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H0464...............................................by REVENUE AND TAXATION COLLEGE SAVINGS PROGRAM - Amends existing law relating to the Idaho College Savings Program to expand the definition of "family member" to include first cousins; to revise the definitions of "nonqualified withdrawal" and "qualified higher education expenses" to comply with federal law; and to eliminate the penalty to be assessed against nonqualified withdrawals. 01/21 House intro - 1st rdg - to printing 01/22 Rpt prt - to Rev/Tax 01/29 Rpt out - rec d/p - to 2nd rdg 01/30 2nd rdg - to 3rd rdg 01/31 3rd rdg - PASSED - 68-0-2 AYES -- Aikele, Barraclough, Barrett, Bedke, Bell, Bieter, Black, Block, Boe, Bolz, Bradford, Bruneel, Callister, Campbell, Clark, Collins, Crow, Cuddy, Deal, Denney, Ellis, Ellsworth, Eskridge, Field(13), Field(20), Gagner, Gould, Hadley, Hammond, Harwood, Henbest, Higgins, Hornbeck, Jaquet, Jones, Kellogg, Kendell, Kunz, Lake, Langford, Loertscher, Mader, Martinez, McKague, Meyer, Montgomery, Mortensen, Moyle, Pearce, Pischner, Pomeroy, Raybould, Ridinger, Roberts, Robison, Sali, Schaefer, Sellman, Shepherd, Smith(33), Smith(23), Smylie, Stevenson, Stone, Tilman, Trail, Wood, Mr. Speaker NAYS -- None Absent and excused -- Wheeler, Young Floor Sponsor - Ridinger Title apvd - to Senate 02/01 Senate intro - 1st rdg - to Loc Gov 02/12 Rpt out - rec d/p - to 2nd rdg 02/13 2nd rdg - to 3rd rdg 02/18 3rd rdg - PASSED - 33-0-2 AYES -- Andreason, Boatright, Branch(Bartlett), Brandt, Bunderson, Burtenshaw, Cameron, Darrington, Davis, Deide, Frasure, Geddes, Goedde, Hawkins, Hill, Ingram, Ipsen, Keough, King-Barrutia, Little, Lodge, Marley, Noh, Richardson, Risch, Schroeder, Sims, Sorensen, Stegner, Stennett, Thorne, Wheeler, Williams NAYS -- None Absent and excused -- Dunklin, Sandy Floor Sponsor - Ipsen Title apvd - to House 02/19 To enrol 02/20 Rpt enrol - Sp signed 02/21 Pres signed 02/22 To Governor 02/27 Governor signed Session Law Chapter 50 Effective: 01/01/02
|||| LEGISLATURE OF THE STATE OF IDAHO |||| Fifty-sixth Legislature Second Regular Session - 2002IN THE HOUSE OF REPRESENTATIVES HOUSE BILL NO. 464 BY REVENUE AND TAXATION COMMITTEE 1 AN ACT 2 RELATING TO THE IDAHO COLLEGE SAVINGS PROGRAM; AMENDING SECTION 33-5401, IDAHO 3 CODE, TO EXPAND THE DEFINITION OF "FAMILY MEMBER" TO INCLUDE FIRST COUSINS 4 AND TO REVISE THE DEFINITIONS OF "NONQUALIFIED WITHDRAWAL" AND "QUALIFIED 5 HIGHER EDUCATION EXPENSES" TO COMPLY WITH FEDERAL LAW; AMENDING SECTION 6 33-5404, IDAHO CODE, TO ELIMINATE THE PENALTY TO BE ASSESSED AGAINST 7 NONQUALIFIED WITHDRAWALS AND TO MAKE TECHNICAL CORRECTIONS; DECLARING AN 8 EMERGENCY AND PROVIDING RETROACTIVE APPLICATION. 9 Be It Enacted by the Legislature of the State of Idaho: 10 SECTION 1. That Section 33-5401, Idaho Code, be, and the same is hereby 11 amended to read as follows: 12 33-5401. DEFINITIONS. As used in this chapter, the following terms have 13 the following meanings unless the context clearly denotes otherwise: 14 (1) "Account" means an individual trust account or savings account estab- 15 lished as prescribed in this chapter. 16 (2) "Account owner" means the person designated at the time an account is 17 opened as having the right to withdraw moneys from the account before the 18 account is disbursed to or for the benefit of the designated beneficiary. 19 (3) "Board" means the state college savings program board created in sec- 20 tion 33-5402, Idaho Code. 21 (4) "Designated beneficiary," except as provided in section 33-5404, 22 Idaho Code, means, with respect to an account, the person designated at the 23 time the account is opened as the person whose higher education expenses are 24 expected to be paid from the account or, if this designated beneficiary is 25 replaced in accordance with section 33-5404, Idaho Code, the replacement bene- 26 ficiary. 27 (5) "Financial institution" means any state bank, national bank, savings 28 bank, savings and loan association, credit union, insurance company, brokerage 29 firm or other similar entity that is authorized to do business in this state. 