S3017

An Act providing a gross income tax credit for certain student loan payments, designated as the Student Loan Debt Relief Tax Credit Act, supplementing Title 54A of the New Jersey Statutes, and making an appropriation.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. a. As used in this section:

“Authority” means the Higher Education Student Assistance Authority established pursuant to N.J.S.18:71A-3.

“Institution of higher education” means a public or private university, college, technical college, or a community or county college.

“Qualified taxpayer” means a taxpayer who has incurred at least $20,000 in student loan debt for attendance at an institution of higher education and has at least $5,000 in outstanding student loan debt at the time an application for a tax credit is submitted to the authority.

“Student loan” means a loan which is (1) secured through a student loan program, a federal student loan program, or a commercial lender; and (2) obtained and expended exclusively for the purposes of paying the tuition and fees and other expenses, such as room and board and books and supplies, related directly to the enrollment of a qualified taxpayer at an institution of higher education.

b. 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 certified by the authority pursuant to this section.

c. A qualified taxpayer shall submit an application for a tax credit to the authority in a form and manner determined by the authority. The application shall include an assurance from the qualified taxpayer that any tax credit awarded pursuant to this section will be used for the repayment of a qualified taxpayer’s student loans in the two taxable years following the taxable year for which the credit was allowed. The application shall include such information as required by the authority to determine a taxpayer’s eligibility for a credit.

d. The authority shall determine the taxpayer’s eligibility for a tax credit and the amount of the tax credit, not to exceed $5,000 per taxpayer per taxable year, and shall issue a certification awarding the tax credit to the taxpayer. The value of tax credits approved by the authority pursuant to this section shall not exceed a total of $10,000,000 in any fiscal year.

The authority shall prioritize applications submitted by qualified taxpayers who:

(1) have higher debt to income ratios;

(2) graduated from an institution of higher education located in this State;

(3) did not receive a tax credit in prior years; or

(4) were eligible for the resident tuition rate at a public institution of higher education or were exempt from paying out-of-State tuition at a public institution of higher education.

e. Tax credits shall be awarded for the taxable year during which the loan payments are due. When filing a tax return that includes a claim for a tax credit allowed pursuant to this section, the taxpayer shall include a copy of the certification issued by the authority. In the case of married individuals filing a separate return, only one individual shall be permitted to claim the credit allowed pursuant to this section in a taxable year.

f. A taxpayer who is not subject to tax in accordance with N.J.S.54A:2-4 for a taxable year and who is awarded a tax credit by the authority may claim the credit using an application made available by the director. The due date for a tax credit application submitted pursuant to this subsection shall coincide with the due date for annual gross income tax returns.

g. If the credit allowed pursuant to this section, together with any other payments, credits, deductions, and adjustments allowed by law, reduces a qualified taxpayer’s tax liability otherwise due under N.J.S.54A:1-1 et seq. to zero, the amount of the credit remaining shall be paid to the taxpayer as a refund of an overpayment 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.

h. The Executive Director of the Higher Education Student Assistance Authority, in consultation with the Director of the Division of Taxation, 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. These regulations shall include, at a minimum, provisions for the recapture of all, or a portion of, any tax credit allowed pursuant to section 1 of P.L. , c. (C. ) (pending before the Legislature as this bill) that is not used for the repayment of a qualified taxpayer’s student loans in the two taxable years following the taxable year for which the credit was allowed.

2. There are appropriated from the General Fund to the Department of the Treasury such amounts as are necessary to make payments of refunds pursuant to subsection g. of section 2 of this act, subject to the approval of the Director of the Division of Budget and Accounting.

3. This act shall take effect immediately and shall apply to taxable years beginning on or after January 1 next following enactment.

STATEMENT

This bill establishes a refundable gross income tax credit of up to $5,000 for student loan payments made by qualified taxpayers. A qualified taxpayer must have incurred a minimum $20,000 in student loan debt for attendance at an institution of higher education and have at least $5,000 in student loan debt outstanding to be eligible for a tax credit.

The bill requires a taxpayer to submit with their gross income tax return such additional information as may be required by the Higher Education Student Assistance Authority necessary to determine the taxpayer’s eligibility for a tax credit. Tax credits may be awarded for the taxable years in which student loan payments were made. The bills requires a taxpayer to use the tax credit to repay a portion of their student loans in the two tax years following the tax year for which a credit is awarded.

The bill appropriates from the General Fund such amounts as are necessary to make payments of refunds to taxpayers whose tax liability is reduced to below zero due to the bill.