REPORT TITLE:
College Savings


DESCRIPTION:
Allows the tax deduction of contributions made to a college
savings program under chapter 256, HRS.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2760
HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO THE COLLEGE SAVINGS PROGRAM.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  Section 235-7, Hawaii Revised Statutes, is
 
 2 amended as follows:
 
 3      1.  By amending subsection (a) to read:
 
 4      "(a)  There shall be excluded from gross income, adjusted
 
 5 gross income, and taxable income:
 
 6      (1)  Income not subject to taxation by the State under the
 
 7           Constitution and laws of the United States;
 
 8      (2)  Rights, benefits, and other income exempted from
 
 9           taxation by section 88-91, having to do with the state
 
10           retirement system, and the rights, benefits, and other
 
11           income, comparable to the rights, benefits, and other
 
12           income exempted by section 88-91, under any other
 
13           public retirement system;
 
14      (3)  Any compensation received in the form of a pension for
 
15           past services;
 
16      (4)  Compensation paid to a patient affected with Hansen's
 
17           disease employed by the State or the United States in
 
18           any hospital, settlement, or place for the treatment of
 
19           Hansen's disease;
 

 
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 1      (5)  Except as otherwise expressly provided, payments made
 
 2           by the United States or this State, under an act of
 
 3           Congress or a law of this State, which by express
 
 4           provision or administrative regulation or
 
 5           interpretation are exempt from both the normal and
 
 6           surtaxes of the United States, even though not so
 
 7           exempted by the Internal Revenue Code itself;
 
 8      (6)  Any income expressly exempted or excluded from the
 
 9           measure of the tax imposed by this chapter by any other
 
10           law of the State, it being the intent of this chapter
 
11           not to repeal or supersede any such express exemption
 
12           or exclusion;
 
13      (7)  The first $1,750 received by each member of the reserve
 
14           components of the Army, Navy, Air Force, Marine Corps,
 
15           or Coast Guard of the United States of America, and the
 
16           Hawaii national guard as compensation for performance
 
17           of duty;
 
18      (8)  Income derived from the operation of ships or aircraft
 
19           if the income is exempt under the Internal Revenue Code
 
20           pursuant to the provisions of an income tax treaty or
 
21           agreement entered into by and between the United States
 
22           and a foreign country, provided that the tax laws of
 
23           the local governments of that country reciprocally
 

 
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 1           exempt from the application of all of their net income
 
 2           taxes, the income derived from the operation of ships
 
 3           or aircraft which are documented or registered under
 
 4           the laws of the United States;
 
 5      (9)  The value of legal services provided by a prepaid legal
 
 6           service plan to a taxpayer, the taxpayer's spouse, and
 
 7           the taxpayer's dependents;
 
 8     (10)  Amounts paid, directly or indirectly, by a prepaid
 
 9           legal service plan to a taxpayer as payment or
 
10           reimbursement for the provision of legal services to
 
11           the taxpayer, the taxpayer's spouse, and the taxpayer's
 
12           dependents;
 
13     (11)  Contributions by an employer to a prepaid legal service
 
14           plan for compensation (through insurance or otherwise)
 
15           to the employer's employees for the costs of legal
 
16           services incurred by the employer's employees, their
 
17           spouses, and their dependents; [and]
 
18     (12)  Amounts received in the form of a monthly surcharge by
 
19           a utility acting on behalf of an affected utility under
 
20           section 269-16.3 shall not be gross income, adjusted
 
21           gross income, or taxable income for the acting utility
 
22           under this chapter.  Any amounts retained by the acting
 
23           utility for collection or other costs shall not be
 

 
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 1           included in this exemption[.]; and
 
 2     (13)  Qualified withdrawals (as defined under 256-1) from a
 
 3           college savings account under section 256-2."
 
