AMENDING TITLE 15, CHAPTER 14, ARIZONA REVISED STATUTES, BY ADDING ARTICLE
7; AMENDING SECTION 43-1022, ARIZONA REVISED STATUTES; RELATING TO A COLLEGE
SAVINGS PLAN.
Be it enacted by the Legislature of the State of Arizona:
Section 1. Title 15, chapter 14, Arizona Revised Statutes, is amended by adding article 7, to read:
1. "ACCOUNT" MEANS AN INDIVIDUAL TRUST ACCOUNT OR SAVINGS ACCOUNT
ESTABLISHED AS PRESCRIBED IN THIS ARTICLE.
2. "ACCOUNT OWNER" MEANS THE PERSON DESIGNATED AT THE TIME AN ACCOUNT
IS OPENED AS HAVING THE RIGHT TO WITHDRAW MONIES FROM THE ACCOUNT BEFORE THE
ACCOUNT IS DISBURSED TO OR FOR THE BENEFIT OF THE DESIGNATED BENEFICIARY.
3. "COMMISSION" MEANS THE COMMISSION FOR POSTSECONDARY EDUCATION
ESTABLISHED BY SECTION 15-1851.
4. "COMMITTEE" MEANS THE FAMILY COLLEGE SAVINGS PROGRAM OVERSIGHT
COMMITTEE.
5. "DESIGNATED BENEFICIARY", EXCEPT AS PROVIDED IN SECTION 15-1875,
SUBSECTIONS U AND V, MEANS, WITH RESPECT TO AN ACCOUNT, THE PERSON DESIGNATED
AT THE TIME THE ACCOUNT IS OPENED AS THE PERSON WHOSE HIGHER EDUCATION
EXPENSES ARE EXPECTED TO BE PAID FROM THE ACCOUNT OR, IF THIS DESIGNATED
BENEFICIARY IS REPLACED IN ACCORDANCE WITH SECTION 15-1875, SUBSECTIONS E,
F AND G, THE REPLACEMENT BENEFICIARY.
6. "FINANCIAL INSTITUTION" MEANS ANY BANK, COMMERCIAL BANK, NATIONAL
BANK, SAVINGS BANK, SAVINGS AND LOAN ASSOCIATION, CREDIT UNION, AN INSURANCE COMPANY, BROKERAGE FIRM OR OTHER SIMILAR ENTITY THAT IS AUTHORIZED TO DO
BUSINESS IN THIS STATE.
7. "HIGHER EDUCATION INSTITUTION" MEANS ANY OF THE FOLLOWING:
(a)
(b)
(c)
(a)
(b)
(c)
(d)
9. "NONQUALIFIED WITHDRAWAL" MEANS A WITHDRAWAL FROM AN ACCOUNT OTHER
THAN ONE OF THE FOLLOWING:
(a)
(b)
(c)
(d)
10. "PROGRAM" MEANS THE FAMILY COLLEGE SAVINGS PROGRAM ESTABLISHED
UNDER THIS ARTICLE.
11. "QUALIFIED HIGHER EDUCATION EXPENSES" MEANS TUITION, FEES, BOOKS,
SUPPLIES AND EQUIPMENT REQUIRED FOR ENROLLMENT OR ATTENDANCE OF A DESIGNATED
BENEFICIARY AT A HIGHER EDUCATION INSTITUTION.
12. "QUALIFIED WITHDRAWAL" MEANS A WITHDRAWAL FROM AN ACCOUNT TO PAY
THE QUALIFIED HIGHER EDUCATION EXPENSES OF THE DESIGNATED BENEFICIARY OF THE
ACCOUNT, BUT ONLY IF THE WITHDRAWAL IS MADE IN ACCORDANCE WITH THIS ARTICLE.
1. THE DIRECTOR OF THE DEPARTMENT OF INSURANCE OR THE DIRECTOR'S
DESIGNEE.
2. THE DIRECTOR OF THE DEPARTMENT OF BANKING OR THE DIRECTOR'S
DESIGNEE.
3. THE STATE TREASURER OR THE STATE TREASURER'S DESIGNEE.
4. THE DIRECTOR OF THE SECURITIES DIVISION OF THE ARIZONA CORPORATION
COMMISSION OR THE DIRECTOR'S DESIGNEE.
5. THE PRESIDENT OF THE ARIZONA BOARD OF REGENTS OR THE PRESIDENT'S
DESIGNEE.
6. THE EXECUTIVE DIRECTOR OF THE STATE BOARD OF DIRECTORS FOR
COMMUNITY COLLEGES OR THE EXECUTIVE DIRECTOR'S DESIGNEE.
7. THE CHAIRPERSON OF THE STATE BOARD FOR PRIVATE POSTSECONDARY
EDUCATION OR THE CHAIRPERSON'S DESIGNEE.
