Establishes the "education investment incentives act" and tax credit

Summary of provisions

Section one of the bill provides the short title, which is the "education investment incentives act."

Section two provides the Legislative findings and intent.

Section three of the bill adds new section 39 to the Tax Law, which is the education incentives tax credit. New section 39 provides a tax credit to individuals and Article 9-A, 32 and 33 businesses for qualified contributions to public education entities, local education funds, and educational scholarship organizations, Prior to making a contribution, a taxpayer must apply to the Department of Taxation and Finance ("DTF") for a contribution authorization certificate, which will list the amount of the authorized contribution and the entity, public school or public school district for which the contribution is authorized. Taxpayers have 60 days from the issuance of the contribution authorization certificate to make the contribution to the named entity, public school, or public school district. Upon receipt of a timely authorized contribution, the recipient will issue a certificate of receipt to the taxpayer. If a contribution is not timely received, the recipient named in the contribution authorization certificate will notify DTF. The amount of the authorized contribution will be added to the maximum amount of credit available in the immediately following calendar year.

The maximum amount that a taxpayer may list in the application filed with DTF is the lesser of 75% of the taxpayer's tax liability for the immediately preceding taxable year or 5% of the credit cap. The maximum amount of credit that a taxpayer may claim for any year is the lesser of 75% of the taxpayer's tax liability for the taxable year, after the application of all other allowable credits, 5% of the credit cap for the year in which the tax return is filed, or the aggregate amounts listed on the credit authorization certificates issued to the taxpayer plus any amount carried over from a prior year. Any amount of qualified contributions in excess of the taxpayer's tax for the taxable year may be carried forward.

The credit is capped at $250 million for calendar year 2014 and $300 million plus any amounts required to be added to the cap due to authorized contributions that were not timely made for each year beginning in calendar year 2015. One half of the annual cap will be available for qualified contributions made to public education entities and local education funds and one half of the annual cap will be available to educational scholarship organizations.

Section three of the bill also provides definitions for terms such as "authorized contribution," "public education entity," "local education fund," and "educational scholarship organization."

Finally, section three provides reporting requirements for public education entities, local education funds, and educational scholarship organizations, as well as a joint report from the Commissioner and the Commissioner of the Department of Education. The joint report shall include, among other things, statistics regarding the number of qualified contributions made to each type of recipient, the distribution of the recipients by county, and the aggregate amount of credit claimed by tax type.

Section four of the bill amends Tax Law section 208(9) (b) by adding a new subparagraph (21) to provide that if a taxpayer claims a charitable contribution deduction at the Federal level for any amount claimed as a credit pursuant to Tax Law section 210(45), such amount must be added back to the taxpayer's entire net income computation.

Section five of the bill amends Tax Law section 210 to add a new subdivision (45) to provide the mechanism for Article 9-A taxpayers to claim the education investment incentives credit.

Section six of the bill amends Tax law section 606(i)(1)(B) to add a new clause (xxxvi) to provide the mechanism for S Corporations to claim the education investment incentives credit.

Section seven of the bill amends section 606 of the Tax Law to add two new subsections (w) and (w-1). New subdivision 606(w) provides the home-based instructional materials credit. The amount of the credit is the lesser of $100 or 100% of the amount used to purchase instructional materials for home-based educational programs. New subdivision 606(w-1) provides the classroom instructional materials and supplies credit for people employed at a public, charter or non-public school. The amount of the credit is the lesser of $75 or 100% of the amounts used to purchase instructional materials and supplies for use in a classroom.

Section eight of the bill amends Tax Law section 606 by adding a new subsection (ww) to provide the mechanism for Article 22 taxpayers to claim the education investment incentives credit.

Section nine of the bill amends Tax Law section 615(g) by adding a new paragraph (3) to provide that if a taxpayer claims a charitable contribution deduction at the Federal level for any amount claimed as a credit pursuant to section 606(8) (ww), such amount must be added back to the New York adjusted income computation.

Section ten of the bill amends Tax Law 1456 by adding a new subdivision (aa) to provide the mechanism for Article 32 taxpayers to claim the education investment incentives credit

Section eleven of the bill amends Tax Law 1453(b) by adding a new paragraph (16) to require that if a taxpayer claims a charitable contribution deduction at the Federal level for any amount claimed as a credit pursuant to section 1456(aa), such amount must be added back to the taxpayer's entire net income computation.

Section twelve of the bill amends Tax Law 1503(b)(2) by adding a new subparagraph (w) to require that if a taxpayer claims a charitable contribution deduction at the Federal level for any amount claimed as a credit pursuant to section 1511(dd), such amount must be added back to the taxpayer's entire net income computation.

Section thirteen of the bill amends tax Law section 1511 by adding a new subdivision (dd) to provide the mechanism for Article 33 taxpayers to claim the education investment incentives credit.

Section fourteen of the bill amends the Education Law to add a new Article 25, entitled the "Education Investment Tax Credit Program." This new article provides the framework for public education entities, local education funds, and educational scholarship organizations to apply for authorization to issue certificates of receipt. Such authorization must be renewed each year after review of the applicant's prior year's activities and annual report. Additionally, any authorization granted may be revoked in a subsequent year.

Additionally, this new article contains the same short title and definitions, as well as the joint report requirement, provided in Tax law section 39.

Section fifteen of this bill provides that nothing herein shall be construed to authorize either the Commissioner of DTF or the Commissioner of the Department of Education to place any additional instructional or programming requirements upon public or non-public schools.

Section sixteen of this bill contains the severability clause

Section seventeen of this bill provides that this act shall take effect immediately and shall apply to taxable years beginning after December 31, 2013.

Existing law

New law

Justification

At a time when the state is considering ways of reducing the tax burden for New York State residents and educators are seeking an expansion of financial resources, charitable giving for educational purposes should be stimulated. permitting public education entities such as school districts and individual public schools, including charter schools, and non-profits that promote the arts, civics, and pre-k instruction, to accept and receive voluntary cash contributions will lessen the need for additional tax revenue, encouraging voluntary support for education without prejudice for or against any state-sponsored educational enterprise. The bill promotes the state's interest in providing the highest quality education to all children in the state. The tax credit does not constitute public aid to non-public sectarian institutions. Permitting school personnel to claim a credit for the purchase of classroom instructional materials and supplies will insure a wider availability of such materials and supplies for all students.

Legislative history

2012: S.2732-C - Passed Senate 2011: S.2732 - Passed Senate 2010: S.5146-A - Senate Finance Committee 2009: S.5416 - Senate Finance Committee

Fiscal implications

$250 million for calendar year 2014 and $300 million for each calendar year beginning in 2015 The bill has the potential to generate $333 million in voluntary contributions to support K-12 education in New York State. Stabilizing the independent and religious sector will significantly lessen the need for local school tax increases as well as for the issuance of bonds for new public school construction, generating further savings for the state.

Effective date

This act shall take effect immediately and shall apply to taxable years beginning after December 31, 2013.