SECTION 1. Subsection (a)(2) of section 2 of chapter 62 of the General Laws is hereby amended by adding the following subparagraphs:
(R) To the extent not otherwise excluded from gross income, in whole or in part, income attributable to the discharge of student debt that includes:
(i) Debt reduced or discharged through the federal Public Service Loan Forgiveness Program or similar program;
(ii) Debt reduced or discharged that is the result of an income-driven repayment plan, such as Income Based Repayment (IBR), Income Contingent Repayment (ICR), Pay as You Earn (PAYE), or Revised Pay as You Earn (REPAYE), or similar programs;
(iii) Debt reduced or discharged by any program that reduces the debt due to disability;
(iv) Debt reduced or discharged because of the death of the student or former student or a guarantor of a student loan;
(v) Debt reduced or discharged by any federal or state program that forgives or discharges student loan debt, or student loans or fees, for school closure or for any other reason attributable to the actions or conditions of the school;
(vi) Debt reduced or discharged by any federal or state program that forgives or discharges student loan debt or student loans or fees.
(S) Amounts received by an employee paid by the employer as contributions to a prepaid tuition program or college savings program established by the commonwealth or any instrumentality or authority thereof held by the employee if the contributions are made pursuant to section 82 of chapter 63 of the General Laws.
SECTION 2. Chapter 63 of the General Laws is hereby amended by inserting after section 81 the following section:
Section 82. A taxpayer who, during the taxable year, makes a contribution to a prepaid tuition program or college savings program established by the commonwealth or any instrumentality or authority thereof in an amount matching a contribution to said programs made in the same taxable year by any employee of the taxpayer whose income does not exceed 200 per cent of the federal poverty level shall be allowed a credit against the tax liability imposed under this chapter in an amount equal to 25 per cent of that matching contribution, but not to exceed $1,000 per contributing employee per taxable year. For partners, shareholders of Subchapter S corporations, and owners of limited liability companies, if the liability company is treated as a partnership for purposes of federal and State income taxation, there is allowed a credit pursuant to this section to be determined in accordance with the determination of income and distributive share of income according to this chapter and Subchapter S of the Internal Revenue Code. If the amount of the credit exceeds the tax liability for the year, the excess may be carried forward and applied to the tax liability of the 5 taxable years following the excess credit year. The tax credit shall be applied to the earliest year for which there is a tax liability. If there are credits for more than one year that are available to offset a liability, the earlier credit shall be applied first.
SECTION 3. This Act shall apply to discharges of indebtedness occurring on or after January 1, 2021 and for tax years commencing on or after January 1, 2022.
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