Tax Credit for College Graduates Buying First Home Proposed, Again

Among the numerous legislative proposals in the early weeks of the current session of the Connecticut General Assembly is one that would require the Commissioner of Economic and Community Development (DECD) to establish the Learn Here, Live Here program.

The program would be designed to help graduates of any institution of higher education, or certain certificate programs of private occupational schools, save toward a down payment on their first home in Connecticut by segregating a portion of their state income tax payments for up to ten years after they graduate.

The legislature’s Commerce Committee raised the concept last week, the next step in the legislative process, although it faces an uncertain future. If approved by the Committee, and then the House and Senate and signed into law by Gov. Lamont, it could take effect as soon as next year.  But that path is strewn with potential obstacles, ranging from the potential fiscal impact on the state, still to be estimated, to the likelihood of legislative consideration in a short session mired in debate on a series of time-consuming controversial issues from tolls to recreational marijuana.

If the proposal (HB5162) seems familiar, that may be because the possibility of such a program has been on the books since 2012.  It was not required, however - only a process that was permissible if and only if the DECD chose to develop and offer it.  This year’s proposal would require the program to be made available to taxpayers.

According to the proposal, individuals who graduate on or after January 1, 2021, from universities, colleges or schools in the state, may have their income tax liability, up to a maximum of $2,500 annually, segregated into a Connecticut first-time homebuyers account.  After a period not exceeding ten years after graduation, funds that had been segregated could be withdrawn by a participant for the purchase of a first home in Connecticut.

In one form or another, a tax credit aimed at incentivizing students to stay in Connecticut has been proposed, sometimes by Republicans, sometimes by Democrats, for at least a decade.  An effort to “mandate, rather than allow” the program was unsuccessful in the 2013 legislative session along with a provision to allow the saved funds to be used to start a business, and variations have fallen short in succeeding years as well.   

That year among the supporters at a public hearing was the since-eliminated Permanent Commission on the Status of Women, which testified that “supporting a young woman’s dream of homeownership and/or creating her own business is a smart for Connecticut’s economy.  Keeping talented young people in the state will ensure that Connecticut’s work force remains strong and vibrant, even as the baby boomer generation leaves the ranks.”

Under this year’s proposal, for a payment to be issued on behalf of the program participant to be used as the down payment on a house, it “must be the first house such participant has bought, either singly or jointly,” according to the proposal.  The payment “may be in an amount equal to the amount of segregated funds deposited on behalf of such participant. If the payment is less than such amount, any excess amount shall be deposited in the General Fund.”  Use it or lose it, so to speak. 

Yes, there is another catch, potentially.  As the proposed legislation explains, “If a participant ceases to live in the state at any time up to one year after the date on which the Commissioner of Economic and Community Development issued the payment to the participant, such participant shall repay one hundred per cent of the amount paid out.”  It goes on to state that if the participant left the state after 2 years, 80% would need to be repaid to the state; 3 years would mean 60%, 4 years 40%, and so on.  If the departure from Connecticut occurred after five years, there would be no repayment obligation.

Not more than one million dollars from all program participants could be segregated from tax payments in any calendar year.

The department would also be required to develop a “comprehensive public education program to educate recent graduates of a public institution of higher education, private university or college, or health care training school in the state, or of a technical education and career school, about the program.”

In addition to colleges and universities, a “health care training school" as defined in the proposal, means a medical or dental school, chiropractic college, school or college of optometry, school or college of chiropody or podiatry, school of occupational therapy, hospital-based occupational school, school or college of naturopathy, school of dental hygiene, school of physical therapy or any other school or institution giving instruction in the healing arts.

The Higher Education and Employment Advancement Committee has raised a similar bill, Senate Bill 102, in the current legislative session.

Back in 2011, a published report on the program’s original passage - when instituting it was at the department’s option - featured favorable comments from legislators.

"It's is a creative way to address two problems Connecticut faces," said state Rep. Kim Fawcett, a Democrat then representing Fairfield and Westport. "It targets our youngest professionals and gives them an incentive to stay in Connecticut and over the long term will help bring greater stability to the housing market in our state."

"It's not intended to be a silver bullet," said Rep. Tom Reynolds, a Democrat then representing Ledyard and Montville. "It is one strand in a much larger multi-faceted strategy to create jobs and provide an environment for young people to afford to live here."

In 2015, advocating for passage of a bill to require the program to be offered, Republican Sen. Tony Hwang (Easton, Fairfield, Newtown, Weston and Westport), noted “While I recognize Learn Here, Live Here comes at an initial revenue cost to the state, I view this program as an investment in our educated population and the promise they hold for our state’s future economic and social vitality, … any lost tax revenue will certainly be more than made up in the long term when those residents become taxpayers and contributing members of our communities.”