BILL NUMBER: S5866
SPONSOR: GOUNARDES
 
TITLE OF BILL:
An act to amend the tax law, in relation to establishing the New York
state early childcare savings program
 
PURPOSE:
This legislation would create a tax advantaged savings account for the
purpose of savings for early childcare for children ages 0 to 12.
 
SUMMARY OF PROVISIONS:
Section 1 amends the Tax Law by adding a new article 24-C which estab-
lishes the early childcare savings program, and defines terms including
"account owner", "designated beneficiary", "financial organization",
"eligible childcare facilities", "program", "qualified early childcare
expenses", "qualified withdrawal", "nonqualified withdrawal", "manage-
ment contract", "early childcare savings agreement", and "program manag-
er". Section 1 also sets forth the comptroller's powers and duties in
relation to the early childcare savings program, and sets forth require-
ments for creating and utilizing an early childcare savings account.
Section 1 also states that monies withdrawn from and interest accrued by
early childcare savings accounts are not taxable income.
Section 2 amends section 612 of the Tax Law by adding a new paragraph 44
which defines "excess distributions", and provides that they are attrib-
utable to deductible contributions only to the extent that they exceed
the aggregate of all nondeductible contributions to the account.
Section 3 amends section 612 of the Tax Law by adding two new paragraphs
47 and 48 which provide that federal income tax credits allowable for
early childcare savings program contributions may not exceed $5,000 per
individual or $10,000 per married couple, and distributions from an
early childcare savings account shall be deductible from federal
adjusted gross income.
Section 4 sets forth the effective date.
 
JUSTIFICATION:
According to the Economic Policy Institute, New York is the sixth most
expensive state for infant care, requiring an average expenditure of
$15,394 per year - $7,456 more per year than in-state public school
tuition. On average, a family making the state median income would have
to spend 18% of their income to cover the cost of child care for an
infant, and 13% of their income to cover the cost of child care for a
toddler.
In 2016, the U.S. Department of Health and Human Services determined
that, to be affordable, childcare should cost no more than 7% of a fami-
ly's income. With New York's median income at $69,651 and the average
cost of childcare in New York at $15,394 - 21% of a median income -- it
is clear that childcare is not affordable for most New Yorkers.
A flexible savings account would allow young couples and newly formed
families to save for childcare expenses and receive tax-advantaged bene-
fits. Such a savings account would allow New Yorkers to plan for such a
crucial future expense. When implemented, this program will be similar
to the 529 college savings program that allows families to save for
college costs.
Additionally, accessible childcare benefits the state's economy in many
ways. It allows both parents to remain in the workforce, increases work-
place productivity, and creates job opportunities for childcare workers.
While there are some free childcare programs, the demand for such
programs often vastly exceeds the supply. The implementation of this
savings program would emphasize the importance of financial planning for
children, reduce gender imbalance in the workplace, and take steps
toward making high-quality child care affordable.
 
PRIOR LEGISLATIVE HISTORY:
2024: S3330 - Reported and committed to Finance
2023: S3330 - Referred to Investigations and Government Operations
2022: S4842 - Referred to Investigations and Government Operations
2021: S4842 - Referred to Investigations and Government Operations
2020: S7075 - Referred to Investigations and Government Operations.
 
FISCAL IMPLICATIONS:
TBD
 
EFFECTIVE DATE:
This act shall take effect on the one hundred eightieth day after it
shall have become a law, and shall apply to taxable years commencing on
or after the first of January next succeeding the date on which it shall
have become a law.

Statutes affected:
S5866: 612 tax law, 612(b) tax law, 612(c) tax law