BILL NUMBER: S143

SPONSOR: GIANARIS
 
TITLE OF BILL:

An act to amend the tax law, in relation to excluding certain student
loan discharge or forgiveness amounts from state income tax

 
PURPOSE:

The purpose of this bill is to subtract from New York 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 subsection (c) of section 612 of the tax law by
adding a new paragraph 47 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 an education; 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 several
sections of the federal IRC. This bill 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 New
York federal adjusted gross income, thus ensuring that no state taxes
would be owed on such relief.

 
LEGISLATIVE HISTORY:

2022: Died in Rules; Died in Ways & Means (Assembly)

 
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.