NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A8176
SPONSOR: Lee TITLE OF BILL:
An act to amend the tax law, in relation to the school tax reduction
credit for residents of a city with a population over one million, and
implementing a child tax credit for residents of such cities
PURPOSE OR GENERAL IDEA OF BILL::
To phase out the highly regressive New York City school tax credit above
certain income thresholds in favor of a new, progressive New York City
child tax credit
SUMMARY OF PROVISIONS::
Section one of this bill amends subsection (ggg) of Section 606 of the
Tax Law to phase out the New York City school tax credit at a rate of
two percent for incomes exceeding $75,000, or $150,000 if married filing
jointly.
Section two of this bill creates a new subsection (qqq) in Section 606
of the Tax Law to create a new New York City child tax credit (CTC) of
$300 per child, which would phase out a rate of one percent for incomes
exceeding $160,000, or $320,000 if married filing jointly. The new NYC
child tax credit would be available for all filers with a Social Securi-
ty Number or an Individual Taxpayer Identification Number and would be
fully refundable.
Section three directs the Commissioner of Taxation and Finance to publi-
cize the new NYC CTC.
Section four sets the effective date.
JUSTIFICATION::
In 1997, then-Governor. George Pataki and the New York State legislature
established the School Tax Relief (STAR) program, which provides either
a property tax credit or exemption to certain income-eligible homeown-
ers. The STAR program, which is administered by the NYS Department of
Taxation and Finance, was created to shift a portion of local educa-
tional tax burdens from individual school districts to the state, as
schools are funded in most areas of the state from property taxes levied
directly by a local board of education (BOE) or municipal government.
When property owners receive relief from the STAR program, thus remit-
ting fewer taxes to a local government or a school district than they
otherwise would, the state will make the locality or district whole by
reimbursing them out of a school tax relief fund funded directly from
state personal income tax revenues (Melamed, Lisa Sturman, et al.
"School Tax Relief (STAR) in New York City." New York City Independent
Budget Office, 9 Sept. 2024,
www.ibo.nyc.ny.ushboreports/StarConferencePaper.html. Accessed 18 Dec.
2024.)
While laudable in its aims, then-Governor Pataki and the legislature
found the STAR program to be an insufficient means of shifting the
educational burden from New York City taxpayers for a number of reasons.
Firstly, New York City property taxes flow to the City's general fund,
alongside other major revenue sources such as sales tax, the city income
tax, and fines and fees (in fact, property taxes account for only 31% of
the total NYC budget, in contrast to many localities upstate where they
routinely make up more than 50% of the budget (Understanding New York
City's Budget: A Guide. New York City Independent Budget Office, July
2021). New York City then in turn funds its public schools from the
general fund (education spending currently accounts for around 29% of
total spending) - resulting in a very different funding model than
exists in much of the rest of the state, where a local BOE levies school
taxes directly on local property owners.
Secondly, while STAR is an effective means of providing targeted relief
to certain property taxpayers in NYC, that are relatively few homeowners
in the city compared to the rest of the state: the State Comptroller
reports homeownership rates across the five boroughs ranging from 20% in
the Bronx to 45% in Queens, falling far below the state average of 53.6%
("Homeownership Rates in New York ! Office of the New York State Comp-
troller." Www.osc.ny.gov, New York State Comptroller Thomas P. DiNapoli,
Oct. 2022, www.osc.nygovireports/homeownership-rates-new-york.). Home-
owner rates in 35 other counties, in contrast, exceed 70%. This means
that the 80% of filers in the Bronx, for example, who do not own a home
receive no relief despite contributing to local educational spending
through their remittance of the city personal income tax (PIT) which
flows to the city's general fund.
As the NYC Independent Budget Office (IBO) notes, the implication of all
of the above is that "while a far greater share of households elsewhere
in the state see their school tax burdens meaningfully reduced by STAR,
property tax relief in the city allows a minority of city households to
enjoy only modest relief from their school tax burden." (Melamed, Lisa
Sturman, et al. "School Tax Relief (STAR) in New York City." New York
City Independent Budget Office, 9 Sept. 2024,
www.ibo.nyc.ny.us/iboreports/StarConferencePaper.html. Accessed 18 Dec.
2024.) Real property tax exemptions and credits alone, such as those
delivered through the STAR program, are not an effective means of
providing relief to all of the New York City residents who finance
public education across the five boroughs.
Due to the city's unique education funding structure, the legislature
thus decided in 1997 to offer an additional measure of relief to city
taxpayers: a New York City school tax credit (STC), which reduces the
amount of city personal income tax (PIT) that city taxpayers owe to the
city's coffers. Just as with the STAR program, the state then reimburses
the city for this foregone PIT revenue. While a creative supplement to
the STAR program, NYC's STC is deeply regressive, delivering virtually
all of its support to the highest earners. This is because the STC
consists of two main components: a "fixed" school tax credit of $62.50,
or $125 if married filing jointly, along with a "rate reduction" that
provides a higher percentage discount to higher income bands. For
married filing jointly taxpayers, for example, the STC is only 0.171% of
city taxable income for filers making $12,600 or less - but 0.228%, plus
$37, for filers making more than this amount. A similar rate structure
applies to head of household, single, and married filing separately
taxpayers as well.
While there are a variety of taxpayers across the five boroughs in
urgent need of relief from the city's PIT, which almost no other locali-
ty in New York State imposes, the STC is structured in the complete
opposite manner from most other credits in the state and city tax code,
which generally confer a higher benefit to the lowest-income filers.
