S2925

An Act concerning improvements to the New Jersey Better Education Savings Trust program, amending various parts of statutory law, and supplementing Titles 18A and 54A of the New Jersey Statutes and Title 54 of the Revised Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. N.J.S.18A:71B-40 is amended to read as follows:

18A:71B-40. a. The authority shall select an investment manager or managers to invest the funds of the trust or the funds in accounts. In making this selection, any investment manager shall be subject to the "prudent person" standard of care applicable to the Division of Investment in the Department of the Treasury pursuant to subsection b. of section 11 of P.L.1950, c.270 (C.52:18A-89), and the authority shall [consider the impact of] select a manager or managers that charge the lowest possible fees and costs imposed by the manager or managers on yield to contributors.

b. The authority may select more than one investment manager and investment instrument for the program if it is in the best interest of contributors and will not interfere with the administration of the program.

c. The authority may provide a contributor with a choice of investment managers or investment instruments or both for the program if both of the following conditions exist:

(1) the federal Internal Revenue Service has provided guidance that providing a contributor with a choice of investment managers or instruments under a State tuition program will not cause the program to fail to qualify for favorable tax treatment under section 529 of the federal Internal Revenue Code of 1986, 26 U.S.C.s.529; and

(2) the authority concludes that a choice of investment managers or of investment instruments is in the best interest of contributors and will not interfere with the administration of the program.

d. If the authority terminates the designation of an investment manager to hold accounts, and accounts must be moved from that investment manager to another investment manager, the authority shall select the investment manager and type of investment instrument to which the balance of the account is moved, unless the federal Internal Revenue Service provides guidance that allowing the contributor to select among several investment managers or investment instruments that have been selected by the authority would not cause a program to cease to be a qualified State tuition program for the purposes of section 529 of the federal Internal Revenue Code, 26 U.S.C.s.529.

e. If the selection process provided for in this section results in an investment manager other than the Division of Investment, the authority shall provide for the orderly transfer of accounts and shall ensure that all the rights of the contributors and designated beneficiaries participating in the program as of the effective date of P.L.2001, c.262 (C.18A:71B-64 et al.), are protected.

(cf: P.L.2001, c.262, s.18)

2. N.J.S.18A:71B-43 is amended to read as follows:

18A:71B-43. Annually, the authority shall determine a dollar amount of an account, which shall not be less than [$25,000] $50,000, which shall not be considered in evaluating the financial needs of a student enrolled in an institution of higher education located in the State of New Jersey, or be deemed a financial resource or a form of financial aid or assistance to a student, for purposes of determining the eligibility of a student for any scholarship, grant, or monetary assistance awarded by the State; nor shall the amount of any account as determined by the authority provided for a designated beneficiary under this article reduce the amount of any scholarship grant or monetary assistance which the student is entitled to be awarded by the State.

(cf: N.J.S.18A:71B-43)

3. Section 3 of P.L.2021, c.128 (C.54A:3-12) is amended to read as follows:

3. A taxpayer with gross income of [$200,000] $300,000 or less shall be allowed a deduction, not to exceed [$10,000] $15,000, from the taxpayer's gross income for the taxable year in the amount of the taxpayer's contribution for the taxable year to an account established pursuant to the "New Jersey Better Educational Savings Trust Program," (N.J.S.18A:71B-35 et seq.).

(cf: P.L.2021, c.128, s.3)

4. Section 2 of P.L.2021, c.128 (C.18A:71B-42.1) is amended to read as follows:

2. a. A NJBEST account when it is initially opened by a taxpayer with gross income of [$75,000] $150,000 or less shall be eligible for a one-time grant of at least 10 percent of the initial deposit into the account up to [$750 in a dollar-for-dollar match of the initial deposit to the account] $1,000. The taxpayer shall be eligible for an additional grant of at least $100 for each year the taxpayer is enrolled in an automated investment plan for an NJBEST account except for the year in which the initial deposit is made. Grant funds shall be deposited directly by the authority into the taxpayer’s NJBEST account.

b. Notwithstanding the provisions of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B -1 et seq.), to the contrary, the authority may adopt, immediately upon filing with the Office of Administrative Law, rules that the authority deems necessary for the appropriate administration and implementation of the provisions of this section, including, a minimum length of time for participation in the NJBEST program in order to maintain eligibility for the credit established pursuant to this section, which rules shall be effective for a period not to exceed 360 days from the date of the filing. The authority shall thereafter amend, adopt, or readopt the rules in accordance with the requirements of P.L.1968, c.410 (C.52:14B-1 et seq.).

