Creates the middle class circuit breaker tax credit and a tax reform study commission

Summary of specific provisions

SECTION 1: Adds a new subsection (qq) to section 606 of the tax law to provide for a real property tax credit. The credit will be based on the income of the household and the percentage that said household pays for real property taxes.

For Homeowners

For taxable years starting in 2009: Household Adjusted Gross Income Tax Maximum Real Property Tax

$100,000 or less Real Property taxes paid in excess of 9% of said income can receive a personal income tax credit of 70% of the overage.

$100,001 + No credit.

For taxable years starting in 2010: Household Adjusted Gross Income Tax Maximum Real Property Tax

$100,000 or less Real Property taxes paid in excess of 8.5% of said of said income can receive a personal income tax credit of 70% of the overage.

$100,001 + No credit.

For taxable years starting in 2011: Household Adjusted Gross Income Tax Maximum Real Property Tax

$100,000 or less Real Property taxes paid in excess of 7.5% of said income can receive a personal income tax credit of 70% of the overage.

$100,001 - $150,000 Real Property taxes paid in excess of 7.5% of the first $100,000 of said income PLUS

8.5% of said income above $100,000 can receive a personal income tax credit of 70% of the overage.

$150,001 + No credit.

For taxable years starting in 2012: Household Adjusted Gross Income Tax Maximum Real Property Tax

$100,000 or less Real Property taxes paid in excess of 6% of said income can receive a personal income tax credit of 70% of the overage.

$100,001 - $150,000 Real Property taxes paid in excess of 6% if the first $100,000 of said income PLUS 7% of said income above $100,000 can receive a personal income tax credit of 70% of of the overage.

$150,001 - $250,000 Real Property taxes paid in excess of 6% of the first $100,000 of said income PLUS 7% of the next $50,000 of said income PLUS 8.5% of said income above $150,000 can receive a personal income tax credit of 70% of the overage.

$250,000 + No credit.

To qualify, the taxpayer must have resided in the home for not less than five years. Also, the taxpayer may still benefit from the Basic STAR exemption or the Enhanced STAR exemption for senior citizens. The cred- it will equal seventy percent of the taxes paid over the allowed percentage cap as provided in the bill.

The act would also provide for a "real property tax equivalent" in the case of taxpayers who rent real property as their primary New York State residence.

For taxable years starting in 2010 the "real property tax equivalent" equal to 15% of the adjusted rent actually paid in the taxable year. taxable years starting in 2011, the amount is increased to 20% of the adjusted rent actually paid in the taxable year.

Section 2

Creates a tax reform study commission with appointments from the Senate, Assembly and the Executive. The commission will review the state's existing property tax reform programs as well as programs enacted in other states.

Section 3

Contains the effective date.

Justification

The middle class property tax circuit breaker program is a concept that has successfully been used in several states to Provide relief from a residential homeowner's property tax when it exceeds a certain portion of their household income. It has been traditionally Used for homeowners with very low incomes and low assessments. New York State currently has a circuit breaker provision that has existed for decades, but the maxi- mum eligible household income is $18,000 and the maximum eligible home value is $85,000. This new program would target middle-class New Yorkers who have financially suffered as municipalities have had to rely more heavily on real property taxes for local government revenue. Many home- owners are facing sky-racking real property tax bills as a result they are often faced with the serious threat of defaulting on their property taxes and/or seriously consider selling their homes.

Critics of the New York's STAR program have claimed that it is inequita- ble because it does not draw a connection between a taxpayer's household income and the amount of his tax bill. The Middle Class STAR Rebate Checks program, which began in 1970 and was eliminated in 2009, compounded this effect because it calculated a household's rebate amount as a percentage of the value of its STAR exemption. This legislation seeks to resolve these limitations and remain sensitive to the State's current financial crisis. Additionally, the bill would add progressivi- ty to property tax relief and extend the benefits to property renters who are often burdened with property taxes in the cost of their rent. The bill is phased in over four years in order to take the state's fiscal situation into consideration while ensuring that the most over- burdened property taxpayers - based on the percentage of income they are paying in property tax on their home - will get relief quickly.

Prior legislative history

None.

Fiscal implications

The program is phased in over four years. and will cost the State noth- ing in the first year. For year two the cost will be $1.1 billion; year three will cost $1.8 billion and every year after will cost $2.3 billion.

Effective date

Immediately after enactment.