Add §42, amd §§208, 210-B, 606 & 615, Tax L; add Art 25 §§1209 - 1217, §1503-a, Ed L
Establishes the "education investment incentives act"; provides credits against income and corporate franchise tax for various qualified education investments including scholarships, education funds and instructional materials.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A2551A
SPONSOR: Cusick (MS) TITLE OF BILL: An act to amend the tax law and the education law, in
relation to enacting the "education investment incentives act"
PURPOSE OR GENERAL IDEA OF BILL:
This bill would provide incentives in the form of tax credit for
donations to public education entities, local education funds, school
improvement organizations and educational scholarship organizations, as
well as tax credits for certain expenses incurred by qualified educators
who purchase materials and supplies for classroom use.
SUMMARY OF SPECIFIC PROVISIONS:
Section one of this bill provides the short title, which is the "educa-
tion investment incentives act."
Section two of this bill provides the legislative findings and intent.
Section three of this bill adds new section 42 to the Tax Law, which is
the education investment tax credit. New section 2 provides a tax credit
to individuals and businesses paying the Article 22 personal income tax
and to businesses paying the Article 9-A corporate franchise tax for
qualified contributions to public education entities, school improvement
organizations, local education funds, and educational scholarship organ-
izations. Prior to making a contribution, a taxpayer must apply to the
Department of Taxation and Finance ("DTF") for a contribution authori-
zation certificate, which will list the amount of the authorized
contribution and the entity, public school (but shall not include a
charter school) or public school district for which the contribution is
authorized. Taxpayers have from the issuance of the contribution author-
ization certificate until December 31st to make the contribution to the
named entity, public school, or public school district. Upon receipt of
a timely authorized contribution, the recipient entity will issue a
certificate of receipt to the taxpayer. If a contribution is not timely
received, the recipient named in the contribution authorization certif-
icate will notify DTF.
The maximum amount of credit that a taxpayer may list in the application
filed with DTF is up to $1 million, which also is the maximum amount of
aggregate credits that a taxpayer may claim for any year, after the
application of all other allowable credits, in which the tax return is
filed, plus any amount carried over from a prior year. A taxpayer can
claim as a credit 75 percent of the donation made to an eligible entity.
Any amount of qualified contributions in excess of the taxpayer's tax
for the taxable year may be carried forward.
The credit is capped at $150 million for calendar year 2017, $225
million for calendar year 2018, and $300 million plus any amounts
required to be added to the cap due to authorized contributions that
were not timely made for each year beginning in calendar year 2019. One
half of the annual cap will be available for qualified contributions
made to public education entities, school improvement organizations and
local education funds and one half of the annual cap will be available
for donations to educational scholarship organizations.
Section three of this bill also provides definitions for terms such as
"authorized contribution," "public education entity," "local education
fund," and "educational scholarship organization." An "eligible student"
who can receive a scholarship must reside in a household with not more
than $250,000 in adjusted gross income; however, to ensure the needs of
low-income communities are addressed, on educational scholarship organ-
ization must provide at least half its scholarships for students from
households with income below 150% of the reduced-price lunch income
thresholds.
Section three also provides reporting requirements for public education
entities, including school improvement organizations (i.e., a non-profit
entity supporting public schools); local education funds; and educa-
tional scholarship organizations, as well as a joint report from the
Commissioner of Tax and Finance and the Commissioner of Education. The
joint report shall include, among other things, statistics regarding the
number of qualified contributions made to each type of recipient, the
distribution of the recipients by county, and the aggregate amount of
credit claimed.
Section four of this bill amends Tax Law section 208(9) (b) by adding a
new subparagraph (22) to provide that if a taxpayer claims a charitable
contribution deduction at the federal level for any amount claimed as a
credit pursuant to Tax Law section 210-B(45), such amount must be added
back to the taxpayer's entire net income computation in order to prevent
obtaining a state tax deduction and state tax credit from the same
donation.
Section five of this bill amends Tax Law section 210-B to add a new
subdivision (49) to provide the mechanism for Article 9-A taxpayers to
claim the education investment tax credit.
