Bill Text: NJ S1941 | 2012-2013 | Regular Session | Introduced
Bill Title: Establishes refundable gross income tax credit for certain taxpayers allowed Hope Scholarship Credit and Lifetime Learning Credit under Federal income tax.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2012-05-17 - Introduced in the Senate, Referred to Senate Higher Education Committee [S1941 Detail]
Download: New_Jersey-2012-S1941-Introduced.html
Sponsored by:
Senator LINDA R. GREENSTEIN
District 14 (Mercer and Middlesex)
SYNOPSIS
Establishes refundable gross income tax credit for certain taxpayers allowed Hope Scholarship Credit and Lifetime Learning Credit under federal income tax.
CURRENT VERSION OF TEXT
As introduced.
An Act establishing a gross income tax credit for taxpayers allowed a Hope Scholarship Credit and a Lifetime Learning Credit under the federal income tax, 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. A taxpayer who has gross income of $90,000 or less for a taxable year, who is allowed a Hope Scholarship Credit (also known as an American Opportunity Tax Credit) for that taxable year under section 25A of the federal Internal Revenue Code (26 U.S.C. s.25A), shall be allowed a credit against the tax otherwise due for that taxable year pursuant to the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., in an amount equal to 25% of the federal credit up to a maximum credit of $500 per eligible student. No credit shall be allowed for a student under this subsection for a taxable year if the taxpayer claims a deduction for the same student pursuant to section 1 of P.L.1976, c.84 (C.54A:3-1.1) for that taxable year.
b. A taxpayer who has gross income of $90,000 or less for a taxable year, who is allowed a Lifetime Learning Credit for that taxable year under section 25A of the federal Internal Revenue Code (26 U.S.C. s.25A), 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 equal to 25% of the federal credit up to a maximum credit of $500 per taxpayer. No credit shall be allowed for a student under this subsection for a taxable year if the taxpayer claims a deduction for the same student pursuant to section 1 of P.L.1976, c.84 (C.54A:3-1.1) for that taxable year.
c. The priority in which the credit allowed pursuant to this section shall and any other credits shall be taken shall be as determined by the Director of the Division of Taxation in the Department of the Treasury. If the credit exceeds the amount of tax otherwise due, the amount of the excess shall be an overpayment for the purposes of N.J.S.54A:9-7; provided however, that subsection (f) of N.J.S.54A:9-7 shall not apply.
2. This act shall take effect immediately and shall apply to taxable years beginning after the date of enactment.
STATEMENT
This bill allows New Jersey gross income taxpayers that have gross income of $90,000 or less during the taxable year to claim a refundable gross income tax credit equal to 25% of the amount of the federal income tax credit they are allowed under the federal income tax Hope Scholarship Credit (also known as the American Opportunity Tax Credit) and Lifetime Learning Credit.
The federal Hope Scholarship Tax Credit provides for tax year 2012 a federal income tax credit, per eligible student, of up to $2,500 (40% of which is refundable) based on the first $4,000 in postsecondary tuition, fees and course materials paid by the taxpayer during the tax year. The federal Hope Scholarship tax credit is 100% of the first $2,000 and 25% of the second $2,000. The tax credit is limited to the first four years of postsecondary education and the eligible student must carry at least half the normal full-time workload for a course of study that leads to a degree, certificate or other recognized educational credential. For tax years after 2012 the amount of this federal credit is currently set to be capped at up to $1,500 and the refundable portion eliminated.
The federal Lifetime Learning Tax Credit provides a federal income tax credit of up to $2,000 per taxpayer based on the first $10,000 in postsecondary tuition and fees paid by the taxpayer during the tax year. The Lifetime learning tax credit is 20% of the first $10,000. The tax credit may be received for an unlimited number of years. In contrast to the federal Hope Scholarship Tax Credit, the federal Lifetime Learning Tax Credit maximum is calculated per taxpayer and is not adjusted based on the number of eligible students in the taxpayer's family. Also, this credit is not based on a student's workload and a student's qualified expenses are eligible for this credit if the student is enrolled in one or more courses in a qualified educational institution.
Both federal credits, and thus both State tax credits, can not be claimed for the same student in the same taxable year. However, a taxpayer may take both federal credits in the same taxable year for qualified educational expenses of different eligible students, and in similar circumstances will be able to take both State tax credits. The New Jersey gross income tax credits established in this bill, while tied to the federal income tax law that establishes the federal credits, are made refundable if the maximum State tax credit of $500 does not offset a taxpayer's entire gross income tax liability. A taxpayer will not be allowed to claim for the same student both a State tax credit and the current statutory deduction of $1,000 for expenses of tuition and maintenance paid for a college student dependent.