(cf: P.L.2021, c.128, s.2)

5. (New section) a. A NJBEST account initially opened by a taxpayer with an annual gross income of $150,000 or less shall be eligible for a one-time grant of up to $500 in a dollar-for-dollar match of the initial deposit into the account provided that the funds used for the initial deposit originate from an out-of-State account established pursuant to section 529 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.529. Grant funds shall be deposited directly by the authority into the taxpayer’s NJBEST account.

b. Notwithstanding the provisions of the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B -1 et seq.), to the contrary, the authority may adopt, immediately upon filing with the Office of Administrative Law, rules that the authority deems necessary for the appropriate administration and implementation of the provisions of this section, including, a minimum length of time for participation in the NJBEST program in order to maintain eligibility for the grant established pursuant to this section, which rules shall be effective for a period not to exceed 360 days from the date of the filing. The authority shall thereafter amend, adopt, or readopt the rules in accordance with the requirements of P.L.1968, c.410 (C.52:14B-1 et seq.).

6. (New section) Gross income, for the purposes of the “New Jersey Gross Income Tax Act,” N.J.S.54A:1-1 et seq., shall not include grant funds received pursuant to section 2 of P.L.2021, c.128 (C.18A:71B-42.1) and section 5 of P.L. , c. (C. ) (pending before the Legislature as this bill).

7. (New section) a. There is established the New Jersey Better Educational Savings Trust (NJBEST) Advisory Council in the Higher Education Student Assistance Authority.

b. The advisory council shall have the following duties and responsibilities:

(1) to advise the Governor and the Legislature on ways to improve the operation, management, and administration of the NJBEST program;

(2) to review, monitor, and report the extent to which the NJBEST program has made a college education accessible and affordable to families across the State; and

(3) support existing, and recommend new, Statewide initiatives encouraging families to save for a college education by opening an NJBEST account.

c. The advisory council shall consist of 13 members as follows:

(1) the Secretary of Higher Education, or a designee;

(2) the Executive Director of the Higher Education Student Assistance Authority, or a designee;

(3) the Commissioner of the Department of Banking and Insurance, or a designee;

(4) a representative from an institution of higher education appointed by the Governor. The representative shall serve for a term of two years and shall serve until a successor is appointed and qualified;

(5) four members of the Legislature, of whom one shall be appointed by the President of the Senate, one by the Minority Leader of the Senate, one by the Speaker of the General Assembly, and one by the Minority Leader of the General Assembly. Legislators appointed to the advisory council shall serve as members thereof for terms co-extensive with their respective terms as members of the Houses of the Legislature from which they were appointed; and

(6) five public members of whom one shall be appointed by the Governor, one by the President of the Senate, one by the Minority Leader of the Senate, one by the Speaker of the General Assembly, and one by the Minority Leader of the General Assembly. Public members appointed to the advisory council shall serve for a term of two years and until a successor is appointed and qualified. Public members shall be residents of the State and chosen to ensure broad geographic diversity.

d. Vacancies in the membership of the advisory council shall be filled in the same manner provided for the original appointments. The public members of the advisory council shall serve without compensation but may be reimbursed for traveling and other miscellaneous expenses necessary to perform their duties within the limits of funds made available to the advisory council for its purposes.

e. The advisory council shall organize as soon as practicable but no later than 60 days following the appointment of its members and shall select a chairperson and vice-chairperson from among the members. The chairperson shall appoint a secretary who need not be a member of the advisory council.

f. The advisory council shall meet at the call of its chairperson at the times and in the places the chairperson deems appropriate and necessary to fulfill its charge. The presence of a majority of the total authorized membership shall constitute a quorum for the purpose of conducting business.

