Reference Title: child abuse registry; records (NOW: savings plan; college)

AN ACT
AMENDING SECTIONS 15-1871 AND 15-1875, ARIZONA REVISED STATUTES; RELATING TO COLLEGE SAVINGS PLANS.

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 15-1871, Arizona Revised Statutes, is amended to read:

15-1871. Definitions

In this article, unless the context otherwise requires:

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) An institution described in the higher education act of 1965 (P.L. 89-329; 79 Stat. 1219; 20 United States Code sections 1001 through 1150).

(b) An area vocational educational school as defined in section 521(3), subparagraph (C) or (D) of the Carl D. Perkins Vocational Education Act (P.L. 98-524; 98 Stat. 2435; 20 United States Code sections 2301 through 2471) 20 UNITED STATES CODE SECTION 2471(4) .

(c) An institution licensed by the state board for private postsecondary education.

8. "Member of the family" means either ANY of the following:

(a) An ancestor of a person.

(b) The spouse of a person.

(c) A lineal descendant, including a legally adopted child, of a person, of a person's spouse or of a parent of a person.

(d) The spouse of any lineal descendant described in subdivision (c) of this paragraph.

( a ) A SON OR DAUGHTER OF A PERSON OR A DESCENDANT OF THE SON OR DAUGHTER OF THE PERSON.

( b ) A STEPSON OR STEPDAUGHTER OF A PERSON.

( c ) A BROTHER, SISTER, STEPBROTHER OR STEPSISTER OF A PERSON. FOR PURPOSES OF THIS SUBDIVISION, "BROTHER" AND "SISTER" INCLUDES A BROTHER OR SISTER BY THE HALF-BLOOD.

( d ) THE FATHER OR MOTHER OF A PERSON OR THE ANCESTOR OF THE FATHER OR MOTHER OF A PERSON.

( e ) A STEPFATHER OR STEPMOTHER OF A PERSON.

( f ) A SON OR DAUGHTER OF A PERSON'S BROTHER OR SISTER. FOR PURPOSES OF THIS SUBDIVISION, "BROTHER" AND "SISTER" INCLUDES A BROTHER OR SISTER BY THE HALF-BLOOD.

( g ) A BROTHER OR SISTER OF THE PERSON'S FATHER OR MOTHER. FOR PURPOSES OF THIS SUBDIVISION, "BROTHER" AND "SISTER" INCLUDES A BROTHER OR SISTER BY THE HALF-BLOOD.

( h ) A SON-IN-LAW, DAUGHTER-IN-LAW, FATHER-IN-LAW, MOTHER-IN-LAW, BROTHER-IN-LAW OR SISTER-IN-LAW OF A PERSON.

( i ) THE SPOUSE OF A PERSON OR THE SPOUSE OF ANY INDIVIDUAL DESCRIBED IN THIS PARAGRAPH.

( j ) ANY INDIVIDUAL WHO MEETS THE CRITERIA FOR FAMILY MEMBERSHIP DESCRIBED IN THIS PARAGRAPH AS A RESULT OF LEGAL ADOPTION.

9. "Nonqualified withdrawal" means a withdrawal from an account other than one of the following:

(a) A qualified withdrawal.

(b) A withdrawal made as the result of the death or disability of the designated beneficiary of an account.

(c) A withdrawal that is made on the account of a scholarship, or the allowance or payment described in section 135(d)(1)(B) or (C) of the internal revenue code, and that is received by the designated beneficiary, but only to the extent of the amount of this scholarship, allowance or payment.

(d) A rollover or change of designated beneficiary.

10. "Program" means the family college savings program established under this article.

11. "Qualified higher education expenses" means tuition, fees, books, supplies , ROOM AND BOARD 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.

Sec. 2. Section 15-1875, Arizona Revised Statutes, is amended to read:

15-1875. Program requirements

A. The program shall be operated through the use of accounts. An account may be opened by any person who desires to save to pay the qualified higher education expenses of a person by satisfying each of the following requirements:

1. Completing an application in the form prescribed by the commission. The application shall include the following information:

(a) The name, address and social security number or employer identification number of the contributor.

(b) The name, address and social security number of the account owner if the account owner is not the contributor.

(c) The name, address and social security number of the designated beneficiary.

(d) The certification relating to no excess contributions required by subsection Q.

(e) Any other information that the commission may require.

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 AS DESIGNATED BY THE ACCOUNT OWNER .

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 IS 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 COMMISSION SHALL REVIEW THE QUARTERLY REPORTS RECEIVED FROM PARTICIPATING FINANCIAL INSTITUTIONS AND CERTIFY THAT the balance in all qualified state tuition programs, as defined in section 529 of the internal revenue code, of which the designated beneficiary THAT PERSON is the designated beneficiary does not exceed the lesser of:

(a) A maximum college savings amount established by the commission from time to time.

(b) The cost in current dollars of qualified higher education expenses that the contributor reasonably anticipates the designated beneficiary will incur.

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(c)(3) of the internal revenue code may open and become the account owner of an account to fund scholarships for persons whose identity will be determined after an account is opened.

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.

W. ANY SOCIAL SECURITY NUMBERS, ADDRESSES OR TELEPHONE NUMBERS OF INDIVIDUAL ACCOUNT HOLDERS AND DESIGNATED BENEFICIARIES THAT COME INTO THE POSSESSION OF THE COMMISSION ARE CONFIDENTIAL, ARE NOT PUBLIC RECORDS AND SHALL NOT BE RELEASED BY THE COMMISSION.

Sec. 3. Emergency

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 28, 1999.

FILED IN THE OFFICE OF THE SECRETARY OF STATE APRIL 28, 1999.