8. THREE MEMBERS OF THE GENERAL PUBLIC, EACH OF WHOM POSSESSES
KNOWLEDGE, SKILL AND EXPERIENCE IN ACCOUNTING, RISK MANAGEMENT OR INVESTMENT
MANAGEMENT OR AS AN ACTUARY. THE GOVERNOR SHALL APPOINT THESE MEMBERS TO
SERVE STAGGERED FOUR YEAR TERMS PURSUANT TO SECTION 38-211. THE INITIAL
MEMBERS APPOINTED PURSUANT TO THIS PARAGRAPH SHALL ASSIGN THEMSELVES BY LOT
TO SERVE TWO, THREE AND FOUR YEAR TERMS. ALL SUBSEQUENT MEMBERS APPOINTED
PURSUANT TO THIS PARAGRAPH SERVE FOUR YEAR TERMS. THE CHAIRPERSON SHALL
NOTIFY THE GOVERNOR'S OFFICE ON APPOINTMENTS OF THESE TERMS.
B. THE COMMISSION SHALL SELECT A CHAIRPERSON AND A VICE-CHAIRPERSON
FROM AMONG THE COMMITTEE'S MEMBERSHIP. A MAJORITY OF THE MEMBERSHIP
CONSTITUTES A QUORUM FOR THE TRANSACTION OF BUSINESS. THE COMMITTEE SHALL
MEET AT LEAST ONCE EACH CALENDAR QUARTER. THE CHAIRPERSON MAY CALL
ADDITIONAL MEETINGS.
C. MEMBERS OF THE FAMILY COLLEGE SAVINGS PROGRAM OVERSIGHT COMMITTEE
APPOINTED PURSUANT TO SUBSECTION A, PARAGRAPH 8 OF THIS SECTION ARE ELIGIBLE
TO RECEIVE COMPENSATION AS DETERMINED PURSUANT TO SECTION 38-611 FOR EACH DAY
OF ATTENDANCE AT COMMITTEE MEETINGS, EXCEPT THAT THE COMPENSATION OF ANY
MEMBER SHALL NOT EXCEED FIVE HUNDRED DOLLARS IN ANY YEAR. THE COMMISSION
SHALL PAY COMPENSATION PURSUANT TO THIS SUBSECTION FROM MONIES OF THE
COMMISSION.
D. THE COMMITTEE SHALL RECOMMEND FINANCIAL INSTITUTIONS FOR APPROVAL
BY THE COMMISSION TO ACT AS THE DEPOSITORIES AND MANAGERS OF FAMILY COLLEGE
SAVINGS ACCOUNTS PURSUANT TO SECTION 15-1874.
E. THE COMMITTEE MAY SUBMIT PROPOSED RULES TO THE COMMISSION TO ASSIST
IN THE IMPLEMENTATION AND ADMINISTRATION OF THIS ARTICLE.
F. MEMBERS OF THE COMMITTEE ARE IMMUNE FROM PERSONAL LIABILITY WITH
RESPECT TO ALL ACTIONS THAT ARE TAKEN IN GOOD FAITH AND WITHIN THE SCOPE OF
THE COMMITTEE'S AUTHORITY.
1. DEVELOP AND IMPLEMENT THE PROGRAM IN A MANNER CONSISTENT WITH THIS
ARTICLE THROUGH THE ADOPTION OF RULES, GUIDELINES AND PROCEDURES.
2. RETAIN PROFESSIONAL SERVICES, IF NECESSARY, INCLUDING ACCOUNTANTS,
AUDITORS, CONSULTANTS AND OTHER EXPERTS.
3. SEEK RULINGS AND OTHER GUIDANCE FROM THE UNITED STATES DEPARTMENT
OF THE TREASURY AND THE INTERNAL REVENUE SERVICE RELATING TO THE PROGRAM.
4. MAKE CHANGES TO THE PROGRAM REQUIRED FOR THE PARTICIPANTS IN THE
PROGRAM TO OBTAIN THE FEDERAL INCOME TAX BENEFITS OR TREATMENT PROVIDED BY
SECTION 529 OF THE INTERNAL REVENUE CODE OF 1986.
5. INTERPRET, IN RULES, POLICIES, GUIDELINES AND PROCEDURES, THE
PROVISIONS OF THIS ARTICLE BROADLY IN LIGHT OF ITS PURPOSE AND OBJECTIVES.
6. CHARGE, IMPOSE AND COLLECT ADMINISTRATIVE FEES AND SERVICE CHARGES
IN CONNECTION WITH ANY AGREEMENT, CONTRACT OR TRANSACTION RELATING TO THE
PROGRAM.
7. SELECT THE FINANCIAL INSTITUTION OR INSTITUTIONS TO ACT AS THE
DEPOSITORY AND MANAGER OF THE PROGRAM IN ACCORDANCE WITH THIS ARTICLE.
B. THE COMMITTEE SHALL SOLICIT PROPOSALS FROM FINANCIAL INSTITUTIONS
TO ACT AS THE DEPOSITORIES AND MANAGERS OF THE PROGRAM. FINANCIAL
INSTITUTIONS THAT SUBMIT PROPOSALS MUST DESCRIBE THE FINANCIAL INSTRUMENTS
THAT WILL BE HELD IN ACCOUNTS.
