Bill Text: NJ A4271 | 2016-2017 | Regular Session | Introduced
Bill Title: Allows gross income tax deduction for employees for amounts paid by employers for certain educational assistance programs for employees and for employee's student loans.
Spectrum: Partisan Bill (Democrat 2-0)
Status: (Introduced - Dead) 2016-10-20 - Introduced, Referred to Assembly Higher Education Committee [A4271 Detail]
Download: New_Jersey-2016-A4271-Introduced.html
Sponsored by:
Assemblyman LOUIS D. GREENWALD
District 6 (Burlington and Camden)
SYNOPSIS
Allows gross income tax deduction for employees for amounts paid by employers for certain educational assistance programs for employees and for employee's student loans.
CURRENT VERSION OF TEXT
As introduced.
An Act allowing a deduction from employees gross income of amounts paid by employers for certain educational assistance programs for employees and for employee's student loans, supplementing Title 54A of the New Jersey Statutes.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. A taxpayer may deduct from the taxpayer's gross income an amount equal to the amounts paid or expenses incurred by the employer of the taxpayer for the taxable year for education assistance to the taxpayer as an employee of the employer during that taxable year up to the amount of $5,250 that is allowed to be excluded for the taxable year from the taxpayer's computation of federal taxable income for federal income tax purposes pursuant to section 127 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.127. The deduction allowed pursuant to this section may be in addition to all other exemptions and deductions allowed the taxpayer for the taxable year including the deduction allowed pursuant to section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill).
2. a. A taxpayer may deduct from the taxpayer's gross income an amount equal to amounts paid or expenses incurred by the employer of the taxpayer for the taxable year for qualified student loan payment assistance to the taxpayer as an employee of the employer during that taxable year up to the amount of $5,250.
b. As used in this section:
"qualified student loan payment assistance" means amounts paid or incurred by an employer under a plan for the exclusive benefit of the employees of the employer to provide those employees with student loan payment assistance;
"student loan payment assistance" means the payment of principal or interest on any indebtedness incurred by an employee for qualified higher education expenses incurred by the employee for education furnished to the employee, and any indebtedness used to refinance that indebtedness; and
"qualified higher education expense" means the cost of attendance as defined in section 472 of the federal "Higher Education Act of 1965," Pub.L.89 329 (20 U.S.C. s.1087ll).
c. The deduction allowed pursuant to this section may be in addition to all other exemptions and deductions allowed the taxpayer for the taxable year including the deduction allowed pursuant to section 1 of P.L. , c. (C. ) (pending before the Legislature as this bill).
3. This act shall take effect immediately and sections 1 and 2 shall apply to taxable years beginning after the date of enactment.
STATEMENT
This bill allows a gross income tax deduction for employees for amounts paid by employers for certain educational assistance programs for employees and for employee's student loans. Making these forms of employer-provided assistance tax free under the New Jersey gross income tax can incentivize employers and employees to establish programs that provide a personal "financial wellness" benefit to employees without actually raising taxable salaries and wages. These forms of tax-free assistance can aid employees in meeting their current costs of pursuing their higher education goals while they hold a job, and can also help address high student debt burdens facing the college-educated workforce.
The deduction for certain educational expenses incurred pursuant to an educational assistance program will have to meet the requirements under the federal income tax exclusion allowed under section 127 of the federal Internal Revenue Code. The New Jersey gross income deduction for employees will be limited to the $5,250 annual limit under the federal income tax exclusion. Tax-free educational assistance provided by an employer includes payments for tuition, fees, textbooks, and equipment. To qualify, the courses need not be work-related or be part of a degree program but cannot involve sports, games, or hobbies. The educational assistance program must be set out in a written plan offered by the employer. Payments for educational assistance compensate the employee for costs of certain coursework undertaken by the employee while employed by the employer, as opposed to student loan debt that the employee had already accrued.
Amounts paid by an employer toward an employee's student loan debt are taxable compensation for federal income tax purposes, and are taxable under the New Jersey gross income tax as taxable "salaries, wages, tips, fees, commissions, bonuses, and other remuneration received for services rendered." The New Jersey gross income deduction under this bill for employer-provided student loan assistance is modeled on one of several pending congressional bills that address student loan debt and federal income taxation. Under this gross income deduction, as under the federal legislation, this assistance includes the payment of principal or interest on student loan indebtedness incurred by an employee for higher education expenses. Under this bill, tax-free assistance will cover up to $5,250 of assistance in a taxable year.
An employee is allowed to deduct both forms of assistance in a taxable year, up to their combined limits, along with other exemptions and deductions the taxpayer otherwise may be allowed to claim under other New Jersey gross income tax provisions.
