Report Title:

College Savings Account Program

Description:

Provides initial state investments at birth and periodic investments to college savings accounts to encourage savings and investment for post-secondary educational purposes.

THE SENATE	S.B. NO.	722
TWENTY-FOURTH LEGISLATURE, 2007
STATE OF HAWAII

A BILL FOR AN ACT

relating to the college savings account program.

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

     SECTION 1.  The purpose of this Act is to provide initial state investments at birth and periodic investments throughout a child's lifetime to college savings accounts to encourage savings and investment for post-secondary educational purposes.

     SECTION 2.  Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

     "§235-   College savings account program; tax deduction. (a)  There shall be allowed as a deduction from gross income the amount paid during the taxable year by an individual taxpayer as contributions to a college savings account under chapter 256; provided that the tax deduction shall not exceed $           for taxpayers filing individually and $           for taxpayers filing jointly.

(b)  The director of taxation shall prepare any forms that may be necessary to claim a tax deduction under this section, may require proof of the claim for the tax deduction, and may adopt rules pursuant to chapter 91.

(c)  For purposes of this section, the term "college savings account" shall have the same meaning as defined in section 256-1."

     SECTION 3.  Section 256-4, Hawaii Revised Statutes, is amended as follows:

     1.   By amending subsection (b) to read:

     "(b)  [Only the] The account owner or the State may make contributions to the account after the account is opened.  Upon acceptance of an application under subsection (a), the State shall transfer from the college savings program trust fund

$           to the account owner's college savings account.  Thereafter, when the designated beneficiary of any account reaches the ages of        and       , the State shall make additional transfers from the college savings program trust fund of $           to the account owner's college savings account for that designated beneficiary."

      2.  By amending subsection (e) to read:

     "(e)  An account owner may change the designated beneficiary of an account to an individual who is a member of the family of the prior designated beneficiary[.]; provided that an amount equal to state contributions to the account, plus interest accrued thereon, shall be withheld as a penalty and paid to the college savings program trust fund.  An account owner may transfer all or a portion of an account to another college account, the designated beneficiary of which is a member of the same family, as defined in section 529 of the Internal Revenue Code of 1986, as amended, or successor legislation, as the beneficiary of the initial account[.]; provided that an amount equal to state contributions to the account, plus interest accrued thereon, shall be withheld as a penalty and paid to the college savings program trust fund.  Changes in designated beneficiaries and transfers under this section shall not be permitted if they constitute excess contributions."

     SECTION 4.  Section 256-6, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

     "(b)  The fund shall consist of a trust account and an operating account.  The trust account shall include amounts received by the college savings program pursuant to tuition savings agreements, administrative charges, fees, and all other amounts received by the program from other sources, and interest and investment income earned by the fund.  The director of finance, from time to time, shall make transfers from the trust account to [the]:

(1) The operating account for the immediate payment of obligations under tuition savings agreements, operating expenses, and administrative costs of the college savings program[.]; and

(2) College savings accounts pursuant to section 256-4."

     SECTION 5.  There is appropriated out of the general revenues of the State of Hawaii the sum of $          , or so much thereof as may be necessary for fiscal year 2007-2008, and the same sum, or so much thereof as may be necessary for fiscal year 2008-2009, to the college savings program trust fund.

     The sums appropriated shall be expended by the department of budget and finance for the purposes of this Act.

     SECTION 6.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 7.  This Act, upon its approval, shall apply to taxable years beginning after December 31, 2006; provided that section 5 shall take effect on July 1, 2007.

INTRODUCED BY:

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