C. ON THE RECOMMENDATION OF THE COMMITTEE, THE COMMISSION SHALL SELECT
AS PROGRAM DEPOSITORIES AND MANAGERS THE FINANCIAL INSTITUTION OR
INSTITUTIONS FROM AMONG BIDDING FINANCIAL INSTITUTIONS THAT DEMONSTRATE THE
MOST ADVANTAGEOUS COMBINATION, BOTH TO POTENTIAL PROGRAM PARTICIPANTS AND
THIS STATE, OF THE FOLLOWING FACTORS:
1. FINANCIAL STABILITY AND INTEGRITY.
2. THE SAFETY OF THE INVESTMENT INSTRUMENTS BEING OFFERED, TAKING INTO
ACCOUNT ANY INSURANCE PROVIDED WITH RESPECT TO THESE INSTRUMENTS.
3. THE ABILITY OF THE INVESTMENT INSTRUMENTS TO TRACK ESTIMATED COSTS
OF HIGHER EDUCATION AS CALCULATED BY THE COMMISSION AND PROVIDED BY THE
FINANCIAL INSTITUTION TO THE ACCOUNT HOLDER.
4. THE ABILITY OF THE FINANCIAL INSTITUTIONS, DIRECTLY OR THROUGH A
SUBCONTRACT, TO SATISFY RECORD KEEPING AND REPORTING REQUIREMENTS.
5. THE FINANCIAL INSTITUTION'S PLAN FOR PROMOTING THE PROGRAM AND THE
INVESTMENT IT IS WILLING TO MAKE TO PROMOTE THE PROGRAM.
6. THE FEES, IF ANY, PROPOSED TO BE CHARGED TO PERSONS FOR MAINTAINING
ACCOUNTS.
7. THE MINIMUM INITIAL DEPOSIT AND MINIMUM CONTRIBUTIONS THAT THE
FINANCIAL INSTITUTION WILL REQUIRE AND THE WILLINGNESS OF THE FINANCIAL
INSTITUTION TO ACCEPT CONTRIBUTIONS THROUGH PAYROLL DEDUCTION PLANS AND OTHER
DEPOSIT PLANS.
8. ANY OTHER BENEFITS TO THIS STATE OR ITS RESIDENTS INCLUDED IN THE
PROPOSAL, INCLUDING AN ACCOUNT OPENING FEE PAYABLE TO THE COMMISSION BY THE
ACCOUNT OWNER AND AN ADDITIONAL FEE FROM THE FINANCIAL INSTITUTION FOR
STATEWIDE PROGRAM MARKETING BY THE COMMISSION.
D. THE COMMISSION SHALL ENTER INTO A CONTRACT WITH A FINANCIAL
INSTITUTION, OR EXCEPT AS PROVIDED IN SUBSECTION E OF THIS SECTION, CONTRACTS
WITH FINANCIAL INSTITUTIONS, TO SERVE AS PROGRAM MANAGERS AND DEPOSITORIES.
E. THE COMMISSION MAY SELECT MORE THAN ONE FINANCIAL INSTITUTION AND
INVESTMENT FOR THE PROGRAM IF BOTH OF THE FOLLOWING CONDITIONS EXIST:
1. THE UNITED STATES INTERNAL REVENUE SERVICE HAS PROVIDED GUIDANCE
THAT GIVING A CONTRIBUTOR A CHOICE OF TWO INVESTMENT INSTRUMENTS UNDER A
STATE PLAN WILL NOT CAUSE THE PLAN TO FAIL TO QUALIFY FOR FAVORABLE TAX
TREATMENT UNDER SECTION 529 OF THE INTERNAL REVENUE CODE.
2. THE COMMISSION CONCLUDES THAT THE CHOICE OF INSTRUMENT VEHICLES IS
IN THE BEST INTEREST OF COLLEGE SAVERS AND WILL NOT INTERFERE WITH THE
PROMOTION OF THE PROGRAM.
F. A PROGRAM MANAGER SHALL:
1. TAKE ALL ACTION REQUIRED TO KEEP THE PROGRAM IN COMPLIANCE WITH THE
REQUIREMENTS OF THIS ARTICLE AND ALL ACTION NOT CONTRARY TO THIS ARTICLE OR
ITS CONTRACT TO MANAGE THE PROGRAM SO THAT IT IS TREATED AS A QUALIFIED STATE
TUITION PLAN UNDER SECTION 529 OF THE INTERNAL REVENUE CODE.
2. KEEP ADEQUATE RECORDS OF EACH ACCOUNT, KEEP EACH ACCOUNT SEGREGATED
FROM EACH OTHER ACCOUNT AND PROVIDE THE COMMISSION WITH THE INFORMATION
NECESSARY TO PREPARE STATEMENTS REQUIRED BY SECTION 15-1875, SUBSECTIONS R,
S AND T OR FILE THESE STATEMENTS ON BEHALF OF THE COMMISSION.
3. COMPILE AND TOTAL INFORMATION CONTAINED IN STATEMENTS REQUIRED TO
BE PREPARED UNDER SECTION 15-1875, SUBSECTIONS R, S AND T AND PROVIDE THESE
COMPILATIONS TO THE COMMISSION.
