Relates to the "middle class STAR" rebate program

Adds a new section 178 to the tax law restoring the middle class STAR rebate program to its previous place in law for senior citizens with annual household incomes at or below $150,000.

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.

Household Adjusted Gross Income Middle Class Circuit Breaker Credit

$120,000 or less Net property taxes paid in excess of 7% of said income eligible to receive a personal income tax credit of 30%of the overage.

$120,001 - $175,000 Net property taxes paid in excess of the sum of $7,200 and 8% of income above $120,000 eligible to receive a personal income tax credit of 30% of the overage.

$175,001 - $250,000 Net property taxes paid in excess of the sum of $11,050 and 9% of income above $175,000 can receive a personal income tax credit of 30% 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.

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.

Amends the tax law and the New York city Administrative Code to restore the NYC enhanced PIT credit to its former place in law for senior citizens with annual household incomes at or below $150,000.

Adds a new section 1307 to the real property tax law to establish a real property tax levy cap for all school districts other than city school districts of cities with a population of 125,000 or more (the "Big 5" school districts).

Under the tax levy cap

A school district's tax levy limit could increase by up to the lesser of 4% or 120% of the annual increase in the consumer price index (CPI);

A school district would be permitted to "bank" unused tax, levy capacity from prior years, but could use this carryover levy capacity to increase its tax levy only by an additional 1.5% in any year;

Tax levy limits would be subject to "underride" through voter-initiated propositions; and

In the event a district's actual tax levy exceeds its authorized levy due to clerical or technical errors, the erroneous excess levy must be placed in reserve to offset the levy for the next school year.

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 senior citizens who lost their Middle Class STAR and Enhanced STAR rebate checks in the 2009-2010 state budget.

The Middle Class STAR rebate program and New York credit would be restored in 2010 to seniors earning less than $150,000. city less The circuit breaker tax credit will provide targeted property tax relief, beginning in the 2010 tax year, 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 7, 8 or 9% would be based on rising household income categories, with the lowest income households (earning up to $120,000 per year) qualifying if property taxes consume more than 7% of their income.

In calculating the circuit breaker tax credit, seniors who received a STAR or Enhanced STAR rebate will be required to subtract the amount of the rebate received in the same taxable year from the amount of property taxes paid. This will avoid duplication of benefits while insuring that seniors receive the maximum amount available to them under either plan.

Prior legislative history

None.

Fiscal implications

To be determined.

Effective date

This act shall take effect immediately.