This bill thus repeals the STC above certain city taxable income thresh-
olds and redirects this state spending to a new, highly progressive New
York City child tax credit instead.
Under this bill, the STC would be maintained as is for all filers making
$75,000, or $150,000 if married filing jointly, and would then begin to
phase out at a rate of two percent. The state would then use the savings
generated from this phaseout to create a new $300 child tax credit for
all city filers with dependents aged 0 - 17, which would begin to phase
out at a rate of one percent at $160,000/$320,000. The credit would be
fully refundable and available to be claimed on a per-child basis for
all children with either a Social Security Number (SSN) or an Individual
Taxpayer Identification Number (ITIN). Under this proposal, all parents
with one child making $120,000, or $165,000 if married filing jointly,
will be better off compared to the status quo, as they would be keeping
a version of their existing STC while also being able to claim the new
CTC. And with two or three children, these income thresholds rise
considerably.
This bill will provide critical relief to low- and middle-income parents
in New York City, helping avoid spells of poverty that are often induced
by the arrival of a newborn. It better targets money that the state is
already spending, reducing our dependence on a poorly designed, highly
regressive school tax credit that rewards only the highest-income
filers. Furthermore, by pairing a partial repeal of the STC with a new
$300 per-child tax credit for all New York City parents making up to
$75,000, or $150,000 if married filing jointly, this bill will ensure we
are providing much-needed support to the families that need it the most
while minimizing any additional fiscal cost to the state.
PRIOR LEGISLATIVE HISTORY::
None
FISCAL IMPLICATIONS::
This bill has a negligible fiscal impact of less than $1 million. That
is because, in repurposing the NYC STC to create a new, progressive
child tax credit, this bill has been carefully designed to be revenue
neutral to the state.
EFFECTIVE DATE::
This act shall take effect immediately and shall apply to taxable years
beginning after the effective date of this act.
STATE OF NEW YORK
________________________________________________________________________
8176
2025-2026 Regular Sessions
IN ASSEMBLY
May 5, 2025
___________
Introduced by M. of A. LEE -- read once and referred to the Committee on
Ways and Means
AN ACT to amend the tax law, in relation to the school tax reduction
credit for residents of a city with a population over one million, and
implementing a child tax credit for residents of such cities
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Subsection (ggg) of section 606 of the tax law is amended
2 by adding a new paragraph 4-c to read as follows:
3 (4-c) Provided however, that for taxable years beginning after the
4 effective date of this paragraph, the credit amount equal to the "fixed"
5 amount provided by paragraph four-a of this subsection plus the "rate
6 reduction" amount provided by paragraph four-b of this subsection shall
7 be reduced by twenty dollars for each one thousand dollars by which a
8 taxpayer's income exceeds:
9 (A) Seventy-five thousand dollars for unmarried individuals, a head of
10 a household, or a married individual filing a separate return, or
11 (B) One hundred fifty thousand dollars for married individuals who
12 make a single return jointly or surviving spouses.
13 Provided, however, that the credit amount shall never be reduced below
14 zero.
15 § 2. Section 606 of the tax law is amended by adding a new subsection
16 (qqq) to read as follows:
17 (qqq) Child tax credit for residents of a city with a population over
18 one million. (1) For taxable years beginning after the effective date of
19 this subsection, a child tax credit of three hundred dollars per quali-
20 fying child shall be allowed to a resident taxpayer of the state who is
21 a resident of a city with a population over one million, as provided in
22 this subsection. For the purposes of this subsection, "qualifying child"
23 shall mean a child who meets the definition of qualifying child under 26
24 USC §24(c)(1), except that such term shall also include qualifying chil-
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD01160-04-5
A. 8176 2
1 dren who have not attained the age of eighteen. If the amount of the
2 credit allowed under this subsection for any taxable year on or after
3 the effective date of this subsection shall exceed the taxpayer's tax
4 for such year, the excess shall be treated as an overpayment of tax to
5 be credited or refunded in accordance with the provisions of section six
6 hundred eighty-six of this article, provided, however, that no interest
7 shall be paid thereon.
8 (2) The amount of the credit under this subsection shall be determined
9 based upon the taxpayer's income as defined in subparagraph (ii) of
10 paragraph (b) of subdivision four of section four hundred twenty-five of
11 the real property tax law.
12 (3) The amount of the credit under this subsection shall be reduced by
13 ten dollars for each one thousand dollars by which the taxpayer's income
14 exceeds:
15 (A) One hundred sixty thousand dollars for a head of a household or a
16 married individual filing a separate return, or
17 (B) Three hundred twenty thousand dollars for married individuals who
18 make a single return jointly or surviving spouses.
19 Provided, however, that the credit amount shall never be reduced below
20 zero.
21 (4) Such resident taxpayer must provide the social security number or
22 individual taxpayer identification number for each qualifying child in
23 order to claim the credit provided in this subsection.
24 (5) If a taxpayer changes status during the taxable year from resident
25 to nonresident, or from nonresident to resident, the child tax credit
26 authorized in this subsection shall be prorated according to the number
27 of months in the period of residence.
28 § 3. The commissioner of taxation and finance shall take steps to
29 publicize the child tax credit authorized by this act and, to the extent
30 reasonably possible, inform taxpayers of tax liability changes made by
31 this act.
32 § 4. This act shall take effect immediately and shall apply to taxable
33 years beginning after the effective date of this act. Effective imme-
34 diately, the addition, amendment and/or repeal of any rule or regulation
35 necessary for the implementation of this act on its effective date are
36 authorized to be made and completed on or before such effective date.
