Affirms the right of state residents to receive personal income tax refunds in the manner in which they choose

Summary of provisions

Amends Article 41 of the New York State Tax Law by adding a new section 3013 to provide that, in connection with payment by the Department of Taxation and Finance ("Department") of personal income tax refunds, and notwithstanding the adoption by the commissioner of any prepaid debit card or direct deposit program for payment of personal income tax refunds, all taxpayers are entitled: (1) to choose the means of payment of personal income tax refunds, including the right to receive a paper check; and (2) to opt out of any prepaid debit card or direct deposit program for payment of tax refunds.

The bill also requires that the Department amend the forms used to file personal income tax returns to reflect, in the area designated the selection of options for processing refunds, so that taxpayers have the option of receiving his or her refund by various methods, including by personal check and that a box be provided for each method so that the taxpayer call check to designate the method by which he or she wishes to receive the refund.

Similarly, the Department is also required to provide written notice regarding any prepaid debit card or direct deposit program for the payment of tax refunds, and must describe in writing all the features of any direct deposit or debit card program (e.g., withdrawal at any ATM or point of sale use), including any fee{s) which may be charged to the taxpayer in accessing his or her tax refund.

Justification

Every year millions of New Yorkers overpay New York State and local taxes on wages they receive. Notwithstanding overpayment of taxes to the State, these overpaid funds remain the rightful property of the taxpayers. Taxpayers are entitled to the timely refund of their overpayment, and should receive their refunds in a manner that is most convenient, understandable and best suited to their individual financial needs.

Currently, the New York State Department of Taxation and Finance ("DTF") is in the process of transitioning all personal income tax refund payments to a mandatory direct deposit/prepaid debit card platform. Although prepaid card programs may appear to be attractive due to cost savings, they include fees and costs to taxpayers, which

may be difficult to understand or keep track of, including ATM usage fees, negative balance fees, bank fees and other charges. Additionally, many taxpayers do not have bank accounts, or convenient access to bank branches in their communities. Due to minimum balance requirements, overdraft fees, and other requirements, many low and moderate income consumers are unable to maintain bank accounts, and likely do not have access to direct deposit accounts. Thus, any program that forces New Yorkers to receive tax refunds in a manner that is not suited to their individual circumstances will negatively and disproportionately impact racial and ethnic minority groups and low and moderate-income citizens.

It is the existing policy of the State of New York that its citizens have the choice to receive their wages in the manner which best suits their needs. Existing state law requires that private employers, who seek to utilize prepaid debit "payroll" cards for delivery of employee wages, must offer their employees the ability to "opt-out" of such payroll card programs and the right to continue to receive paper checks. Likewise, these same considerations should also be extended to taxpayers who are owed personal income tax refunds.

When enacted into law, this bill will preserve an important personal right of choice to which every citizen consumer should always be entitled and good public policy which should be retained.

Prior legislative history

Same as A.6997 (Perry)

Fiscal implications

Undetermined.

Effective date

Ninetieth day after becoming law.