4. IF THERE IS MORE THAN ONE PROGRAM MANAGER, PROVIDE THE COMMISSION
WITH THIS INFORMATION TO ASSIST THE COMMISSION TO DETERMINE COMPLIANCE WITH
SECTION 15-1875, SUBSECTION Q.
5. PROVIDE REPRESENTATIVES OF THE COMMISSION, INCLUDING OTHER
CONTRACTORS OR OTHER STATE AGENCIES, ACCESS TO THE BOOKS AND RECORDS OF THE
PROGRAM MANAGER TO THE EXTENT NEEDED TO DETERMINE COMPLIANCE WITH THE
CONTRACT.
6. HOLD ALL ACCOUNTS IN TRUST FOR THE BENEFIT OF THIS STATE AND THE
ACCOUNT OWNER.
G. ANY CONTRACT EXECUTED BETWEEN THE COMMISSION AND A FINANCIAL
INSTITUTION PURSUANT TO THIS SECTION SHALL BE FOR A TERM OF AT LEAST THREE
YEARS AND NOT MORE THAN SEVEN YEARS.
H. IF A CONTRACT EXECUTED BETWEEN THE COMMISSION AND A FINANCIAL
INSTITUTION PURSUANT TO THIS SECTION IS NOT RENEWED, ALL OF THE FOLLOWING
CONDITIONS APPLY AT THE END OF THE TERM OF THE NONRENEWED CONTRACT:
1. ACCOUNTS PREVIOUSLY ESTABLISHED AND HELD IN INVESTMENT INSTRUMENTS
AT THE FINANCIAL INSTITUTION SHALL NOT BE TERMINATED.
2. ADDITIONAL CONTRIBUTIONS MAY BE MADE TO THE ACCOUNTS.
3. NO NEW ACCOUNTS MAY BE PLACED WITH THAT FINANCIAL INSTITUTION.
I. THE COMMISSION MAY TERMINATE A CONTRACT WITH A FINANCIAL
INSTITUTION AT ANY TIME FOR GOOD CAUSE ON THE RECOMMENDATION OF THE
COMMITTEE. IF A CONTRACT IS TERMINATED PURSUANT TO THIS SUBSECTION, THE
COMMISSION SHALL TAKE CUSTODY OF ACCOUNTS HELD AT THAT FINANCIAL INSTITUTION
AND SHALL SEEK TO PROMPTLY TRANSFER THE ACCOUNTS TO ANOTHER FINANCIAL
INSTITUTION THAT IS SELECTED AS A PROGRAM MANAGER AND INTO INVESTMENT
INSTRUMENTS AS SIMILAR TO THE ORIGINAL INVESTMENTS AS POSSIBLE.
1. COMPLETING AN APPLICATION IN THE FORM PRESCRIBED BY THE COMMISSION.
THE APPLICATION SHALL INCLUDE THE FOLLOWING INFORMATION:
(a)
(d)
(e)
2. PAYING THE ONE-TIME APPLICATION FEE ESTABLISHED BY THE COMMISSION.
3. MAKING THE MINIMUM CONTRIBUTION REQUIRED BY THE COMMISSION OR BY
OPENING AN ACCOUNT.
4. DESIGNATING THE TYPE OF ACCOUNT TO BE OPENED IF MORE THAN ONE TYPE
OF ACCOUNT IS OFFERED.
B. ANY PERSON MAY MAKE CONTRIBUTIONS TO AN ACCOUNT AFTER THE ACCOUNT
IS OPENED.
C. CONTRIBUTIONS TO ACCOUNTS MAY BE MADE ONLY IN CASH.
D. ACCOUNT OWNERS MAY WITHDRAW ALL OR PART OF THE BALANCE FROM AN
ACCOUNT ON SIXTY DAYS' NOTICE, OR A SHORTER PERIOD AS MAY BE AUTHORIZED BY
THE COMMISSION, UNDER RULES PRESCRIBED BY THE COMMISSION. THESE RULES SHALL
INCLUDE PROVISIONS THAT WILL GENERALLY ENABLE THE COMMISSION OR PROGRAM
MANAGER TO DETERMINE IF A WITHDRAWAL IS A NONQUALIFIED WITHDRAWAL OR A
QUALIFIED WITHDRAWAL. THE RULES MAY, BUT NEED NOT, REQUIRE ONE OR MORE OF
THE FOLLOWING:
1. ACCOUNT OWNERS SEEKING TO MAKE A QUALIFIED WITHDRAWAL OR OTHER
WITHDRAWAL THAT IS NOT A NONQUALIFIED WITHDRAWAL SHALL PROVIDE
CERTIFICATIONS, COPIES OF BILLS FOR QUALIFIED HIGHER EDUCATION EXPENSES OR
OTHER SUPPORTING MATERIAL.
2. QUALIFIED WITHDRAWALS FROM AN ACCOUNT SHALL BE MADE ONLY BY A CHECK
PAYABLE JOINTLY TO THE DESIGNATED BENEFICIARY AND A HIGHER EDUCATION
INSTITUTION.