 4      2.  By amending subsection (g) to read:
 
 5      "(g)  In computing taxable income there shall be allowed as
 
 6 a deduction:
 
 7      (1)  Political contributions by any taxpayer not in excess
 
 8           of $250 in any year; provided that such contributions
 
 9           are made to a central or county committee of a
 
10           political party whose candidates shall have qualified
 
11           by law to be voted for at the immediately previous
 
12           general election; [or]
 
13      (2)  Political contributions by any individual taxpayer in
 
14           an aggregate amount not to exceed $1,000 in any year;
 
15           provided that such contributions are made to candidates
 
16           as defined in section 11-191, who have agreed to abide
 
17           by the campaign expenditure limits as set forth in
 
18           section 11-209; and provided further that not more than
 
19           $250 of an individual's total contribution to any
 
20           single candidate shall be deductible for purposes of
 
21           this section[.]; or
 
22      (3)  Contributions made to a college savings account under
 
23           chapter 256; provided that the deduction shall not
 

 
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 1           exceed in any given year, $5,000 and $10,000 for
 
 2           individual and joint tax filers, respectively."
 
 3      SECTION 2.  Section 256-2, Hawaii Revised Statutes, is
 
 4 amended to read as follows:
 
 5      "[[]§256-2[]]  College savings program established.  (a)
 
 6 There is established the college savings program.  The purpose of
 
 7 this program is to enable families to save for college tuition
 
 8 and other expenses through college accounts.  The program shall
 
 9 provide college accounts to:
 
10      (1)  Enable residents of this State and other states to
 
11           benefit from the tax incentive provided for qualified
 
12           state tuition programs under the Internal Revenue Code
 
13           of 1986, as amended;
 
14      (2)  Attract students to public and private colleges and
 
15           universities within the State.
 
16      (b)  Contributions shall not exceed $5,000 and $10,000 for
 
17 individual and joint tax filers, respectively, and qualified
 
18 withdrawals shall be excluded from gross income, adjusted income,
 
19 and taxable income for tax purposes under section 235-7."
 
20      SECTION 3.  Section 256-3, Hawaii Revised Statutes, is
 
21 amended by amending subsection (d) to read as follows:
 
22      "(d)  The director of finance may enter into a contract of
 
23 up to ten years with a financial organization.  The financial
 

 
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 1 organization shall provide only one type of investment
 
 2 instrument[.] that may include a mix of asset classes in
 
 3 commingled funds; provided that account owners shall not act as
 
 4 their own program managers.  The management contract shall
 
 5 include, at a minimum, terms requiring the financial organization
 
 6 to:
 
 7      (1)  Take any action required to keep the program in
 
 8           compliance with requirements of section 256-4 and to
 
 9           manage the program to qualify it as a qualified state
 
10           tuition plan under section 529 of the Internal Revenue
 
11           Code of 1986, as amended, or successor legislation;
 
12      (2)  Keep adequate records of each account, keep each
 
13           account segregated from each other account, and provide
 
14           the director of finance with the information necessary
 
15           to prepare the statements required by section 256-4;
 
16      (3)  Compile information contained in statements required to
 
17           be prepared under section 256-4 and provide the
 
18           compilations to the director of finance;
 
19      (4)  If there is more than one program manager, provide the
 
20           director of finance with the information necessary to
 
21           determine compliance with section 256-4;
 
22      (5)  Provide the director of finance or designee access to
 
23           the books and records of the program manager to the
 

 
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 1           extent needed to determine compliance with the
 
 2           contract;
 
 3      (6)  Hold all accounts for the benefit of the account owner;
 
 4      (7)  Be audited at least annually by a firm of certified
 
 5           public accountants selected by the program manager, and
 
 6           provide the results of the audit to the director of
 
 7           finance; and
 
 8      (8)  Provide the director of finance with copies of all
 
 9           regulatory filings and reports related to the program
 
10           made by it during the term of the management contract
 
11           or while it is holding any accounts, other than
 
12           confidential filings or reports that will not become
 
13           part of the program.  The program manager shall make
 
14           available for review by the director of finance, the
 
15           results of any periodic examination of the manager by
 
16           any state or federal banking, insurance, or securities
 
17           commission, except to the extent that the report or
 
18           reports may not be disclosed under applicable law or
 
19           the rules of the commission."
 
20      SECTION 4.  Statutory material to be repealed is bracketed.
 
21 New statutory material is underscored.
 
22      SECTION 5.  This Act shall take effect upon its approval and
 

 
 
 
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 1 shall apply to taxable years beginning after December 31, 1999.
 
 2 
 
 3                       INTRODUCED BY:  ___________________________