Amended in Senate September 3, 2015

Amended in Senate August 17, 2015

Amended in Senate July 1, 2015

Amended in Assembly May 5, 2015

Amended in Assembly March 19, 2015

California Legislature—2015–16 Regular Session

Assembly BillNo. 449


Introduced by Assembly Member Irwin

(Principal coauthor: Assembly Member Wilk)

(Principal coauthors: Senators Hertzberg and Pavley)

(Coauthors: Assembly Members Baker, Brown, Chávez, Cristina Garcia, Jones, Maienschein, Steinorth, and Waldron)

(Coauthors: Senators Allen, Anderson, and Vidak)

February 23, 2015


An act to addbegin delete Sections 17140.4 andend deletebegin insert Sectionend insert 23711.4 to the Revenue and Taxation Code, and to addbegin delete Chapter 15 (commencing with Section 4875) to Division 4.5 ofend deletebegin insert Sections 4877, 4878, 4880, 4882, and 4884 toend insert the Welfare and Institutions Code, relating to taxation, and making an appropriation therefor.

LEGISLATIVE COUNSEL’S DIGEST

AB 449, as amended, Irwin. Income taxation: savings plans: Qualified ABLE Program.

The Personal Income Tax Law and the Corporation Tax Law, in specified conformity with federal income tax laws regarding qualified tuition programs, provide that distributions from a qualified tuition program are generally not included in the income of the donor or the beneficiary, as specified.

Existing federal law, the Stephen Beck Jr., Achieving a Better Life Experience Act of 2014 (ABLE Act), for taxable years beginning on or after January 1, 2015, encourages and assists individuals and families to save private funds for the purpose of supporting persons with disabilities to maintain their health, independence, and quality of life by excluding from gross income distributions used for qualified disability expenses by a beneficiary of a Qualified ABLE Program established and maintained by a state, as specified.

This bill would, for taxable years beginning on or after January 1, 2016, conform to these federal income tax law provisions relating to the ABLE Act underbegin delete the Personal Income Tax Law andend delete the Corporation Tax Law, as provided. The bill would also establish in state government the ABLE program trust for purposes of implementing the federal ABLE Act. The bill wouldbegin delete createend deletebegin insert authorizeend insert the ABLE Act Boardbegin delete and would authorize the boardend delete to adopt regulations to implement the program. The bill would create the program fund, a continuously appropriated fund, thereby making an appropriation, and the administrative fund, as specified. The bill would require thebegin delete Boardend deletebegin insert boardend insert to administer the program in compliance with the requirements of the federal ABLE Act.

begin insert

This bill would become operative only if SB 324 is enacted and takes effect on or before January 1, 2016.

end insert

Vote: majority. Appropriation: yes. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

P2    1

SECTION 1.  

It is the intent of the Legislature to further the
2purposes of the federal Stephen Beck Jr., Achieving a Better Life
3Experience Act to ensure that people with disabilities may save
4for the future to achieve greater independence.

5

SEC. 2.  

This act shall be known, and may be cited, as the
6California Achieving a Better Life Experience Act.

begin delete7

SEC. 3.  

Section 17140.4 is added to the Revenue and Taxation
8Code
, to read:

9

17140.4.  

For taxable years beginning on or after January 1,
102016, Section 529A of the Internal Revenue Code, relating to
11qualified ABLE programs, added by Section 102 of Division B of
12Public Law 113-295, shall apply, except as otherwise provided.

P3    1(a) Section 529A of the Internal Revenue Code is modified as
2follows:

3(1) By substituting the phrase “under this part and Part 11
4(commencing with Section 23001)” in lieu of the phrase “under
5this subtitle.”

6(2) By substituting “Article 2 (commencing with Section
723731)” in lieu of “Section 511.”

8(b) A copy of the report required to be filed with the Secretary
9of the Treasury under Section 529A(d) of the Internal Revenue
10Code, relating to reports, shall be filed with the Franchise Tax
11Board at the same time and in the same manner as specified in that
12section.

end delete
13

begin deleteSEC. 4.end delete
14begin insertSEC. 3.end insert  

Section 23711.4 is added to the Revenue and Taxation
15Code
, to read:

16

23711.4.  