3. WITHDRAWALS NOT MEETING CERTAIN REQUIREMENTS SHALL BE TREATED AS
NONQUALIFIED WITHDRAWALS BY THE PROGRAM MANAGER, AND IF THESE WITHDRAWALS ARE
NOT NONQUALIFIED WITHDRAWALS, THE ACCOUNT OWNER MUST SEEK REFUNDS OF
PENALTIES DIRECTLY FROM THE COMMISSION.
E. AN ACCOUNT OWNER MAY CHANGE THE DESIGNATED BENEFICIARY OF AN
ACCOUNT TO AN INDIVIDUAL WHO IS A MEMBER OF THE FAMILY OF THE FORMER
DESIGNATED BENEFICIARY IN ACCORDANCE WITH PROCEDURES ESTABLISHED BY THE
COMMISSION.
F. ON THE DIRECTION OF AN ACCOUNT OWNER, ALL OR A PORTION OF AN
ACCOUNT MAY BE TRANSFERRED TO ANOTHER ACCOUNT OF WHICH THE DESIGNATED
BENEFICIARY IS A MEMBER OF THE FAMILY OF THE DESIGNATED BENEFICIARY OF THE
TRANSFEREE ACCOUNT.
G. CHANGES IN DESIGNATED BENEFICIARIES AND ROLLOVERS UNDER THIS
SECTION ARE NOT PERMITTED IF THE CHANGES OR ROLLOVERS WOULD VIOLATE EITHER
OF THE FOLLOWING:
1. SUBSECTION Q, RELATING TO EXCESS CONTRIBUTIONS.
2. SUBSECTION N, RELATING TO INVESTMENT CHOICE.
H. IN THE CASE OF ANY NONQUALIFIED WITHDRAWAL FROM AN ACCOUNT, AN
AMOUNT EQUAL TO TEN PER CENT OF THE PORTION OF THE PROPOSED WITHDRAWAL THAT
WOULD CONSTITUTE INCOME AS DETERMINED IN ACCORDANCE WITH SECTION 529 OF THE
INTERNAL REVENUE CODE SHALL BE WITHHELD AS A PENALTY AND PAID TO THE
COMMISSION FOR USE IN OPERATING AND MARKETING THE PROGRAM AND FOR STATE
STUDENT FINANCIAL AID.
I. THE COMMISSION, BY RULE, SHALL INCREASE THE PERCENTAGE OF THE
PENALTY PRESCRIBED IN SUBSECTION H OR CHANGE THE BASIS OF THIS PENALTY IF THE
COMMISSION DETERMINES THAT THE AMOUNT OF THE PENALTY MUST BE INCREASED TO
CONSTITUTE A PENALTY THAT IS MORE THAN A DE MINIMIS PENALTY FOR PURPOSES OF
QUALIFYING THE PROGRAM AS A QUALIFIED STATE TUITION PROGRAM UNDER SECTION 529
OF THE INTERNAL REVENUE CODE.
J. THE COMMISSION MAY DECREASE THE PERCENTAGE OF THE PENALTY
PRESCRIBED IN SUBSECTION H IF IT DETERMINES THAT BOTH OF THE FOLLOWING
CONDITIONS EXIST:
1. THE PENALTY IS GREATER THAN IS REQUIRED TO CONSTITUTE A PENALTY
THAT IS MORE THAN A DE MINIMIS PENALTY FOR PURPOSES OF QUALIFYING THE PROGRAM
AS A QUALIFIED STATE TUITION PROGRAM UNDER SECTION 529 OF THE INTERNAL
REVENUE CODE.
2. THE PENALTY, WHEN COMBINED WITH OTHER REVENUE GENERATED UNDER THIS
ARTICLE, IS PRODUCING MORE REVENUE THAN IS REQUIRED TO COVER THE COSTS OF
OPERATING AND MARKETING THE PROGRAM AND TO RECOVER ANY COSTS NOT PREVIOUSLY
RECOVERED.
K. IF AN ACCOUNT OWNER MAKES A NONQUALIFIED WITHDRAWAL AND NO PENALTY
AMOUNT IS WITHHELD PURSUANT TO SUBSECTION H OR THE AMOUNT WITHHELD WAS LESS
THAN THE AMOUNT REQUIRED TO BE WITHHELD UNDER THAT SUBSECTION FOR
NONQUALIFIED WITHDRAWALS, THE ACCOUNT OWNER SHALL PAY THE UNPAID PORTION OF
THE PENALTY TO THE COMMISSION ON OR BEFORE APRIL 15 OF THE FOLLOWING TAX
YEAR.
L. EACH ACCOUNT SHALL BE MAINTAINED SEPARATELY FROM EACH OTHER ACCOUNT
UNDER THE PROGRAM.
M. SEPARATE RECORDS AND ACCOUNTING SHALL BE MAINTAINED FOR EACH
ACCOUNT FOR EACH DESIGNATED BENEFICIARY.