g. The advisory council shall be entitled to call to its assistance, and avail itself of the services of the employees of, any State, county, or municipal department, board, bureau, commission, or agency as it may require and as may be available to it for its purposes. The Higher Education Student Assistance Authority shall provide staff support to the commission.

h. The advisory council may seek the advice of experts, such as persons with specialized knowledge in 529 college savings plans, family financial planning for higher education, and investment strategies and portfolio management, as deemed appropriate by the membership of the advisory council.

i. The advisory council shall annually report to the Governor, and to the Legislature pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), detailing its findings and recommendations to improve the operation and management of the NJBEST program and the extent to which the program has helped make a college education accessible and affordable no later than December 31 of each year.

8. (New section) a. A taxpayer shall be allowed a credit against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5) for matching contributions made to the NJBEST accounts of employees during the taxable year. The credit allowed pursuant to this paragraph shall be the total amount of matching contributions made to the NJBEST accounts of employees.

b. To qualify for the tax credit allowed pursuant to this section, the taxpayer shall report to the Director of the Division of Taxation all matching contributions made to employee NJBEST accounts for the taxable year on such forms and in such a manner as determined by the director. The report shall contain the names, addresses, and account numbers of the NJBEST accountholders employed by the taxpayer who received matching contributions during the taxable year and the amount of the contributions made to employee accounts.

c. The order of priority of the application of the credit allowed under this section and any other credits allowed by law shall be as prescribed by the director. The amount of the tax credit applied under this section against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), for a privilege period, when taken together with any other payments, credits, deductions, and adjustments allowed by law shall not exceed 50 percent of the tax liability otherwise due and shall not reduce the tax liability of the taxpayer to an amount less than the statutory minimum provided in subsection (e) of section 5 of P.L.1945, c.162 (C.54:10A-5).

d. The amount of the tax credit otherwise allowable under this section which cannot be applied for the privilege period may be carried forward, if necessary, to the five privilege periods following the privilege period for which a portion of the tax credit was allowed.

9. (New section) a. A taxpayer who is an employer 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. for the total amount of matching contributions made by the taxpayer to the NJBEST accounts of employees during the taxable year.

b. The order of priority of the application of the credit allowed under this section and any other credits allowed by law shall be as prescribed by the director. To qualify for the tax credit allowed pursuant to this section, the taxpayer shall report to the Director of the Division of Taxation all matching contributions made to employee NJBEST accounts for the taxable year on such forms and in such a manner as determined by the director. The report shall contain the names, addresses, and account numbers of the NJBEST accountholders employed by the taxpayer who received matching contributions during the taxable year and the amount of the contributions made to employee accounts.

c. The amount of the tax credit applied under this section against the tax otherwise due under the “New Jersey Gross Income Tax Act,” N.J.S.54A:1-1 et seq., for a taxable year, when taken together with any other payments, credits, deductions, and adjustments allowed by law shall not reduce the tax liability of the taxpayer to an amount less than zero. The amount of the tax credit otherwise allowable under this section which cannot be applied for the taxable year due to the limitations of this subsection or under other provisions of N.J.S.54A:1-1 et seq. may be carried forward, if necessary, to the five taxable years following the taxable year for which the tax credit was allowed.

d. (1) A business entity that is classified as a partnership for federal income tax purposes shall not be allowed a tax credit pursuant to this section directly, but the amount of tax credit of a taxpayer in respect of a distributive share of entity income, shall be determined by allocating to the taxpayer that proportion of the tax credit acquired by the entity that is equal to the taxpayer’s share, whether or not distributed, of the total distributive income or gain of the entity for its taxable year ending within or with the taxpayer’s taxable year.

(2) A New Jersey S Corporation shall not be allowed a tax credit pursuant to this section directly, but the amount of tax credit of a taxpayer in respect of a pro rata share of S Corporation income shall be determined by allocating to the taxpayer that proportion of the tax credit acquired by the New Jersey S Corporation that is equal to the taxpayer’s share, whether or not distributed, of the total pro rata share of S Corporation income of the New Jersey S Corporation for its privilege period ending within or with the taxpayer’s taxable year.

10. This act shall take effect immediately and sections 6, 8, and 9 shall first apply to taxable years and privilege periods beginning on or after January 1, 2024.

