Bill Text: NY S03315 | 2021-2022 | General Assembly | Introduced


Bill Title: Establishes the New York college debt repayment program.

Spectrum: Partisan Bill (Democrat 3-0)

Status: (Introduced - Dead) 2022-01-05 - REFERRED TO HIGHER EDUCATION [S03315 Detail]

Download: New_York-2021-S03315-Introduced.html



                STATE OF NEW YORK
        ________________________________________________________________________

                                          3315

                               2021-2022 Regular Sessions

                    IN SENATE

                                    January 28, 2021
                                       ___________

        Introduced by Sens. BAILEY, SEPULVEDA -- read twice and ordered printed,
          and when printed to be committed to the Committee on Higher Education

        AN  ACT  to amend the education law, in relation to establishing the New
          York college debt repayment program

          The People of the State of New York, represented in Senate and  Assem-
        bly, do enact as follows:

     1    Section  1. The education law is amended by adding a new section 355-e
     2  to read as follows:
     3    § 355-e. New York college debt repayment program. 1.  A  college  debt
     4  repayment  program may be established by any resident of this state. The
     5  earnings from the program shall grow federally  and  state  tax-deferred
     6  and  withdrawals for qualified expenses shall not be subject to state or
     7  federal income tax.
     8    2. For purposes of this section:
     9    (a) The term "college debt repayment program" means a  program  estab-
    10  lished and maintained by this state or agency or instrumentality thereof
    11  or  by  one  or  more  eligible  educational  institutions under which a
    12  person:
    13    i. may pay off debt incurred by tuition  credits  or  certificates  on
    14  behalf  of a designated beneficiary which entitle the beneficiary to the
    15  waiver or payment of debt incurred from higher education expenses of the
    16  beneficiary, or
    17    ii. in the case of a program established and maintained by this  state
    18  or  agency  or  instrumentality  thereof,  may  make contributions to an
    19  account which is  established  for  the  purpose  of  meeting  the  debt
    20  incurred  by qualified higher education expenses of the designated bene-
    21  ficiary of the account.
    22    (b) The term "member of the family" means any  spouse,  child,  grand-
    23  child or first degree cousin of any designated beneficiary.
    24    (c) The term "designated beneficiary" means:

         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD07056-01-1

        S. 3315                             2

     1    i.  the  individual designated at the commencement of participation in
     2  the college debt repayment program as the beneficiary  of  amounts  paid
     3  (or to be paid) to the program; or
     4    ii.  in  the  case of a change in beneficiaries, the individual who is
     5  the new beneficiary.
     6    (d) The term "qualified higher education expenses" means:
     7    i. tuition, room and  board,  fees,  books,  supplies,  and  equipment
     8  required for the enrollment or attendance of a designated beneficiary at
     9  an eligible educational institution;
    10    ii. expenses for special needs services in the case of a special needs
    11  beneficiary  which  are  incurred  in connection with such enrollment or
    12  attendance; or
    13    iii. expenses paid or incurred in two thousand nine  or  two  thousand
    14  ten  for  the purchase of any computer technology or Internet access and
    15  related services, if such technology, equipment, or services are  to  be
    16  used  by  the beneficiary and the beneficiary's family during any of the
    17  years the beneficiary is enrolled at an  eligible  educational  institu-
    18  tion.
    19    (e)  The  term "eligible educational institution" means an institution
    20  which is described in section 481 of the higher education  act  of  1965
    21  (20 U.S.C. 1088), as in effect on the effective date of this paragraph.
    22    (f) A program shall not be treated as a college debt repayment program
    23  unless  it  provides that purchases or contributions may only be made in
    24  cash.
    25    (g) A program shall not be treated as a college debt repayment program
    26  unless it provides separate accounting for each designated beneficiary.
    27    (h) A program shall not be treated as a college debt repayment program
    28  unless it provides that any contributor to,  or  designated  beneficiary
    29  under,  such  program may, directly or indirectly, direct the investment
    30  of any contributions to the program (or any earnings  thereon)  no  more
    31  than two times in any calendar year.
    32    (i) A program shall not be treated as a college debt repayment program
    33  if  it  allows  any interest in the program or any portion thereof to be
    34  used as security for a loan.
    35    (j) A program shall not be treated as a college debt repayment program
    36  unless it provides  adequate  safeguards  to  prevent  contributions  on
    37  behalf  of  a  designated  beneficiary  in  excess of those necessary to
    38  provide for the debt incurred by the qualified higher education expenses
    39  of the beneficiary.
    40    3. (a) Except as otherwise provided in  this  subdivision,  no  amount
    41  shall be includible in gross income of:
    42    i. a designated beneficiary under a college debt repayment program; or
    43    ii.  a contributor to such program on behalf of a designated benefici-
    44  ary, with respect to any distribution or earnings under such program.
    45    (b) Any contribution to a college debt repayment program on behalf  of
    46  any designated beneficiary shall:
    47    i.  be  treated as a completed gift to such beneficiary which is not a
    48  future interest in property; and
    49    ii. not be treated as a qualified transfer under  section  2503(e)  of
    50  the internal revenue code.
    51    (c)  If  the  aggregate amount of contributions described in paragraph
    52  (b) of this subdivision during the calendar year by a donor exceeds  the
    53  limitation  for  such year under section 2503(b) of the internal revenue
    54  code, such aggregate amount shall, at the  election  of  the  donor,  be
    55  taken  into  account  for purposes of such section ratably over the five
    56  year period beginning with such calendar year.

