Print Friendly HOUSE BILL NO. 282 – Education savings acct, tax deduct
HOUSE BILL NO. 282
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H0282...............................................by REVENUE AND TAXATION
EDUCATIONAL SAVINGS ACCOUNT - Adds to existing law to authorize a state
income tax deduction for contributions to an educational savings account
for the purpose of paying eligible educational expenses.
02/19 House intro - 1st rdg - to printing
02/22 Rpt prt - to Rev/Tax
|||| LEGISLATURE OF THE STATE OF IDAHO ||||
Fifty-fifth Legislature First Regular Session - 1999
IN THE HOUSE OF REPRESENTATIVES
HOUSE BILL NO. 282
BY REVENUE AND TAXATION COMMITTEE
1 AN ACT
2 RELATING TO INCOME TAX DEDUCTION FOR CERTAIN EDUCATIONAL CONTRIBUTIONS; AMEND-
3 ING CHAPTER 30, TITLE 63, IDAHO CODE, BY THE ADDITION OF A NEW SECTION
4 63-3022N, IDAHO CODE, TO AUTHORIZE A STATE INCOME TAX DEDUCTION FOR CON-
5 TRIBUTIONS TO AN EDUCATIONAL SAVINGS ACCOUNT, TO SPECIFY PURPOSES OF THE
6 ACCOUNT, TO DEFINE TERMS AND TO PROVIDE PENALTIES FOR WITHDRAWAL OF FUNDS
7 FOR OTHER PURPOSES; AND PROVIDING A SUNSET ON JUNE 1, 2004.
8 Be It Enacted by the Legislature of the State of Idaho:
9 SECTION 1. That Chapter 30, Title 63, Idaho Code, be, and the same is
10 hereby amended by the addition thereto of a NEW SECTION , to be
11 known and designated as Section 63-3022N, Idaho Code, and to read as follows:
12 63-3022N. EDUCATIONAL SAVINGS ACCOUNT. (1) For taxable years commencing
13 on and after January 1, 2000, annual contributions to an educational savings
14 account not exceeding five hundred dollars ($500) for the account holder and
15 interest earned on an educational savings account shall be deducted from tax-
16 able income by the account holder, if such amount has not been previously
17 deducted or excluded in arriving at taxable income. For married individuals
18 the maximum deduction shall be computed separately for each individual.
19 (2) For the purpose of this section, the following terms have the follow-
20 ing meanings unless the context clearly denotes otherwise:
21 (a) "Account holder" means an individual, in the case of married individ-
22 uals each spouse, including a self-employed person, who has established an
23 educational savings account from which qualifying expenditures are made.
24 (b) "Depository" means a state or national bank, trust company, federal
25 or state savings and loan association, federal or state credit union or
26 trust company authorized to act as a fiduciary or an insurance administra-
27 tor or insurance company authorized to do business in this state, a broker
28 or investment advisor regulated by the department of finance, or a broker
29 or insurance agent regulated by the department of insurance.
30 (c) "Eligible postsecondary educational expense" means tuition, fees,
31 books, required equipment, room and board paid by the account holder for
32 postsecondary education at any Idaho institution of postsecondary educa-
33 tion for the account holder or any eligible relative of the account
35 (d) "Eligible primary/secondary educational expense" means any tuition,
36 fees, books, required equipment, room and board paid by the account holder
37 for the education of an eligible relative who is over the age of seven (7)
38 years and who does not attend a public school situated in Idaho or another
39 state at Idaho taxpayer expense pursuant to section 33-1403, Idaho Code,
40 but who is otherwise in compliance with the compulsory school attendance
41 requirements of section 9, article IX, of the constitution of the state of
42 Idaho and section 33-202, Idaho Code; provided, such expenditures must be
43 made within the state of Idaho.
1 (e) "Educational savings account" means an account established with a
2 depository to pay the eligible postsecondary or primary/secondary educa-
3 tional expense of the account holder or eligible relatives of the account
4 holder. Educational savings accounts shall carry the name of the account
5 holder, a designated beneficiary or beneficiaries of the account holder
6 and shall be designated by the depository as an "educational savings
8 (f) "Relative" means a spouse, child, stepchild, the spouse of a child or
9 stepchild, any descendent and their spouse of a child or stepchild, or
10 sibling of an account holder.
11 (3) Funds held in an educational savings account may be withdrawn by the
12 account holder at any time after they have been in the account not less than
13 twelve (12) months. Withdrawals for the purpose of paying eligible
14 primary/secondary or postsecondary educational expenses shall not be subject
15 to the tax imposed in this chapter. The burden of proving that a withdrawal
16 from an educational savings account was made for an eligible postsecondary or
17 primary/secondary educational expense is upon the account holder and not upon
18 the depository. Other withdrawals shall be subject to the following restric-
19 tions and penalties:
20 (a) There shall be a distribution penalty for withdrawal of funds by the
21 account holder for purposes other than the payment of eligible expenses.
22 The penalty shall be ten percent (10%) of the amount of withdrawal from
23 the account and, in addition, the amount withdrawn shall be subject to the
24 tax imposed in this chapter. The direct transfer of funds from an educa-
25 tional savings account to an educational savings account at a different
26 depository shall not be considered a withdrawal for purposes of this sec-
27 tion. Charges relating to the administration and maintenance of the
28 account by the depository are not withdrawals for purposes of this sec-
30 (b) Upon the death of an account holder, the account principal, as well
31 as any interest accumulated thereon, shall be distributed without penalty
32 to the designated beneficiary or beneficiaries.
33 (c) Funds withdrawn which are later reimbursed shall be taxable unless
34 redeposited into the account within sixty (60) days of the reimbursement.
35 Deposits of reimbursed eligible educational expenses shall not be included
36 in calculating the amount deductible.
37 (d) Funds deposited in an educational savings account which are deposited
38 in error or unintentionally and which are withdrawn within thirty (30)
39 days of being deposited shall be treated as if the amounts had not been
40 deposited in the educational savings account.
41 (e) Funds withdrawn which are, not later than the sixtieth day after the
42 day of the withdrawal, deposited into another educational savings account
43 for the benefit of the same account holder are not a withdrawal for pur-
44 poses of this section and shall not be included in calculating the amount
46 (4) Reporting. Depositories shall provide to the state tax commission the
47 following information regarding educational savings accounts: the name of the
48 account holder, the address of the account holder, the taxpayer identification
49 number of the account holder, deposits made during the tax year by the account
50 holder, withdrawals made during the tax year by the account holder, interest
51 earned on the proceeds of an educational savings account or other information
52 deemed necessary by the commission. Reports shall be filed annually on or
53 before the last day of February following the year to which the information in
54 the report relates.
1 SECTION 2. The provisions of this act shall be null, void and of no force
2 and effect on and after June 30, 2004.
STATEMENT OF PURPOSE
This legislation provides for pre-tax dollars for educational purposes.
According to best information available there could be a $1,000,000
negative impact to the General Fund through reduced income tax on
contributions made by eligible participants to an educational savings
account proposed under this statute.
CONTACT: Frank Bruneel, Representative
Tim Ridinger, Representative
STATEMENT OF PURPOSE/ FISCAL NOTE Bill No. H 282