N. NO CONTRIBUTOR TO, ACCOUNT OWNER OF OR DESIGNATED BENEFICIARY OF
ANY ACCOUNT MAY DIRECT THE INVESTMENT OF ANY CONTRIBUTIONS TO AN ACCOUNT OR
THE EARNINGS FROM THE ACCOUNT.
O. IF THE COMMISSION TERMINATES THE AUTHORITY OF A FINANCIAL
INSTITUTION TO HOLD ACCOUNTS AND ACCOUNTS MUST BE MOVED FROM THAT FINANCIAL
INSTITUTION TO ANOTHER FINANCIAL INSTITUTION, THE COMMISSION SHALL SELECT THE
FINANCIAL INSTITUTION AND TYPE OF INVESTMENT TO WHICH THE BALANCE OF THE
ACCOUNT IS MOVED UNLESS THE INTERNAL REVENUE SERVICE PROVIDES GUIDANCE
STATING THAT ALLOWING THE ACCOUNT OWNER TO SELECT AMONG SEVERAL FINANCIAL
INSTITUTIONS THAT ARE THEN CONTRACTORS WOULD NOT CAUSE A PLAN TO CEASE TO BE
A QUALIFIED STATE TUITION PLAN.
P. NEITHER AN ACCOUNT OWNER NOR A DESIGNATED BENEFICIARY MAY USE AN
INTEREST IN AN ACCOUNT AS SECURITY FOR A LOAN. ANY PLEDGE OF AN INTEREST IN
AN ACCOUNT IS OF NO FORCE AND EFFECT.
Q. ON THE RECOMMENDATION OF THE COMMITTEE, THE COMMISSION SHALL ADOPT
RULES TO PREVENT CONTRIBUTIONS ON BEHALF OF A DESIGNATED BENEFICIARY IN
EXCESS OF THOSE NECESSARY TO PAY THE QUALIFIED HIGHER EDUCATION EXPENSES OF
THE DESIGNATED BENEFICIARIES. THE RULES SHALL ADDRESS THE FOLLOWING:
1. PROCEDURES FOR AGGREGATING THE TOTAL BALANCES OF MULTIPLE ACCOUNTS
ESTABLISHED FOR A DESIGNATED BENEFICIARY.
2. THE ESTABLISHMENT OF A MAXIMUM TOTAL BALANCE THAT MAY BE HELD IN
ACCOUNTS FOR A DESIGNATED BENEFICIARY.
3. REQUIREMENTS THAT PERSONS WHO CONTRIBUTE TO AN ACCOUNT CERTIFY THAT
TO THE BEST OF THEIR KNOWLEDGE THE BALANCE IN ALL QUALIFIED STATE TUITION
PROGRAMS, AS DEFINED IN SECTION 529 OF THE INTERNAL REVENUE CODE, OF WHICH
THE DESIGNATED BENEFICIARY IS THE DESIGNATED BENEFICIARY DOES NOT EXCEED THE
LESSER OF:
(a)
(b)
4. REQUIREMENTS THAT ANY EXCESS BALANCES WITH RESPECT TO A DESIGNATED
BENEFICIARY BE PROMPTLY WITHDRAWN IN A NONQUALIFIED WITHDRAWAL OR ROLLED OVER
TO ANOTHER ACCOUNT IN ACCORDANCE WITH THIS SECTION.
R. IF THERE IS ANY DISTRIBUTION FROM AN ACCOUNT TO ANY PERSON OR FOR
THE BENEFIT OF ANY PERSON DURING A CALENDAR YEAR, THE DISTRIBUTION SHALL BE
REPORTED TO THE INTERNAL REVENUE SERVICE AND THE ACCOUNT OWNER OR THE
DESIGNATED BENEFICIARY TO THE EXTENT REQUIRED BY FEDERAL LAW.
S. THE FINANCIAL INSTITUTION SHALL PROVIDE STATEMENTS TO EACH ACCOUNT
OWNER AT LEAST ONCE EACH YEAR WITHIN THIRTY-ONE DAYS AFTER THE TWELVE MONTH
PERIOD TO WHICH THEY RELATE. THE STATEMENT SHALL IDENTIFY THE CONTRIBUTIONS
MADE DURING A PRECEDING TWELVE MONTH PERIOD, THE TOTAL CONTRIBUTIONS MADE
THROUGH THE END OF THE PERIOD, THE VALUE OF THE ACCOUNT AS OF THE END OF THIS
PERIOD, DISTRIBUTIONS MADE DURING THIS PERIOD AND ANY OTHER MATTERS THAT THE
COMMISSION REQUIRES BE REPORTED TO THE ACCOUNT OWNER.
T. STATEMENTS AND INFORMATION RETURNS RELATING TO ACCOUNTS SHALL BE
PREPARED AND FILED TO THE EXTENT REQUIRED BY FEDERAL OR STATE TAX LAW.
U. A STATE OR LOCAL GOVERNMENT OR ORGANIZATIONS DESCRIBED IN SECTION
501(
V. IN THE CASE OF ANY ACCOUNT DESCRIBED IN SUBSECTION U, THE
REQUIREMENT THAT A DESIGNATED BENEFICIARY BE DESIGNATED WHEN AN ACCOUNT IS
OPENED DOES NOT APPLY AND EACH PERSON WHO RECEIVES AN INTEREST IN THE ACCOUNT
AS A SCHOLARSHIP SHALL BE TREATED AS A DESIGNATED BENEFICIARY WITH RESPECT
TO THE INTEREST.
