Relates to the "middle class STAR" rebate program

Summary of specific provisions

The real property tax law is amended to add a new section 1306-b restor- ing the Middle Class STAR rebate program to its previous position in law.

Adds a new section 178 to the tax law restoring the "Middle Class STAR" rebate program to its previous place in law.

In 2009, the Middle Class STAR rebate program will be restored at 2008 benefit levels for homeowners with household incomes of $250,000 or less.

In 2010 and thereafter the Middle Class STAR rebate program will only be available to seniors with household incomes of $150,000 or less.

Amends subparagraph (e) of paragraph 1 of subsection (e) of section 606 of the tax law to define "qualifying real property taxes" for purposes of calculating a circuit breaker tax credit.

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

CIRCUIT BREAKER FOR CITY OF NEW YORK, AND THE COUNTIES OF NASSAU, SUFFOLK, ROCKLAND, WESTCHESTER, PUTNAM, ORANGE AND DUTCHESS:

Household Adjusted Gross Income Middle Class Circuit Breaker Credit $120,0000 or less Net property taxes paid in excess of 6% of said income can receive a personal income tax credit of 70% of the overage.

$120,001 - $175,000 Net property taxes paid in excess of the sum of $7,200 and 7% of income above $120,000 can receive a personal income tax credit

of 70% of the overage.

$175,001 - $250,000 Net property taxes paid in excess of the sum of $11,050 and 8% of income above $175,000 can receive a personal income tax credit of 70% of the overage.

$250,001 + No credit.

Circuit breaker for all other counties in the state

Household Adjusted Gross Income Middle Class circuit breaker credit

$90,000 or less No property taxes paid in excess of 6% of said income can receive a personal income tax credit of 70% of the overage.

$90,001 - $150,000 Net property taxes paid in excess of the sum of $5,400 and 7% of income exceeding $90,000 can receive a personal income tax credit of 70% of the overage.

$150,001 - $250,000 Net property taxes paid in excess of the sum of $9,600 and 8% of income exceeding $150,000 can receive a personal income tax credit of 70% of the overage.

$250,001 + No credit.

Renters will be eligible to claim the Middle Class circuit breaker benefit with eligibility to be determined based on a "property tax equivalent" of 15% of their rent in 2010 and 20% every year thereafter.

To be eligible for the Middle Class circuit breaker benefit, homeowners and renters must live in their residences for three years.

The Middle Class circuit breaker also defines the measure of income for families earning at least 50% of their total income from farming as modified adjusted gross income instead of adjusted gross income for purposes of the circuit breaker income tax credit. The exclusion of

Renters will be eligible to claim the Middle Class circuit breaker benefit with eligibility to be determined based on a "property tax equivalent" of 15% of their rent in 2010 and 20% every year thereafter.

To be eligible for the Middle Class circuit breaker benefit, homeowners and renters must live in their residences for three years.

The Middle Class circuit breaker also defines the measure of income for families earning at least 50% of their total income from farming as modified adjusted gross income instead of adjusted gross income for purposes of the circuit breaker income tax credit. The exclusion of principal payments from modified adjusted gross income allows farmers to exclude the cost of equipment from their income, resulting in a lower measure of family income that more accurately reflects the farm family's ability to pay property taxes and results in a greater circuit breaker benefit.

Amends the tax law and the New York City Administrative Code to restore the NYC enhanced PIT credit to its former place in law.

In 2009, the NYC enhanced PIT credit will be restored at 2008 benefit levels for taxpayers with household incomes of $250,000 or less.

In 2010 and thereafter the enhanced PIT credit will only be available to seniors with household incomes of$150,000 or less. All other taxpayers will receive the standard PIT credit.

Justification

The Commission on Property Tax Relief issued its Preliminary Report and Recommendations on June 3, 2008. The Commission's report explores the root causes of the growth in property taxes, and highlights several key facts:

* New York State's local taxes are the highest in the nation, and are 79% above the national average * Outside of New York City, school property taxes make up 62% of the property tax burden * Nine of the top ten counties in the country with the highest tax rates relative to home values are in Upstate New York. * Nassau, Suffolk, Rockland and Westchester Counties are in the nation's top ten in terms of the percentage of household income that must be devoted to paying property taxes; and * Property tax levies are currently rising at more than twice the rate of inflation and salary growth.

Incorporating recommendations from reports of the New York State Commission on Property Tax Relief, this legislation will reduce the crushing burden of property taxes on local residents by providing targeted income tax relief to New Yorkers who pay the highest property taxes, relative to their incomes. The amended bill will also provide much needed relief to the three million New York State households that lost their STAR and Enhanced STAR rebate checks in the recently enacted 2009-2010 state budget.

The Middle Class STAR rebate program and New York City Enhanced PIT credit would be restored immediately for 2009 at the same level of benefits paid in 2008. And starting in 2010, rebate checks issued to seniors earning less than $150,000 under this program will subtract out the amount of any circuit breaker tax credit already claimed in the same taxable year. This will avoid duplication of benefits while insuring that seniors receive the maximum amount available to them under either plan.

The circuit breaker tax credit will provide targeted tax relief, beginning in 2010, to households earning up to $250,000 per year and paying more than a threshold percentage of their income on local property taxes. The precise threshold of 6, 7 or 8% would be based on rising household income categories, with the lowest income households (earning up to $90,000 per year upstate or $120,000 per year downstate) qualifying if property taxes consume more than 6% of their income.

Prior legislative history

None.

Fiscal implications

To be determined.

Effective date

This act shall take effect immediately.