Do tuition payments for a dependent enrolled in a six-year pre-pharmacy/Doctor of Pharmacy program count as 'qualified college tuition expenses' under Tax Law § 606(t)(2)(C)?

Plain-English summary

Petitioner is a New Jersey resident who works in New York and files a New York nonresident personal income tax return. His dependent is enrolled in a special six-year program at a university outside New York, combining two years of undergraduate pre-pharmacy study with a four-year Doctor of Pharmacy (Pharm.D.) program accredited by the Accreditation Council for Pharmacy Education. Admission into the Pharm.D. portion requires some prior college-level study but not a Bachelor's degree - though students who already hold a Bachelor's degree can also be admitted - and Pharm.D. students pay a special professional tuition rate that doesn't apply during the two pre-pharmacy years. Petitioner asked whether tuition paid for the dependent counts as "qualified college tuition expenses" under Tax Law § 606(t)(2)(C).

Because Petitioner is a nonresident, he cannot claim the college tuition credit under Tax Law § 606(t), which is available only to residents. He may, however, take an itemized deduction for "allowable college tuition expenses" in computing his New York tax, under Tax Law §§ 601(e) and 615(d)(4). "Allowable college tuition expenses" means qualified college tuition expenses paid during the year, capped at $10,000 per student (Tax Law § 606(t)(2)(A)). "Qualified college tuition expenses" is defined as tuition required for enrollment or attendance of an eligible student at an institution of higher education, but the definition excludes tuition paid from scholarships or financial aid, and excludes tuition for a course of study leading to a post-baccalaureate or other graduate degree (Tax Law § 606(t)(2)(C)).

Citing Matter of Grace v. New York State Tax Commission, 37 N.Y.2d 193 (1975), the Department reiterated that tax deductions are a matter of legislative grace and a taxpayer must show he fits within the statute. The Department concluded that although the Pharm.D. program does not literally require a Bachelor's degree for admission, the fact that students can enter after already earning one, combined with the special professional tuition rate charged only for that phase, makes the Pharm.D. program analogous to a "post baccalaureate or other graduate degree" program. Tuition for the four-year Pharm.D. years is therefore excluded from "qualified college tuition expenses." By contrast, tuition paid for the two years of undergraduate-level pre-pharmacy study before formal entry into the Pharm.D. program does qualify, because that study is indistinguishable from other undergraduate-level coursework.

What this means for you

Parents paying for combined undergraduate/professional degree programs

If your dependent is in a program that blends undergraduate coursework with a professional degree (such as pharmacy, and potentially similar accelerated law, dental, or medical tracks), don't assume the whole program's tuition automatically qualifies - or automatically fails to qualify - as "qualified college tuition expenses." The Department looks past whether a Bachelor's degree is formally required and instead asks whether the professional-degree phase functions like graduate-level study (for example, whether it's priced at a separate professional tuition rate and whether Bachelor's-degree holders are admitted into it).

Nonresidents claiming the itemized deduction instead of the credit

Only New York residents can claim the college tuition credit under Tax Law § 606(t). Nonresidents who itemize on their New York returns can instead claim a deduction for "allowable college tuition expenses" under Tax Law §§ 601(e) and 615(d)(4), subject to the same $10,000-per-student cap and the same exclusion for graduate-level tuition.

Common questions

Q: Why couldn't Petitioner claim the college tuition credit directly?
A: The college tuition credit under Tax Law § 606(t) is available only to New York residents. As a nonresident, Petitioner could instead claim an itemized deduction for allowable college tuition expenses under Tax Law §§ 601(e) and 615(d)(4).

Q: Does tuition for the four-year Doctor of Pharmacy program qualify as a "qualified college tuition expense"?
A: No. The Department found the Pharm.D. program analogous to a post-baccalaureate or graduate degree program, so its tuition is excluded under Tax Law § 606(t)(2)(C).

Q: Does tuition for the two-year pre-pharmacy undergraduate portion qualify?
A: Yes. That portion is indistinguishable from ordinary undergraduate-level study and so counts as a "qualified college tuition expense."

Q: Does it matter that the Pharm.D. program doesn't technically require a Bachelor's degree for admission?
A: Not decisively. The Department noted that students can be admitted with only two years of prior college study, but also that students who already hold a Bachelor's degree are admitted, and that a separate professional tuition rate applies - factors that made the program analogous to graduate study regardless of the formal admission requirement.

Q: What legal standard did the Department apply in reading the statute narrowly?
A: Citing Matter of Grace v. New York State Tax Commission, 37 N.Y.2d 193 (1975), the Department applied the principle that tax deductions are a matter of legislative grace, so a taxpayer must affirmatively show he comes within the statute's terms.

