NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A5834A
SPONSOR: Englebright (MS) TITLE OF BILL: An act to amend the tax law, in relation to creating
the middle class circuit breaker tax credit and creating a tax reform
study commission
PURPOSE OR GENERAL IDEA OF BILL:
To provide a personal income tax credit for certain property taxpayers
who pay a disproportionate share of their income to property taxes.
SUMMARY OF SPECIFIC PROVISIONS:
SECTION 1: Adds a new subsection (yy) 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 2014:
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.
$100,00+ No credit.
For taxable years starting in 2014:
Household Adjusted Gross Income Tax
Maximum Real Property Tax
$100,000 or less Real Property taxes paid
in excess of 8.5% of said
income can receive
a personal income tax credit
of 70% of the overage.
$100,001+ No credit.
For taxable years starting in 2015: 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 2016: 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
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.
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 2015 the "real property tax equivalent"
equal to 15% of the adjusted rent actually paid in the taxable year.
Taxable years starting in 2016, 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 York-
ers who have financially suffered as municipalities have had to rely
more heavily on real property taxes for local government revenue. Many
homeowners 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.
FISCAL IMPLICATIONS:
The program is phased in over four years and will cost the State nothing
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.