30 (6) "Higher education institution" means any of the following: 31 (a) An institution described in the higher education act of 1965 (P.L. 32 89-329; 79 Stat. 1219; 20 U.S.C. sections 1001 et seq.); 33 (b) An area vocational educational school as defined in 20 U.S.C. section 34 2471(4); 35 (c) An institution regulated by the state board of education. 36 (7) "Member of the family" means any of the following: 37 (a) A son or daughter of a person or a descendant of the son or daughter 38 of the person; 39 (b) A stepson or stepdaughter of a person; 40 (c) A brother, sister, stepbrother or stepsister of a person. For pur- 41 poses of this paragraph, "brother" and "sister" include a brother or sis- 42 ter by the half-blood; 43 (d) The father or mother of a person or the ancestor of the father or 2 1 mother of a person; 2 (e) A stepfather or stepmother of a person; 3 (f) A son or daughter of a person's brother or sister. For purposes of 4 this paragraph, "brother" and "sister" include a brother or sister by the 5 half-blood; 6 (g) A brother or sister of the person's father or mother. For purposes of 7 this paragraph, "brother" and "sister" include a brother or sister by the 8 half-blood; 9 (h) A son-in-law, daughter-in-law, father-in-law, mother-in-law, brother- 10 in-law or sister-in-law of a person; 11 (i) The spouse of a person or the spouse of any individual described in 12 this paragraph; 13 (j) The first cousin of a person; 14 (k) Any individual who meets the criteria for family membership described 15 in this subsection as a result of legal adoption. 16 (8) "Nonqualified withdrawal" means an account withdrawalfrom an account17other thanthat is not one (1) of the following: 18 (a) A qualified withdrawal; 19 (b) A withdrawal made as the result of the death or disability of the 20 designated beneficiary of an account; 21 (c) A withdrawal that is made ontheaccount of a scholarship, or the22allowance or payment described in section 135(d)(1)(B) or (C) of the23Internal Revenue Code, and that is received by the designated beneficiary,24but only to the extent of the amount of this scholarship, allowance or25paymentas defined in 26 U.S.C. section 117 or an educational allowance as 26 defined in 26 U.S.C. section 25A(g)(2); 27 (d) A rollover or change of the designated beneficiary. 28 (9) "Program" means the college savings program established under this 29 chapter. 30 (10) "Qualified higher education expenses"means tuition, fees, books,31supplies, room and board, and equipment required for enrollment or attendance32of a designated beneficiary at a higher education institutionshall have the 33 meaning provided in 26 U.S.C. section 529(e)(3). 34 (11) "Qualified withdrawal" means a withdrawal from an account to pay the 35 qualified higher education expenses of the designated beneficiary of the 36 account, but only if the withdrawal is made in accordance with this chapter. 37 SECTION 2. That Section 33-5404, Idaho Code, be, and the same is hereby 38 amended to read as follows: 39 33-5404. PROGRAM REQUIREMENTS. (1) The program shall be operated through 40 the use of accounts. An account may be opened by any person who desires to 41 save to pay the qualified higher education expenses of a person by satisfying 42 each of the following requirements: 43 (a) Completing an application in the form prescribed by the board. The 44 application shall include the following information: 45 (i) The name, address and social security number or employer iden- 46 tification number of the contributor; 47 (ii) The name, address and social security number of the account 48 owner if the account owner is not the contributor; 49 (iii) The name, address and social security number of the designated 50 beneficiary; 51 (iv) The certification relating to no excess contributions required 52 by subsection (173) of this section; 53 (v) Any other information that the board may require; 3 1 (b) Paying the one-time application fee established by the board; 2 (c) Making the minimum contribution required by the board or by opening 3 an account; 4 (d) Designating the type of account to be opened if more than one (1) 5 type of account is offered. 6 (2) Any person may make contributions to an account after the account is 7 opened. 