Citations and references

• Tax Law § 606(t)(2)(A) - defines "allowable college tuition expenses," capped at $10,000 per student
• Tax Law § 606(t)(2)(C) - defines "qualified college tuition expenses"; excludes scholarship/financial-aid-funded tuition and tuition for a course of study leading to a post-baccalaureate or other graduate degree
• Tax Law § 601(e) - nonresident tax computation
• Tax Law § 615(d)(4) - itemized deduction for college tuition expenses
• Matter of Grace v. New York State Tax Commission, 37 N.Y.2d 193 (1975) - tax deductions are a matter of legislative grace

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/income_ao_2012.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/income/a12_6i.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Counsel
Advisory Opinion Unit

TSB-A-12(6)I
Income Tax
October 15, 2012

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. I120327A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
name and address redacted. Petitioner asks whether the term, “qualified college tuition
expenses,” as defined by section 606(t)(2)(C) of the Tax Law, includes tuition payments made on
behalf of a dependent student. The student is enrolled in a special six-year name redacted
University program where, when completed, the student receives a professional degree. The
student does not receive a Bachelor’s degree as part of this program.
We conclude that “qualified college tuition expenses,” as defined by section 606 (t)(2)(C)
of the Tax Law, does not include payments for enrollment or attendance in the graduate
equivalent of a program leading to a professional degree.
Facts
Petitioner is a resident of New Jersey who works in New York and files a New York
nonresident personal income tax return each year. He has a dependent enrolled in name redacted
University’s pre-pharmacy/pharmacy program. Name redacted University is an institution of
higher education in the State of name of state redacted, and its pharmacy program is accredited
by the Accreditation Council for Pharmacy Education.
Under the special program, the student studies for two years as a pre-pharmacy
undergraduate major. After two years, the student can be admitted into the four-year Doctor of
Pharmacy (Pharm.D.) program. According to the university’s web site, the Doctor of Pharmacy
is a professional degree, not a graduate degree. Admission into the program requires some prior
college level study, but not a Bachelor’s degree. Students admitted into the Doctor of Pharmacy
program can, however, have a Bachelor’s degree. Admission into the program is not automatic
after two years; students not admitted can use their undergraduate credits to pursue a Bachelor’s
degree at name redacted. The students in the Doctor of Pharmacy program pay a special
professional tuition rate which is not applicable to the two-year pre-pharmacy program. The
four-year Doctor of Pharmacy program is a necessary step in the process of becoming a
registered pharmacist. Petitioner’s dependent was admitted into the Doctor of Pharmacy
program after completing two years in the undergraduate pre-pharmacy program.
Analysis
As a nonresident, Petitioner cannot claim the college tuition credit provided by section
606(t) of the Tax Law on his New York nonresident return. However, in his calculation of

-2-

TSB-A-12(6)I
Income Tax
October 15, 2012

New York tax owed, he may be able to take an itemized deduction for “allowable college tuition
expenses,” as defined in section 606(t)(2) of the Tax Law. See Tax Law §§ 601(e) and
615(d)(4). “Allowable college tuition expenses” is defined as the amount of qualified college
tuition expenses . . . paid by the taxpayer during the taxable year, limited to $10,000 for each
student. See Tax Law §606(t)(2)(A). “ ‘Qualified college tuition expenses’ shall mean the
tuition required for the enrollment or attendance of an eligible student at an institution of higher
education. Provided, however, tuition payments made pursuant to the receipt of any scholarships
or financial aid, or tuition required for enrollment or attendance in a course of study leading to
the granting of a post baccalaureate or other graduate degree, shall be excluded from the
definition of ‘qualified college tuition expenses.’ ” Tax Law §606(t)(2)(C).
Under New York case law, tax deductions are a matter of legislative grace, and a
taxpayer must be able to show that he or she comes within the provisions of an applicable statute
or regulation. See Matter of Grace v. New York State Tax Commission, 37 N.Y.2d 193 (1975).
The Tax Law specifically excludes tuition payments required for a course of study leading to the
“granting of a post baccalaureate or other graduate degree.” It makes no mention of professional
programs that combine aspects of both undergraduate and graduate study. Although Petitioner’s
dependent did not need a Bachelor’s degree to be enrolled in the Doctor of Pharmacy program,
he or she could have applied after earning one, and this makes the Doctor of Pharmacy program
analogous to the “post baccalaureate or graduate” category. For this reason, a deduction cannot
be claimed for that aspect of the program’s tuition expenses. However, tuition payments for the
undergraduate-level study years of the program prior to formal entry into the Doctor of
Pharmacy program would qualify as “qualified college tuition expenses” under section
606(t)(2)(C) of the Tax Law as such undergraduate study is indistinguishable from other
undergraduate-level study.

DATED: October 15, 2012

NOTE:

/S/
DEBORAH R. LIEBMAN
Deputy Counsel

An Advisory Opinion is issued at the request of a person or entity. It is limited to the
facts set forth therein and is binding on the Department only with respect to the
person or entity to whom it is issued and only if the person or entity fully and
accurately describes all relevant facts. An Advisory Opinion is based on the law,
regulations, and Department policies in effect as of the date the Opinion is issued or
for the specific time period at issue in the Opinion. The information provided in this
document does not cover every situation and is not intended to replace the law or
change its meaning.