        S. 3315                             3

     1    4. (a) Any distribution under a college debt repayment  program  shall
     2  be  includible  in  the gross income of the distributee in the manner as
     3  provided under section 72 of the internal revenue code.
     4    (b)  No amount shall be includible in gross income under paragraph (a)
     5  of this subdivision by  reason  of  a  distribution  which  consists  of
     6  providing a benefit to the distributee which, if paid for by the distri-
     7  butee, would constitute payment of a qualified higher education expense.
     8    (c)  In  the  case  of distributions not described in paragraph (b) of
     9  this subdivision, if:
    10    i. such distributions do not exceed the debt incurred by the qualified
    11  higher education expenses (reduced by expenses  described  in  paragraph
    12  (b) of this subdivision), no amount shall be includible in gross income;
    13  and
    14    ii. in any other case, the amount otherwise includible in gross income
    15  shall  be reduced by an amount which bears the same ratio to such amount
    16  as such expenses bear to such distributions.
    17    (d) Any benefit furnished to a designated beneficiary under a  college
    18  debt repayment program shall be treated as a distribution to the benefi-
    19  ciary for purposes of this subdivision.
    20    (e)  Paragraph (a) of this subdivision shall not apply to that portion
    21  of any distribution which, within sixty days of  such  distribution,  is
    22  transferred:
    23    i.  to  another  college debt repayment program for the benefit of the
    24  designated beneficiary; or
    25    ii. to the credit of another designated beneficiary  under  a  college
    26  debt  repayment  program who is a member of the family of the designated
    27  beneficiary with respect to which the distribution was made.
    28    (f) Any change in the designated  beneficiary  of  an  interest  in  a
    29  college  debt  repayment  program shall not be treated as a distribution
    30  for purposes of paragraph (a) of this subdivision if the new beneficiary
    31  is a member of the family of the old beneficiary.
    32    5. (a) All college debt repayment programs of which an individual is a
    33  designated beneficiary shall be treated as one program;
    34    (b) all distributions during a taxable year shall be  treated  as  one
    35  distribution; and
    36    (c)  the value of the contract, income on the contract, and investment
    37  in the contract shall be computed as of the close of the  calendar  year
    38  in which the taxable year begins.
    39    6.  (a) No amount shall be includible in the gross estate of any indi-
    40  vidual for purposes of chapter 11 of the internal revenue code by reason
    41  of an interest in a college debt repayment program.
    42    (b) Paragraph (a) of this  subdivision  shall  not  apply  to  amounts
    43  distributed on account of the death of a beneficiary.
    44    (c)  In  the case of a donor who makes the election described in para-
    45  graph (c) of subdivision three of this section and who dies  before  the
    46  close  of  the  five year period referred to in such paragraph, notwith-
    47  standing paragraph (a) of this subdivision,  the  gross  estate  of  the
    48  donor shall include the portion of such contributions properly allocable
    49  to periods after the date of death of the donor.
    50    (d)  Except  as  provided  in paragraph (e) of this subdivision, in no
    51  event shall a distribution from a  college  debt  repayment  program  be
    52  treated as a taxable gift.
    53    (e)  The  taxes  imposed by chapters 12 and 13 of the internal revenue
    54  code shall apply to a transfer by reason of a change in  the  designated
    55  beneficiary  under  the  program  (or a rollover to the account of a new
    56  beneficiary) unless the new beneficiary is:

        S. 3315                             4

     1    i. assigned to the same generation as (or a  higher  generation  than)
     2  the  old  beneficiary (determined in accordance with section 2651 of the
     3  internal revenue code); and
     4    ii. a member of the family of the old beneficiary.
     5    7.  The  tax imposed by section 530(d)(4) of the internal revenue code
     6  shall apply to any payment or distribution from a college debt repayment
     7  program in the same manner as such tax applies to a payment or  distrib-
     8  ution from a Coverdell education savings account. This subdivision shall
     9  not  apply  to any payment or distribution in any taxable year beginning
    10  before January first, two thousand four, which is  includible  in  gross
    11  income  but  used  for qualified higher education expenses of the desig-
    12  nated beneficiary.
    13    8. A contributor shall make an initial investment of at least  twenty-
    14  five  dollars  and may contribute up to three hundred seventy-five thou-
    15  sand dollars to a college debt repayment program.
    16    9. Any designated beneficiary who withdraws funds to pay for nonquali-
    17  fied expenses shall pay a ten percent penalty tax on earnings as well as
    18  federal and state income tax.
    19    10. The comptroller shall be authorized to offer age-based options for
    20  participants of the program similar to those offered in this state's 529
    21  college savings program.
    22    11. (a) Individual taxpayers may deduct the contributions they make to
    23  a college debt repayment program, up to five thousand dollars annually.
    24    (b) Married individual taxpayers that  file  jointly  may  deduct  the
    25  contributions  they  make to a college debt repayment program, up to ten
    26  thousand dollars annually.
    27    § 2. This act shall take effect on the one hundred eightieth day after
    28  it shall have become a law.
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