New York Gov. Andrew Cuomo talks to media members outside his office at the state Capitol on Wednesday, March 30, 2016, in Albany, N.Y. Cuomo says legislative leaders have agreed to a $150 billion state budget plan that includes a minimum wage hike and $1 billion in middleclass income tax relief. (AP Photo/Mike Groll)
ALBANY — New homeowners in New York will receive a rebate check for a portion of their school-property taxes instead of receiving it as an upfront savings in their tax bill.
The change was a compromise on the issue reached between Gov. Andrew Cuomo and the state Legislature as part of the state budget deal last week.
“STAR is a tax-relief program so this change is to achieve consistency with how other state tax cuts are provided,” said Cuomo’s budget spokesman Morris Peters. “There is no change to the amount of the STAR credit for taxpayers, only the mechanism used to claim the credit.”
Originally, Cuomo’s sought to require new homeowners to pay their taxes upfront and get the STAR rebate on their school taxes when they file their income taxes.
In the budget deal, new homeowners or people who move will get a rebate check each fall for the portion of their school taxes covered by STAR. Then they would have to claim the money on their income taxes the following year.
The move is expected to save the state about $180 million a year when fully implemented in 2018, and the Cuomo administration has argued that the plan would better streamline the process of getting the STAR rebates.
The program costs the state $3 billion a year and comes as an upfront break when people pay their school taxes each September. Then the state reimburses schools for the cost of the rebate.
The Legislature was successful in beating back some of Cuomo’s other proposed changes to STAR, such as a freeze in the rebate rather than let it grow 2 percent a year for STAR and Enhanced STAR, which is for senior citizens.
Households with income under $500,000 are eligible for STAR. They get an exemption from the first $30,000 of the full value of their primary home from school taxes.
Homeowners 65 and older get a larger tax break for Enhanced STAR: The first $65,300 of their home value is exempt from school taxes.
Assemblyman Kenneth Zebrowski, D-New City, Rockland County, said he was disappointed the budget included the changes. He said he will look to beat back the plan before the legislative session ends in mid-June.
“We preserved the increase, and we prevented it from being an income-tax deduction, but it did morph into a check for new homeowners,” Zebrowski said. “We felt we were able to protect the program, but I’m not happy.”
The state has sought to crack down on abuses in the program, such as people getting the break on more than one home and if they exceed the income limit.
The change from a credit to a rebate check is more aimed at helping the state’s ledger to pay for new spending in the state budget, such as a $1 billion income-tax cut, said E.J. McMahon, president of the Empire Center, an Albany-based conservative think tank.
“Every year, it’s actually going to steadily erode the apparent cost of STAR because every year, as houses change hands, more and more of STAR will shift from the spending side to the revenue side of the budget,” he said.