For taxable years beginning on or after January 1,
172016, Section 529A of the Internal Revenue Code, relating to
18qualified ABLE programs, added by Section 102 of Division B of
19Public Law 113-295, shall apply, except as otherwise provided.

20(a) Sectionbegin delete 529Aend deletebegin insert 529A(a)end insert of the Internal Revenue Code is
21modified as follows:

22(1) By substituting the phrase “under Part 10 (commencing with
23Section 17001) and this part” in lieu of the phrase “under this
24subtitle.”

25(2) By substituting “Article 2 (commencing with Section
2623731)” in lieu of “Section 511.”

begin insert

27(b) Section 529A(c)(3)(A) of the Internal Revenue Code is
28modified by substituting “2.5 percent” in lieu of “10 percent.”

end insert
begin delete

29(b)

end delete

30begin insert(c)end insert A copy of the report required to be filed with the Secretary
31of the Treasury under Section 529A(d) of the Internal revenue
32Code, relating to reports shall be filed with the Franchise Tax
33Board at the same time and in the same manner as specified in that
34section.

begin delete
35

SEC. 5.  

Chapter 15 (commencing with Section 4875) is added
36to Division 4.5 of the Welfare and Institutions Code, to read:

37 

38Chapter  15. Qualified ABLE Program
39

 

40

4875.  

For purposes of this chapter:

P4    1(a) “ABLE account” or “account” means the account established
2and owned by a designated beneficiary pursuant to this chapter
3for the purpose of meeting the qualified disability expenses of the
4designated beneficiary of the account.

5(b)  “Administrative fund” means the fund used to administer
6this chapter.

7(c) “Board” means the California ABLE Act Board established
8under this chapter.

9(d) “California ABLE Program Trust” or “ABLE program trust”
10means the trust created pursuant to this chapter.

11(e) “Designated beneficiary” means the eligible individual who
12established an ABLE account and is the owner of the account.

13(f) “Eligible individual” means an individual who is eligible
14under the program for a taxable year if during that taxable year
15both of the following criteria are met:

16(1) The individual is entitled to benefits based on blindness or
17disability under Title II or XVI of the federal Social Security Act,
18and that blindness or disability occurred before the date on which
19the individual attained 26 years of age.

20(2) A disability certification, as defined in the federal ABLE
21Act, with respect to the individual is filed pursuant to the
22requirements set forth in the federal ABLE Act.

23(g) “Federal ABLE Act” means the federal Stephen Beck Jr.,
24Achieving a Better Life Experience Act of 2014.

25(h) “Investment management” means the functions performed
26by a manager contracted to perform functions delegated by the
27board.

28(i) “Investment manager” means a manager contracted to
29perform functions delegated by the board.

30(j) “Program fund” means the program fund established by this
31chapter, which shall be held as a separate fund within the California
32ABLE Program Trust.

33(k) “Qualified ABLE Program” or “program” means the program
34established by this chapter to implement the federal ABLE Act
35pursuant to Section 529A of the Internal Revenue Code.

36(l) “Qualified disability expenses” means any expenses related
37to the eligible individual’s blindness or disability that are made
38for the benefit of an eligible individual who is the designated
39beneficiary, including expenses related to education, housing,
40transportation, employment training and support, assistive
P5    1technology and personal support services, health, prevention and
2wellness, financial management and administrative services, legal
3fees, expenses for oversight and monitoring, funeral and burial
4expenses, and other expenses, which are approved by the Secretary
5of the Treasury under regulations and consistent with the purposes
6of the federal ABLE Act.

7

4876.  

There is hereby created the California ABLE Act Board
8that consists of the Treasurer, the Director of Finance, the
9Controller, the Director of Developmental Services, the chairperson
10of the State Council on Developmental Disabilities, the Director
11of Rehabilitation, and the Chair of the State Independent Living
12Council, or their designees. The Treasurer shall serve as chair of
13the board.

end delete
14begin insert

begin insertSEC. 4.end insert  

end insert

begin insertSection 4877 is added to the end insertbegin insertWelfare and Institutions
15Code
end insert
begin insert, to read:end insert

16

4877.  