STATEMENT

This bill makes improvements to the New Jersey Better Education and Savings Trust (NJBEST) program to assist accountholders in saving for a college education. The Higher Education Student Assistance Authority, in selecting an investment manager for NJBEST accounts, would be required to select the investment manager that charges the lowest possible fees and costs imposed by the manager or managers on yield to contributors. State law currently requires the authority to, among other criteria, consider the impact of fees and costs imposed by the manager on yield to contributors.

The minimum dollar amount held in an NJBEST account that is required to be excluded when evaluating the financial needs of a student would also be raised from $25,000 to $50,000. Under current law, the Higher Education Student Assistance Authority determines a dollar amount of an NJBEST account that: (1) is not permitted to be considered in evaluating the financial need of a student beneficiary enrolled in an institution of higher education located in the State or be deemed a financial resource or form of financial aid for purposes of determining the student beneficiary’s eligibility for any State scholarship or grant; and (2) may not be used to reduce the amount of any scholarship, grant, or monetary assistance awarded by the State to which the student beneficiary is entitled. The authority may not set this dollar amount at less than $25,000. This bill would increase the amount to $50,000, thereby authorizing the exclusion of a greater amount of a NJBEST account from consideration in evaluating the student beneficiary’s financial need for purposes of determining eligibility for any scholarship, grant or monetary assistance awarded by the State.

The current income limitation for taxpayers who wish to deduct contributions made to an NJBEST account would be raised to $300,000 and permit a deduction of up to $15,000 in contributions from the taxpayer's gross income for the taxable year. Under current law, taxpayers with incomes of $200,000 or less may only deduct up to $10,000 in contributions made during the taxable year.

Taxpayers with an annual gross income of $150,000 or less who frequently deposit into their NJBEST accounts would be eligible for grants of at least 10 percent of the initial deposit into the account up to $1,000 and for an additional grant of at least $100 for each year the taxpayer is enrolled in an automated investment plan except for the year in which the initial deposit is made. Currently, NJBEST accounts opened by taxpayers with gross incomes of $75,000 or less is only eligible for a one-time grant of up to $750 in a dollar-for-dollar match of the initial deposit into the account. In addition, taxpayers with a gross income of $150,000 or less would be eligible for a one-time grant of up to $500 in a dollar-for-dollar match of the initial deposit into an NJBEST account provided that the funds used for the initial deposit originate from an out-of-state account established pursuant to section 529 of the federal Internal Revenue Code. Grant funds received by the taxpayer would not be subject to State income taxes.

This bill also creates the New Jersey Better Education Savings and Trust (NJBEST) Advisory Council within the Higher Education Student Assistance Authority (HESAA). The advisory council would advise the Governor and the Legislature on ways to improve the operation, management, and administration of the NJBEST program, reviewing, monitoring, and reporting the extent to which the NJBEST program has made a college education accessible and affordable to families across the State; and support existing, and recommending new, Statewide initiatives encouraging families to save for a college education by opening an NJBEST account. The advisory council would be composed of the following members:

· the Secretary of Higher Education, or a designee;

· the Executive Director of the Higher Education Student Assistance Authority, or a designee;

· the Commissioner of the Division of Banking and Insurance, or a designee;

· a representative from an institution of higher education appointed by the Governor;

· four members of the Legislature appointed by the President of the Senate, Minority Leader of the Senate, Speaker of the General Assembly, and the Minority Leader of the General Assembly; and

· five public members appointed by the Governor, the President of the Senate, the Minority Leader of the Senate, the Speaker of the General Assembly, and the Minority Leader of the General Assembly.

Finally, the bill provides tax credits against taxes otherwise due under the State corporate business tax and the New Jersey Gross Income Tax Act for employers that make matching contributions to the NJBEST accounts of employees. Employers would be allowed a tax credit for the total amount of matching contributions made by the taxpayer to the NJBEST accounts of employees during the taxable year. To qualify for the tax credit, the taxpayer would report the names, addresses, and account numbers of the NJBEST accountholders employed by the taxpayer who received matching contributions during the taxable year and the amount of the contributions made to employee accounts.