B. SUBSECTION A APPLIES TO ANY FINANCIAL ASSISTANCE PROGRAM
ADMINISTERED BY A STATE SUPPORTED COLLEGE OR UNIVERSITY.
C. SUBSECTIONS A AND B DO NOT APPLY IF ANY OF THE FOLLOWING CONDITIONS
EXIST:
1. FEDERAL LAW REQUIRES ALL OR A PORTION OF THE AMOUNT IN AN ACCOUNT
TO BE TAKEN INTO ACCOUNT IN A DIFFERENT MANNER.
2. FEDERAL BENEFITS COULD BE LOST IF ALL OR A PORTION OF THE AMOUNT
IN AN ACCOUNT IS NOT TAKEN INTO ACCOUNT IN A DIFFERENT MANNER.
3. A SPECIFIC GRANT ESTABLISHING A FINANCIAL ASSISTANCE PROGRAM
REQUIRES THAT ALL OR A PORTION OF THE AMOUNT IN AN ACCOUNT BE TAKEN INTO
ACCOUNT.
1. GIVE ANY DESIGNATED BENEFICIARY ANY RIGHTS OR LEGAL INTEREST WITH
RESPECT TO AN ACCOUNT UNLESS THE DESIGNATED BENEFICIARY IS THE ACCOUNT OWNER.
2. GUARANTEE THAT A DESIGNATED BENEFICIARY WILL BE ADMITTED TO A
HIGHER EDUCATION INSTITUTION OR BE ALLOWED TO CONTINUE ENROLLMENT AT OR
GRADUATE FROM A HIGHER EDUCATION INSTITUTION LOCATED IN THIS STATE AFTER
ADMISSION.
3. ESTABLISH STATE RESIDENCY FOR A PERSON MERELY BECAUSE THE PERSON
IS A DESIGNATED BENEFICIARY.
4. GUARANTEE THAT AMOUNTS SAVED PURSUANT TO THE PROGRAM WILL BE
SUFFICIENT TO COVER THE QUALIFIED HIGHER EDUCATION EXPENSES OF A DESIGNATED
BENEFICIARY.
B. NOTHING IN THIS ARTICLE ESTABLISHES ANY OBLIGATION OF THIS STATE
OR ANY AGENCY OR INSTRUMENTALITY OF THIS STATE TO GUARANTEE FOR THE BENEFIT
OF ANY ACCOUNT OWNER, CONTRIBUTOR TO AN ACCOUNT OR DESIGNATED BENEFICIARY ANY
OF THE FOLLOWING:
1. THE RETURN OF ANY AMOUNTS CONTRIBUTED TO AN ACCOUNT.
2. THE RATE OF INTEREST OR OTHER RETURN ON ANY ACCOUNT.
3. THE PAYMENT OF INTEREST OR OTHER RETURN ON ANY ACCOUNT.
4. TUITION RATES OR THE COST OF RELATED HIGHER EDUCATION EXPENDITURES.
C. UNDER RULES ADOPTED BY THE COMMISSION, EVERY CONTRACT, APPLICATION,
DEPOSIT SLIP OR OTHER SIMILAR DOCUMENT THAT MAY BE USED IN CONNECTION WITH
A CONTRIBUTION TO AN ACCOUNT SHALL CLEARLY INDICATE THAT THE ACCOUNT IS NOT
INSURED BY THIS STATE AND NEITHER THE PRINCIPAL DEPOSITED NOR THE INVESTMENT
RETURN IS GUARANTEED BY THIS STATE.
Sec. 2. Section 43-1022, Arizona Revised Statutes, is amended to read:
In computing Arizona adjusted gross income, the following amounts shall be subtracted from Arizona gross income:
1. The amount of exemptions allowed by section 43-1023.
2. Benefits, annuities and pensions in an amount totalling not more than two thousand five hundred dollars received from one or more of the following:
(a) The United States government service retirement and disability fund, retired or retainer pay of the uniformed services of the United States, the United States foreign service retirement and disability system and any other retirement system or plan established by federal law.
(b) The state retirement system, the state retirement plan, the corrections officer retirement plan, the public safety personnel retirement system, the elected officials' retirement plan, an optional retirement program established by the Arizona board of regents under section 15-1628 or a retirement plan established for employees of a county, city or town in this state.
3. A beneficiary's share of trust or estate income recognized pursuant to the internal revenue code.
4. The amount of any distributions from an individual retirement account as provided for in section 408 of the internal revenue code or from a qualified retirement plan of a self-employed individual as provided for in section 401 of the internal revenue code to the extent that total adjustments made pursuant to this paragraph in all tax years do not exceed the total of all contributions made by the taxpayer to such plans prior to December 31, 1975, which were included in computing Arizona taxable income.
