Enacts the "Tax-free debt forgiveness act"; excludes certain student loan forgiveness amounts authorized under 20 U.S.C. Sections 1098aa, 1098bb, 1098cc, 1098dd or 1098ee from state income tax.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A4421
SPONSOR: Reyes TITLE OF BILL:
An act to amend the tax law, in relation to excluding certain student
loan discharge or forgiveness amounts from state income tax
PURPOSE:
The purpose of this bill is to subtract from New York adjusted gross
income any federal student loan forgiveness awards authorized by the
Secretary of Education.
SUMMARY OF PROVISIONS:
Section one sets the title.
Section two amends subsection (c) of section 612 of the tax law by
adding a new paragraph 47 to exclude from taxation the discharge or
forgiveness of any federal student loan when authorized by the
Secretary of Education as authorized by 20 U.S.C. § 1098aa, 1098bb,
1098cc, 1098dd or 1098ee.
Section three sets the effective date.
JUSTIFICATION:
On August 24th, 2022 the Biden administration announced the federal
government will forgive billions of dollars in federal student loan debt
for low- to middle-income borrowers. Under President Biden's plan, for
individual borrowers whose income is less than $125,000 or married
couples/heads of households whose income is less than $250,000, the
Department of Education will provide up to $20,000 in debt relief for
Pell Grant recipients and up to $10,000 for non-Pell Grant recipients.
Federal support for college has not kept up with the rising cost of
higher education, which has increased 169% in the last forty years.
This has required many low- and middle- income students to borrow to
cover the ballooning costs of an education; one which is increasingly
expected by many employers. The effects of this debt can be crushing,
causing many students to not be able to afford to finish their degree,
and makes it harder for lower-and middle- income borrowers to build
wealth. It is for these reasons this student loan forgiveness is essen-
tial. However, New York State must also ensure that beneficiaries do not
have to pay money out of their own pockets in the form of tax liability
on such forgiveness.
The American Rescue Plan (ARPA) already stipulates that this debt relief
will not be treated as taxable income for federal income tax purposes.
However, in the 2021 tax year, New York State de-coupled from several
sections of the federal IRC. This bill would amend state tax law to
ensure federal student loan debt forgiveness authorized by the Secretary
of Education and awarded to an individual will be subtracted from New
York federal adjusted gross income, thus ensuring that no state taxes
would be owed on such relief.
LEGISLATIVE HISTORY:
2022 - Referred to Ways & Means
FISCAL IMPLICATIONS:
None.
EFFECTIVE DATE:
This act shall take effect immediately, and shall apply to the taxable
year in which it shall take effect and to all subsequent taxable years.
STATE OF NEW YORK
________________________________________________________________________
4421
2023-2024 Regular Sessions
IN ASSEMBLY
February 14, 2023
___________
Introduced by M. of A. REYES, KELLES, EPSTEIN, CRUZ -- read once and
referred to the Committee on Ways and Means
AN ACT to amend the tax law, in relation to excluding certain student
loan discharge or forgiveness amounts from state income tax
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. This act shall be known and may be cited as the "Tax-free
2 debt forgiveness act".
3 § 2. Subsection (c) of section 612 of the tax law is amended by adding
4 a new paragraph 47 to read as follows:
5 (47) The amount of any student loan discharged or forgiven by the
6 secretary of education pursuant to authorization provided by 20 U.S.C. §
7 1098aa, 1098bb, 1098cc, 1098dd or 1098ee shall not be considered taxable
8 income for the purpose of calculating New York adjusted gross income,
9 irrespective of whether it is considered taxable income for federal
10 income tax purposes.
11 § 3. This act shall take effect immediately, and shall apply to the
12 taxable year in which it shall take effect and to all subsequent taxable
13 years.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD01849-01-3
