ASSEMBLY, No. 1207

STATE OF NEW JERSEY

218th LEGISLATURE

 

PRE-FILED FOR INTRODUCTION IN THE 2018 SESSION

 


 

Sponsored by:

Assemblyman  JOHN F. MCKEON

District 27 (Essex and Morris)

Assemblyman  LOUIS D. GREENWALD

District 6 (Burlington and Camden)

 

Co-Sponsored by:

Assemblyman Schaer, Assemblywoman Lampitt, Assemblymen Prieto, Coughlin, DiMaio, Bramnick, Assemblywoman Jasey and Assemblyman Zwicker

 

 

 

 

SYNOPSIS

     Provides gross income tax credit for certain contributions to New Jersey Better Educational Savings Trust (NJBEST) program.

 

CURRENT VERSION OF TEXT

     Introduced Pending Technical Review by Legislative Counsel.

  


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 [an] a Coverdell education [individual retirement] savings account or a [qualified State] tuition program 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)   "[Education individual retirement] Coverdell education savings account" means [an] a Coverdell education [retirement] 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 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.529;

     (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, or paragraph (5) of subsection (d) of section 530 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.529 or 530;

     (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 or paragraph (6) of subsection (d) of section 530 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.529 or 530;

     d.    The portion of a distribution from [an] a Coverdell education [individual retirement] savings 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 and 530 of the federal Internal Revenue Code of 1986, 26 U.S.C. ss.529 and 530.

(P.L.2001, c.262, s.21)

 

     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.