Section six of this bill amends Tax law section 606(i)(1)(B) to add a
new clause (xli) to provide the mechanism for S Corporations to claim
the education investment tax credit.
Section seven of this bill amends section 606 of the Tax Law to add a
new subsection (w) to provide the classroom instructional materials and
supplies credit for people employed at a public or non-public school.
The amount of the credit is the lesser of $200 or 100% of the amounts
used to purchase instructional materials and supplies for use in a
classroom.
Section eight of this bill amends Tax Law section 606 by adding a new
subsection (ccc) to provide the mechanism for Article 22 taxpayers to
claim the education investment tax credit.
Section nine of this bill amends Tax Law section 615(c) by adding a new
paragraph (9) to provide that if a taxpayer claims a charitable contrib-
ution deduction at the federal level for any amount claimed as a credit
pursuant to section 606(kk), such amount must be added back to the New
York adjusted income computation in order to prevent obtaining a state
tax deduction and state tax credit from the same donation.
Section ten of this bill amends the Education Law to add a new Article
25, entitled the "Education Investment Tax Credit Program." This new
article provides the framework for public education entities, school
improvement organizations, local education funds and educational schol-
arship organizations to apply for authorization to issue certificates of
receipt. Authorized entities receiving tax-credited donations must
submit an annual report in a form and manner required by the state Board
of Regents. Additionally, any authorization granted may be revoked by
the Regents for violations of applicable law.
This new article contains the same short title and definitions, as well
as the joint report requirement, provided in Tax law section 42, as
added by section three of the bill.
Section eleven of the this bill adds a new section 1503-a to the educa-
tion law to ensure public schools and school districts can accept chari-
table donations and that such donations shall be excluded for the
purposes of determining state aid to public schools.
Section twelve of this bill contains the severability clause.
Section thirteen of this bill provides that this act shall take effect
immediately and apply to taxable years beginning after December 31,
2016.
EXISTING LAW:
This is a new law.
JUSTIFICATION:
At a time when the state is considering ways of reducing the tax burden
for New York State residents and educators are seeking an expansion of
financial resources, charitable giving for educational purposes should
be encouraged. Permitting public education entities such as school
districts and individual public schools and non-profits that promote the
arts, civics, and pre-k instruction, to accept and receive voluntary
cash contributions will lessen the need for additional tax revenue,
encouraging voluntary support for education without prejudice for or
against any state-sponsored educational enterprise.
The provisions of this bill ensure against a taxpayer from taking a
state tax deduction and this tax credit on the same donation, and guard
against a taxpayer having a combined federal and state tax benefit that
exceeds the donation level.
The bill promotes the state's interest in providing the highest quality
education to all children in the state. The tax credit does not consti-
tute public aid to non-public sectarian institutions. This bill also
will enable children from low-income households in high-needs communi-
ties to continue with their education in non-public schools and mitigate
the trend of private school closures, particularly in such areas, the
result of which has added costs to public education, and contributed to
higher property tax burdens and overcrowded classrooms in the state.
Permitting school personnel to claim a credit for the purchase of class-
room instructional materials and supplies will insure a wider availabil-
ity of such materials and supplies for all students.
PRIOR LEGISLATIVE HISTORY:
2013-2014: A.1826-D-Died in Ways and Means Committee;
2011-12: A.5081-C-Died in Ways and Means Committee.
FISCAL IMPLICATIONS:
$150 million for fiscal year 2017-18, $225 million for fiscal year
2018-19, and $300 million for fiscal year 2019-2020 and annually there-
after. This bill would generate $400 million in voluntary contributions
to support K-12 education in New York State based on the credit equaling
75 percent of the charitable donation. Stabilizing the independent and
religious school sector will significantly lessen the need for local
school property tax increases as well as for the issuance of bonds for
new public school construction, generating further savings for the
state. In addition, another $50 million is projected to be forgone
revenue from the instructional and materials supply credit for teachers
and instructional personnel.
EFFECTIVE DATE:
This act shall take effect immediately and shall apply to taxable years
beginning after December 31, 2016.
