Bill Text: NJ AR95 | 2024-2025 | Regular Session | Amended

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Bill Title: Urges Congress to amend tax code to permanently exclude all forms of discharged student loans from federal income tax.

Spectrum: Partisan Bill (Democrat 7-0)

Status: (Passed) 2024-10-28 - Filed with Secretary of State [AR95 Detail]

Download: New_Jersey-2024-AR95-Amended.html

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[First Reprint]

ASSEMBLY RESOLUTION No. 95

STATE OF NEW JERSEY

221st LEGISLATURE

 

PRE-FILED FOR INTRODUCTION IN THE 2024 SESSION

 

 

Sponsored by:

Assemblyman  BENJIE E. WIMBERLY

District 35 (Bergen and Passaic)

Assemblywoman  SHANIQUE SPEIGHT

District 29 (Essex and Hudson)

 

Co-Sponsored by:

Assemblywoman Reynolds-Jackson and Assemblyman Atkins

 

 

 

 

SYNOPSIS

     Urges Congress to amend tax code to permanently exclude all forms of discharged student loans from federal income tax.

 

CURRENT VERSION OF TEXT

     As reported by the Assembly Higher Education Committee on June 3, 2024, with amendments.

  

An Assembly Resolution urging Congress to amend the tax code to ¹permanently¹ exclude all forms of discharged student loans from federal income tax.

 

Whereas, ¹[Under federal] Federal¹ law ¹[,] has traditionally treated¹ income from discharge of indebtedness ¹[is] as¹ subject to the income tax unless there is a specified exception in the law; and

Whereas, ¹[Discharged] For example,¹ student loans ¹[are] have typically¹ not ¹been¹ subject to the income tax if ¹[, for example, they are] the loans are¹ forgiven ¹[through a provision of the loan that allows forgiveness when] after¹ the borrower works for certain employers in particular professions for a designated period of time; and

Whereas, Teachers and other public service employees meeting the requirements can qualify for such forgiveness through the Teacher Loan Forgiveness and Public Service Loan Forgiveness programs; and

Whereas, As part of the "Tax Cuts and Jobs Act," Pub.L.115-97, Congress also excluded from the income tax discharge of student loans on account of death or disability if the discharge occurs ¹[after] between¹ December 31, 2017 and ¹[before]¹ January 1, 2026; and

Whereas, ¹[Student] Despite the exclusion provided through the "Tax Cuts and Jobs Act," student¹ loans discharged for certain other reasons, ¹[as] including¹ the forgiveness of loans in Income-Driven Repayment-Plans after the 20 or 25 year repayment period, ¹[are] were¹ still subject to federal income taxation; and

¹[Whereas, Because not all forms of discharged student loans are excluded from the federal income tax, there are borrowers who have their student loans forgiven, but as a result have to pay the federal income tax on the amount forgiven; and

Whereas, Discharge of student loans would be far more helpful to those in greatest need of discharge if the borrower did not have to pay the income tax on the amount discharged; and]

Whereas, Through the enactment of the "American Rescue Plan Act of 2021," Pub.L.117-2, Congress permitted virtually all student loan debt to be exempt from income tax but only if the debt was forgiven between January 1, 2021 and January 1, 2026; and

Whereas, The relief provided through the "American Rescue Plan Act of 2021" has ensured that borrowers are not charged thousands of dollars in taxes and has been especially instrumental in assisting borrowers who may have been disproportionately impacted by the economic effects of the COVID-19 pandemic; and

Whereas, Beginning on January 1, 2026, borrowers receiving discharged student loans will be subject to income tax on amounts discharged after that date, potentially saddling borrowers with substantive tax liabilities; and

Whereas, It is expected that an unprecedented number of borrowers will receive student loan forgiveness due to proposed federal regulations that would discharge: certain amounts of interest on federal student loans; outstanding loan amounts for borrowers who were eligible for discharge under a specific program, but never applied for the program; student loan amounts for borrowers who enrolled in low-financial-value programs; and student loan amounts for borrowers experiencing hardship paying back federal student loans; and

Whereas, A permanent extension of the tax relief provided through the "American Rescue Plan Act of 2021" would continue to help borrowers, especially those who were struggling to make payments even before the COVID-19 pandemic; and¹

Whereas, It is fitting and proper for this House to urge Congress to reassess the circumstances under which discharged student loans are subject to the federal income tax and to permanently exclude the discharge of student debt ¹[on account of death or disability]¹ from the income tax; now, therefore,

 

     Be It Resolved by the General Assembly of the State of New Jersey:

 

     1.    This House urges Congress to ¹permanently¹ exclude all forms of discharged student loans from federal income taxation.

 

     2.    Copies of this resolution, as filed with the Secretary of State, shall be transmitted by the Clerk of the General Assembly to each member of Congress representing New Jersey, the Secretary of the United States Treasury, and the Commissioner of Internal Revenue.