8 (3) Contributions to accounts may be made only in cash. 9 (4) Account owners may withdraw all or part of the balance from an 10 account on sixty (60) days' notice, or a shorter period as may be authorized 11 by the board, under rules prescribed by the board. These rules shall include 12 provisions that will generally enable the board or program manager to deter- 13 mine if a withdrawal is a nonqualified withdrawal or a qualified withdrawal. 14 The rules may, but need not, require one (1) or more of the following: 15 (a) Account owners seeking to make a qualified withdrawal or other with- 16 drawal that is not a nonqualified withdrawal shall provide certifications, 17 copies of bills for qualified higher education expenses or other support- 18 ing material; 19 (b) Qualified withdrawals from an account shall be made only by a check 20 payable as designated by the account owner;21(c) Withdrawals not meeting certain requirements shall be treated as22nonqualified withdrawals by the program manager, and if these withdrawals23are not nonqualified withdrawals, the account owner must seek refunds of24penalties directly from the board. 25 (5) An account owner may change the designated beneficiary of an account 26 to an individual who is a member of the family of the former designated bene- 27 ficiary in accordance with procedures established by the board. 28 (6) On the direction of an account owner, all or a portion of an account 29 may be transferred to another account of which the designated beneficiary is a 30 member of the family of the designated beneficiary of the transferee account. 31 (7) Changes in designated beneficiaries and rollovers under this section 32 are not permitted if the changes or rollovers would violate either of the fol- 33 lowing provisions of this section relating to excess contributions or to 34 investment choice. 35 (8)In the case of any nonqualified withdrawal from an account, an amount36equal to ten percent (10%) of the portion of the proposed withdrawal that37would constitute income as determined in accordance with section 529 of the38Internal Revenue Code shall be withheld as a penalty and paid to the board for39use in operating and marketing the program and for state student financial40aid.41(9) The board, by rule, shall increase the percentage of the penalty pre-42scribed in subsection (8) of this section or change the basis of this penalty43if the board determines that the amount of the penalty must be increased to44constitute a penalty that is more than a de minimis penalty for purposes of45qualifying the program as a qualified state tuition program under section 52946of the Internal Revenue Code.47(10) The board may decrease the percentage of the penalty prescribed in48subsection (8) of this section if it determines that both of the following49conditions exist:50(a) The penalty is greater than is required to constitute a penalty that51is more than a de minimis penalty for purposes of qualifying the program52as a qualified state tuition program under section 529 of the Internal53Revenue Code;54(b) The penalty, when combined with other revenue generated under this55chapter, is producing more revenue than is required to cover the costs of4 1operating and marketing the program and to recover any costs not previ-2ously recovered.3(11) If an account owner makes a nonqualified withdrawal and no penalty4amount is withheld pursuant to subsection (8) of this section or the amount5withheld is less than the amount required to be withheld under that subsection6for nonqualified withdrawals, the account owner shall pay the unpaid portion7of the penalty to the state tax commission on or before April 15 of the fol-8lowing tax year.9(12)Each account shall be maintained separately from each other account 10 under the program. 11 (139) Separate records and accounting shall be maintained for each account 12 for each designated beneficiary. 13 (140) No contributor to, account owner of or designated beneficiary of any 14 account may direct the investment of any contributions to an account or the 15 earnings from the account. 