2002 Legislation
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HOUSE BILL NO. 464 – College Savings Prog, withdrawals


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Daily Data Tracking History

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

Bill Text

  ||||              LEGISLATURE OF THE STATE OF IDAHO             ||||
 Fifty-sixth Legislature                  Second Regular Session - 2002
                              IN THE HOUSE OF REPRESENTATIVES
                                     HOUSE BILL NO. 464
                             BY REVENUE AND TAXATION COMMITTEE
  1                                        AN ACT
  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
  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 withdrawal from an account
 17    other than that 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 on the account of a scholarship, or the
 22        allowance or payment described in  section  135(d)(1)(B)  or  (C)  of  the
 23        Internal Revenue Code, and that is received by the designated beneficiary,
 24        but  only  to  the  extent of the amount of this scholarship, allowance or
 25        payment as 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,
 31    supplies, room and board, and equipment required for enrollment or  attendance
 32    of  a  designated beneficiary at a higher education institution shall 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;
  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  as
 22        nonqualified  withdrawals by the program manager, and if these withdrawals
 23        are not nonqualified withdrawals, the account owner must seek  refunds  of
 24        penalties 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 amount
 36    equal to ten percent (10%) of the portion  of  the  proposed  withdrawal  that
 37    would  constitute  income  as determined in accordance with section 529 of the
 38    Internal Revenue Code shall be withheld as a penalty and paid to the board for
 39    use in operating and marketing the program and  for  state  student  financial
 40    aid.
 41        (9)  The board, by rule, shall increase the percentage of the penalty pre-
 42    scribed  in subsection (8) of this section or change the basis of this penalty
 43    if the board determines that the amount of the penalty must  be  increased  to
 44    constitute  a  penalty  that is more than a de minimis penalty for purposes of
 45    qualifying the program as a qualified state tuition program under section  529
 46    of the Internal Revenue Code.
 47        (10) The  board  may  decrease the percentage of the penalty prescribed in
 48    subsection (8) of this section if it determines that  both  of  the  following
 49    conditions exist:
 50        (a)  The  penalty is greater than is required to constitute a penalty that
 51        is more than a de minimis penalty for purposes of qualifying  the  program
 52        as  a  qualified  state  tuition program under section 529 of the Internal
 53        Revenue Code;
 54        (b)  The penalty, when combined with other revenue  generated  under  this
 55        chapter,  is producing more revenue than is required to cover the costs of
  1        operating and marketing the program and to recover any  costs  not  previ-
  2        ously recovered.
  3        (11) If  an  account  owner makes a nonqualified withdrawal and no penalty
  4    amount is withheld pursuant to subsection (8) of this section  or  the  amount
  5    withheld is less than the amount required to be withheld under that subsection
  6    for  nonqualified  withdrawals, the account owner shall pay the unpaid portion
  7    of the penalty to the state tax commission on or before April 15 of  the  fol-
  8    lowing 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  qualified  state
 23    tuition plan program.
 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        fied  state  tuition  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-
  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 / Fiscal Impact

                        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.

Name:	Ben Ysursa, Bill Ruud,
Idaho College Savings Board
Phone:	334-2852, 334-2100