Bill Text: NJ S3070 | 2016-2017 | Regular Session | Introduced
Bill Title: Provides gross income tax credit for certain contributions to New Jersey Better Educational Savings Trust (NJBEST) program.
Spectrum: Slight Partisan Bill (Democrat 2-1)
Status: (Introduced - Dead) 2017-03-06 - Introduced in the Senate, Referred to Senate Higher Education Committee [S3070 Detail]
Download: New_Jersey-2016-S3070-Introduced.html
Sponsored by:
Senator ROBERT M. GORDON
District 38 (Bergen and Passaic)
Senator THOMAS H. KEAN, JR.
District 21 (Morris, Somerset and Union)
SYNOPSIS
Provides gross income tax credit for certain contributions to New Jersey Better Educational Savings Trust (NJBEST) program.
CURRENT VERSION OF TEXT
As introduced.
An Act providing a credit against the gross income tax for certain contributions to the New Jersey Better Educational Savings Trust (NJBEST) program, supplementing Title 54A of the New Jersey Statutes and amending P.L.1997, c.237.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. (New section) a. A taxpayer having gross income for the taxable year not in excess of $500,000, or not in excess of $250,000 for a married individual filing separately, shall be allowed a credit against the tax otherwise due for the taxable year under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., in an amount equal to five percent of up to $5,000 of contributions, or up to $2,500 of contributions for a married individual filing separately, that are made by the taxpayer during the taxable year to one or more accounts established pursuant to the "New Jersey Better Educational Savings Trust (NJBEST) Program," N.J.S.18A:71B-35 et seq.
b. The credit allowed pursuant to subsection a. of this section shall not reduce the tax liability otherwise due for the taxable year under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., to an amount less than zero. The amount of any unused credit resulting from the limitations of this subsection may be carried forward, if necessary, to the seven taxable years following the taxable year for which the credit was allowed. The form and method of carryforward shall be as prescribed by the director.
2. Section 13 of P.L.1997, c.237 (C.54A:6-25) is amended to read as follows:
13. a. Gross income shall not include earnings on a Coverdell education savings account, a [qualified State] tuition program account, or a qualified ABLE account until the earnings are distributed from the account, at which time [they] the amount of the distribution attributable to earnings on the account and the amount of the distribution attributable to contributions allowed as a credit pursuant to section 1 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall be includible in the gross income of the distributee except as provided in this section.
b. Gross income shall not include qualified distributions as defined in paragraph (3) of subsection c. of this section.
c. For purposes of this section:
(1) "Coverdell education savings account" means a Coverdell education savings account as defined pursuant to paragraph (1) of subsection (b) of section 530 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.530.
(2) "[Qualified State tuition] Tuition program account" means an account established pursuant to the "New Jersey Better Educational Savings Trust (NJBEST) Program," (N.J.S.18A:71B-35 et seq.) or an account established pursuant to any [qualified State] tuition program [, as defined pursuant to] established in compliance with subsection (b) of section 529 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.529 or a tuition credit or certificate purchased pursuant to any such program.
(3) "Qualified distribution" means any of the following:
(a) a distribution from a [qualified State] tuition program account that is used for qualified higher education expenses as defined pursuant to paragraph (3) of subsection (e) of section 529 or a distribution from a qualified ABLE account that is used for qualified disability expenses as defined pursuant to paragraph (5) of subsection (e) of section 529A of the federal Internal Revenue Code of 1986, 26 U.S.C. s.529 or 529A;
(b) a rollover from one account to another account as described in clause (i) of subparagraph (C) of paragraph (3) of subsection (c) of section 529, if applicable, clause (i) of subparagraph (C) of paragraph (1) of subsection (c) of section 529A, or paragraph (5) of subsection (d) of section 530 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.529, 529A, or 530; or
(c) a change in designated beneficiaries of an account as described in clause (ii) of subparagraph (C) of paragraph (3) of subsection (c) of section 529, clause (ii) of subparagraph (C) of paragraph (1) of subsection (c) of section 529A, or paragraph (6) of subsection (d) of section 530 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.529, 529A, or 530; and
(d) any other transfer involving a qualified ABLE account which is a qualified distribution for the purposes of section 529A of the federal Internal Revenue Code, 26 U.S.C. s.529A.
(4) "Qualified ABLE account" means an account established pursuant to P.L.2015, c.185 (C.52:18A-250 et al.) or an account established pursuant to any qualified State ABLE Program established pursuant to section 529A of the federal Internal Revenue Code of 1986, 26 U.S.C. s.529A.
d. The portion of a distribution from a Coverdell education savings account, a qualified ABLE account, or a [qualified State] tuition program account that is attributable to earnings and to contributions allowed as a credit pursuant to section 1 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall be determined in accordance with the principles of section 72 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.72, as applied for purposes of sections 529, 529A, and 530 of the federal Internal Revenue Code of 1986, 26 U.S.C. ss.529, 529A, and 530.
(cf: P.L.2015, c.185, s.1)
3. This act shall take effect immediately and section 1 shall apply to contributions made during taxable years beginning on or after January 1 next following the date of enactment.
STATEMENT
This bill provides a credit against the gross income tax for certain contributions to the New Jersey Better Educational Savings Trust (NJBEST) program. Under the bill, taxpayers having gross income not in excess of $500,000, or not in excess of $250,000 if married filing separately, are allowed a credit against the gross income tax in an amount equal to 5% of up to $5,000 of contributions, or up to $2,500 of contributions if married filing separately, that are made during the taxable year to one or more NJBEST college savings accounts.
The NJBEST program is New Jersey's IRC Section 529 qualified college savings program. Federal tax law allows contributions of federally taxed income to accounts established for the beneficiaries' qualified higher education expenses. Account investment earnings are not federally taxed until withdrawn, and if the earnings are used for qualified higher educational expenses they are never taxed. Currently, New Jersey matches those federal tax advantages, but unlike a number of other states does not offer tax incentives for contributions made to college savings accounts.
This bill establishes a state-level incentive for contributions in New Jersey. In doing so, it encourages individuals and families to put more money aside to meet the ever increasing cost of higher education.
The bill takes effect immediately and provides for the credit to apply to contributions made during taxable years beginning on or after January 1 next following the date of enactment.