16 (151) If the board terminates the authority of a financial institution to 17 hold accounts and accounts must be moved from that financial institution to 18 another financial institution, the board shall select the financial institu- 19 tion and type of investment to which the balance of the account is moved 20 unless the internal revenue service provides guidance stating that allowing 21 the account owner to select among several financial institutions that are cur- 22 rent contractors would not cause a plan to cease to be a qualifiedstate23 tuitionplanprogram. 24 (162) Neither an account owner nor a designated beneficiary may use an 25 interest in an account as security for a loan. Any pledge of an interest in an 26 account is of no force and effect. 27 (173) The board shall adopt rules to prevent contributions on behalf of a 28 designated beneficiary in excess of those necessary to pay the qualified 29 higher education expenses of the designated beneficiaries. The rules shall 30 address the following: 31 (a) Procedures for aggregating the total balances of multiple accounts 32 established for a designated beneficiary; 33 (b) The establishment of a maximum total balance that may be held in 34 accounts for a designated beneficiary; 35 (c) The board shall review the quarterly reports received from partici- 36 pating financial institutions and certify that the balance in all quali- 37 fiedstatetuition programs, as defined in section 529 of the Internal 38 Revenue Code, of which that person is the designated beneficiary does not 39 exceed the lesser of: 40 (i) A maximum college savings amount established by the board from 41 time to time; 42 (ii) The cost in current dollars of qualified higher education 43 expenses that the contributor reasonably anticipates the designated 44 beneficiary will incur; 45 (d) Requirements that any excess balances with respect to a designated 46 beneficiary be promptly withdrawn in a nonqualified withdrawal or rolled 47 over to another account in accordance with this section. 48 (184) If there is any distribution from an account to any person or for 49 the benefit of any person during a calendar year, the distribution shall be 50 reported to the internal revenue service and the account owner or the desig- 51 nated beneficiary to the extent required by federal law. 52 (195) The financial institution shall provide statements to each account 53 owner at least once each year within thirty-one (31) days after the twelve 54 (12) month period to which they relate. The statement shall identify the con- 55 tributions made during a preceding twelve (12) month period, the total contri- 5 1 butions made through the end of the period, the value of the account as of the 2 end of this period, distributions made during this period and any other mat- 3 ters that the board requires be reported to the account owner. 4 (2016) Statements and information returns relating to accounts shall be 5 prepared and filed to the extent required by federal or state tax law. 6 (217) A state or local government or organization described in section 7 501(c)(3) of the Internal Revenue Code may open and become the account owner 8 of an account to fund scholarships for persons whose identity will be deter- 9 mined after an account is opened. 10 (2218) In the case of any account described in subsection (217) of this 11 section, the requirement that a designated beneficiary be designated when an 12 account is opened does not apply and each person who receives an interest in 13 the account as a scholarship shall be treated as a designated beneficiary with 14 respect to the interest. 15 (2319) Any social security numbers, addresses or telephone numbers of 16 individual account holders and designated beneficiaries that come into the 17 possession of the board are confidential, are not public records and shall not 18 be released by the board. 19 SECTION 3. An emergency existing therefor, which emergency is hereby 20 declared to exist, this act shall be in full force and effect on and after its 21 passage and approval, and retroactively to January 1, 2002.
STATEMENT OF PURPOSE RS 11515 This bill is necessary to bring the Idaho College Savings Program in compliance with the Federal Economic Growth and Tax Relief Reconciliation Act of 2001. FISCAL IMPACT There is no fiscal impact to the State of Idaho. Contact Name: Ben Ysursa, Bill Ruud, Idaho College Savings Board Phone: 334-2852, 334-2100 STATEMENT OF PURPOSE/FISCAL NOTE H 464