5. The amount of income on an installment receivable which is recognized pursuant to the internal revenue code and which has already been recognized on the death of the taxpayer for purposes of this title for tax years ending before January 1, 1990.
6. Interest income received on obligations of the United States, less any interest on indebtedness, or other related expenses, and deducted in arriving at Arizona gross income, which were incurred or continued to purchase or carry such obligations.
7. The amount of any income tax refunds which were received from states other than Arizona and which were included as income in computing federal adjusted gross income.
8. Annuity income included in federal adjusted gross income pursuant to section 72 of the internal revenue code if the first payment with respect to such annuity was received prior to December 31, 1978.
9. The excess of a partner's share of income required to be included under section 702(a)(8) of the internal revenue code over the income required to be included under chapter 14, article 2 of this title.
10. The excess of a partner's share of partnership losses determined pursuant to chapter 14, article 2 of this title over the losses allowable under section 702(a)(8) of the internal revenue code.
11. The amount by which the adjusted basis of property described in this paragraph and computed pursuant to this title and the income tax act of 1954, as amended, exceeds the adjusted basis of such property computed pursuant to the internal revenue code. This paragraph shall apply to all property which is held for the production of income and which is sold or otherwise disposed of during the taxable year other than depreciable property used in a trade or business.
12. The amount allowed by section 43-1024 for amortization, by a qualified defense contractor certified by the department of commerce under section 41-1508, of a capital investment for private commercial activities.
13. The amount of gain included in federal adjusted gross income on the sale or other disposition of a capital investment that a qualified defense contractor has elected to amortize pursuant to section 43-1024.
14. The amount allowed by section 43-1025 for contributions during the taxable year of agricultural crops to charitable organizations.
15. The amount of prizes or winnings less than five thousand dollars in a single taxable year from any of the state lotteries established and operated pursuant to title 5, chapter 5, article 1, except that all such winnings before March 22, 1983, including periodic distributions from such winnings made after March 22, 1983, may be subtracted.
16. The amount of exploration expenses determined pursuant to section 617 of the internal revenue code which have been deferred in a taxable year ending before January 1, 1990 and for which a subtraction has not previously been made. The subtraction shall be made on a ratable basis as the units of produced ores or minerals discovered or explored as a result of this exploration are sold.
17. The amount included in federal adjusted gross income pursuant to section 86 of the internal revenue code, relating to taxation of social security and railroad retirement benefits.
18. To the extent not already excluded from Arizona gross income under section 112 of the internal revenue code, compensation received for active service as a member of the armed forces of the United States for any month during any part of which the member served in a combat zone as determined under section 112 of the internal revenue code or in an area given the same treatment as a combat zone for purposes of section 112 of the internal revenue code.
19. The amount of nonreimbursed medical and hospital costs, adoption counseling, legal and agency fees and other nonrecurring costs of adoption not to exceed three thousand dollars. In the case of a husband and wife who file separate returns, the subtraction may be taken by either taxpayer or may be divided between them, but the total subtractions allowed both husband and wife shall not exceed three thousand dollars. The subtraction under this paragraph may be taken for the costs described in this paragraph that are incurred in prior years, but the subtraction may be taken only in the year during which the final adoption order is granted.
20. The amount authorized by section 43-1026 for the taxable year for purchases of, and equipment relating to, alternative fuel vehicles.
21. The amount authorized by section 43-1027 for the taxable year for purchases of, and nonoptional equipment directly related to the operation of, qualified wood stoves, wood fireplaces or gas fired fireplaces.
22. With respect to an individual medical savings account established pursuant to section 43-1028:
(a) The account holder may subtract:
(i) The amount of contributions made by the taxpayer's employer during the taxable year to the taxpayer's individual medical savings account pursuant to section 43-1028 to the extent that the employer contributions are included in the taxpayer's federal adjusted gross income.
(ii) The amount deposited by the taxpayer in the account during the taxable year.
(b) The account holder's employer may subtract the amount of contributions made by the employer to an individual medical savings account established on the employee's behalf to the extent that the contributions are not deductible under the internal revenue code.
23. The amount by which a net operating loss carryover or capital loss carryover allowable pursuant to section 43-1029, subsection F exceeds the net operating loss carryover or capital loss carryover allowable pursuant to section 1341(b)(5) of the internal revenue code.
Sec. 3.
The legislature intends to establish the family college savings program in recognition that the general welfare and well-being of the state of Arizona are directly related to the educational levels and skills of its citizens. Therefore, a vital and valid public purpose of the state of Arizona is served by the establishment and implementation of the program that will encourage and make possible the attainment of an accessible, affordable postsecondary education by the greatest number of citizens through a savings program. The legislature further intends that the Arizona commission for postsecondary education may achieve this purpose most effectively through a public-private partnership using selected financial institutions to serve as depositories for individual family college savings accounts.
Sec. 4.
This act is an emergency measure that is necessary to preserve the public peace, health or safety and is operative immediately as provided by law.
APPROVED BY THE GOVERNOR APRIL 24, 1997.
FILED IN THE OFFICE OF THE SECRETARY OF STATE APRIL 25, 1997.
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