BILL NUMBER: S9548

SPONSOR: GIANARIS
 
TITLE OF BILL:

An act to amend the tax law, in relation to including certain student
loan forgiveness amounts as a reduction of federal adjusted gross income

 
PURPOSE:

The purpose of this bill is to subtract from the federal adjusted gross
income any federal student loan forgiveness awards authorized by the
Secretary of Education.

 
SUMMARY OF PROVISIONS:

Section one sets the title.

Section two amends subparagraph A of paragraph 42 of subsection (c) of
section 612 of the tax law to exclude from taxation the discharge or
forgiveness of any federal student loan when authorized by the

              

Secretary of Education as authorized by 20 U.S.C. § 1098aa, 1098bb,
1098cc, 1098dd or 1098ee.

Section three sets the effective date.

 
JUSTIFICATION:

On August 24th, 2022 the Biden administration announced the federal
government will forgive billions of dollars in federal student loan debt
for low- to middle-income borrowers. Under President Biden's plan, for
individual borrowers whose income is less than $125,000 or married
couples/heads of households whose income is less than $250,000, the
Department of Education will provide up to $20,000 in debt relief for
Pell Grant recipients and up to $10,000 for non-Pell Grant recipients.

Federal support for college has not kept up with the rising cost of
higher education, which has increased 169% in the last forty years.
This has required many low- and middle- income students to borrow to
cover the ballooning costs of aneducation; one which is increasingly
expected by many employers. The effects of this debt can be crushing,
causing many students to not be able to afford to finish their degree,
and makes it harder for lower-and middle- income borrowers to build
wealth. It is for these reasons this student loan forgiveness is essen-
tial. However, New York State must also ensure that beneficiaries do not
have to pay money out of their own pockets in the form of tax liability
on such forgiveness.

The American Rescue Plan (ARPA) already stipulates that this debt relief
will not be treated as taxable income for federal income tax purposes.
However, in the 2021 tax year, New York State de-coupled from ARPA's
waiver of taxation on student loan forgiveness. To prevent this from
recurring beginning with the effective date of this bill, it would amend
state tax law to ensure federal student loan debt forgiveness authorized
by the Secretary of Education and awarded to an individual will be
subtracted from federal adjusted gross income, thus ensuring that no
state taxes would be owed on such relief.

 
LEGISLATIVE HISTORY:

New bill.

 
FISCAL IMPLICATIONS:

None.

 
EFFECTIVE DATE:
This act shall take effect immediately, and shall apply to the taxable
year in which it shall take effect and to all subsequent taxable years.