposes and shall not exceed $5,000 for a taxable year for married individuals filing separately or for unmarried individuals.
2. Section 13 of P.L.1997, c.237 (C.54A:6-25) is amended to read as follows:
13. a. Gross income shall not include earnings on a Coverdell education savings account, a [qualified State] tuition program account, or a qualified ABLE account until the earnings are distributed from the account, at which time [they] the amount of the distribution attributable to earnings on the account and the amount of the distribution attributable to contributions allowed as a deduction pursuant to section 1 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall be includible in the gross income of the distributee except as provided in this section.
b. Gross income shall not include qualified distributions as defined in paragraph (3) of subsection c. of this section.
c. For purposes of this section:
(1) "Coverdell education savings account" means a Coverdell education savings account as defined pursuant to paragraph (1) of subsection (b) of section 530 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.530.
(2) "[Qualified State tuition] Tuition program account" means an account established pursuant to the "New Jersey Better Educational Savings Trust (NJBEST) Program," (N.J.S.18A:71B-35 et seq.) or an account established pursuant to any [qualified State] tuition program [, as defined pursuant to] established in compliance with subsection (b) of section 529 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.529 or a tuition credit or certificate purchased pursuant to any such program.
(3) "Qualified distribution" means any of the following:
(a) a distribution from a [qualified State] tuition program account that is used for qualified higher education expenses as defined pursuant to paragraph (3) of subsection (e) of section 529 or a distribution from a qualified ABLE account that is used for qualified disability expenses as defined pursuant to paragraph (5) of subsection (e) of section 529A of the federal Internal Revenue Code of 1986, 26 U.S.C. s.529 or 529A;
(b) a rollover from one account to another account as described in clause (i) of subparagraph (C) of paragraph (3) of subsection (c) of section 529 if applicable, clause (i) of subparagraph (C) of paragraph (1) of subsection (c) of section 529A, or paragraph (5) of subsection (d) of section 530 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.529, 529A, or 530; or
(c) a change in designated beneficiaries of an account as described in clause (ii) of subparagraph (C) of paragraph (3) of subsection (c) of section 529, clause (ii) of subparagraph (C) of paragraph (1) of subsection (c) of section 529A, or paragraph (6) of subsection (d) of section 530 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.529, 529A, or 530; and
(d) any other transfer involving a qualified ABLE account which is a qualified distribution for the purposes of section 529A of the federal Internal Revenue Code, 26 U.S.C. s.529A.
(4) "Qualified ABLE account" means an account established pursuant to P.L.2015, c.185 (C.52:18A-250 et al.) or an account established pursuant to any qualified State ABLE Program established pursuant to section 529A of the federal Internal Revenue Code of 1986, 26 U.S.C. s.529A.
d. The portion of a distribution from a Coverdell education savings account, a qualified ABLE account, or a [qualified State] tuition program account that is attributable to earnings and to contributions allowed as a deduction pursuant to section 1 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall be determined in accordance with the principles of section 72 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.72, as applied for purposes of sections 529, 529A, and 530 of the federal Internal Revenue Code of 1986, 26 U.S.C. ss.529, 529A, and 530.
(cf: P.L.2015, c.185, s.2)
3. This act shall take effect immediately and section 1 shall apply to contributions made or costs incurred for taxable years beginning after enactment.
STATEMENT
This bill allows a gross income tax deduction for amounts contributed to the New Jersey Better Educational Savings Trust (NJBEST) Program.
NJBEST is New Jersey's IRS Section 529 qualified education savings program. Federal tax law allows contributions of federally taxed income to accounts established for the beneficiaries' qualified education expenses. Initially, IRS Section 529 withdrawals are tax-free as long as the funds are spent towards qualified higher education expenses. However, a provision of the federal Tax Cuts and Jobs Act, Pub.L.115-97, permits 529 plans to also be used for up to $10,000 per year in K-12 expenses.
Account investment earnings are not federally taxed until withdrawn, and if the earnings are used for qualified educational expenses they are never taxed. Currently, New Jersey matches those federal tax advantages. Additionally, New Jersey currently allows $25,000 of NJBEST college savings to be excluded from a financial need evaluation of the student, and awards students who pursue higher education in New Jersey a scholarship of up to $1,500 for participating in the program. This bill provides further incentives for college savings.
This bill allows a gross income tax deduction of up to $10,000 annually for married couples filing jointly, $5,000 annually for other taxpayers, for contributions to one or more NJBEST accounts.
