ARIZONA STATE SENATE
Phoenix, Arizona
family college savings
program
Retroactive to January 1,
2002, conforms the Arizona family college savings program to comply with
changes made to federal law by the Economic Growth and Tax Relief
Reconciliation Act of 2001 (EGTRRA).
One of
the Arizona Commission for Postsecondary Education (Commission)
responsibilities is to assist in the preparation of students for
postsecondary achievement through financial aid program administration. The Commission administers the Arizona family college savings program (program),
which is the State's federally approved savings plan that allows individuals to
save for future higher education expenses. Higher education expenses include
tuition, fees, supplies, room and board, equipment and books.
Under the program, any person choosing to save for the qualified higher
education expenses of another person who is interested in pursuing postsecondary
education can open an account to which anyone may contribute. Account holders may contribute to a designated fund
with a deferment of federal income taxes on the investment earnings. Monies used to pay for the beneficiary’s
qualified higher education expenses are exempt from state tax if the designated
beneficiaries reside in Arizona. Funds
may be used for qualified expenses at higher education
institutions in the United States, including two-year and four-year public or
private colleges, universities, community colleges or technical training
schools.
H.B. 2098, retroactive to
January 1, 2002, conforms the program to changes made in federal law by
EGTRRA.
The
fiscal impact to the state general fund associated with this bill is unknown at
this time.
1. Replaces the definition of “higher education institution” with “eligible education institution,” which as an institution of higher education qualifies under the Internal Revenue Code (IRC).
2. Adds, to the definition of “member of the family,” a person’s first cousin.
3. Includes, in the definition of “qualified higher education expenses,” special needs expenses in the case of a special needs beneficiary incurred in connection with enrollment or attendance.
4. Removes the current rules and penalties associated with a nonqualified withdrawal from the college savings plan program.
5. Allows a penalty to be imposed when a nonqualified withdrawal is made from a college savings plan account if the penalty is required for purposes of qualifying the program under the IRC.
6. Allows the Commission to adopt rules to assess penalties and requires such penalties assessed to be paid to the Commission for operating and marketing the program and student financial aid.
7. Clarifies that when the Commission adopts rules, the purpose of establishing a maximum total balance is to forbid contributions to designated beneficiary accounts that could cause the maximum total balance to be surpassed.
8. Makes conforming, clarifying and technical changes.
9. Contains a retroactivity clause of January 1, 2002.
ED 2/04/02 DP 7-0-0-3-0
WM 2/12/02 DP 9-0-0-1-0
3rd Read
3/26/02
58-0-2-0
Prepared by Senate Staff
April 2, 2002