(a) There is hereby created an instrumentality of the
17State of California to be known as the California ABLE Program
18Trust.

19(b) The purposes, powers, and duties of the California ABLE
20Program Trust are vested in, and shall be exercised by, the board.

21(c) The board, in the capacity of trustee, shall have the power
22and authority to do all of the following:

23(1) Sue and be sued.

24(2) Make and enter into contracts necessary for the
25administration of the ABLE program trust, and engage personnel,
26including consultants, actuaries, managers, counsel, and auditors,
27as necessary for the purpose of rendering professional, managerial,
28and technical assistance and advice.

29(3) Adopt a corporate seal and change and amend it from time
30to time.

31(4) Cause moneys in the program fund to be held and invested
32and reinvested.

33(5) Accept any grants, gifts, appropriations, and other moneys
34from any unit of federal, state, or local government or any other
35person, firm, partnership, or corporation for deposit to the
36administrative fund or the program fund.begin delete The board may not accept
37any contribution by any nonpublic entity, person, firm, partnership,
38or corporation that is not designated for a specified designated
39beneficiary.end delete

P6    1(6) Enter into agreements with designated beneficiaries or
2eligible individuals to establish and maintain an ABLE account.

3(7) Make provisions for the payment of costs of administration
4and operation of the ABLE program trust.

5(8) Carry out the duties and obligations of the ABLE program
6trust pursuant to this chapter and the federal ABLE Act pursuant
7to Section 529A of the Internal Revenue Code and federal
8regulations issued pursuant to that code, and have any other powers
9as may be reasonably necessary for the effectuation of the purposes,
10objectives, and provisions of this chapter.

11(9) Carry out studies and projections in order to advise
12designated beneficiaries or eligible individuals regarding present
13and estimated future qualified disability expenses and the levels
14of financial participation in the ABLE program trust required in
15order to assist designated beneficiaries or eligible individuals.

16(10) Participate in any other way in any federal, state, or local
17governmental program for the benefit of the ABLE program trust.

18(11) Promulgate, impose, and collect administrative fees and
19charges in connection with transactions of the ABLE program
20trust, and provide for reasonable service charges, including
21penalties for cancellations.

22(12) Set minimum and maximum investment levels.

23(13) Administer the funds of the ABLE program trust.

24(14) Procure insurance against any loss in connection with the
25property, assets, or activities of the ABLE program trust.

26(15) Procure insurance indemnifying any member of the board
27from personal loss or liability resulting from a member’s action
28or inaction as a member of the board.

29(d) The Treasurer shall, on behalf of the board, appoint an
30executive director, who shall not be a member of the board and
31who shall serve at the pleasure of the board. The Treasurer shall
32determine the duties of the executive director and other staff as
33necessary and set his or her compensation. The board may authorize
34the executive director to enter into contracts on behalf of the board
35or conduct any business necessary for the efficient operation of
36the board.

begin delete
37

4878.  

end delete
38begin insert

begin insertSEC. 5.end insert  

end insert

begin insertSection 4878 is added to the end insertbegin insertWelfare and Institutions
39Code
end insert
begin insert, to read:end insert

P7    1begin insert

begin insert4878.end insert  

end insert

(a) The board shall segregate moneys received by the
2ABLE program trust into two funds, which shall be identified as
3the program fund and the administrative fund.

4(1) Notwithstanding Section 13340 of the Government Code,
5the program fund is hereby continuously appropriated, without
6regard to fiscal years, to the ABLE Act Board for the purposes
7specified in this act.

8(2) The moneys in the administrative fund shall be available for
9the ABLE Act Board, upon appropriation, for administration of
10the act. Administrative costs shall not exceed 3 percent of the
11incoming funds for each fiscal year for the first five fiscal years
12following the opening of the first ABLE Act account. After the
13five-year period, administrative costs shall not exceed 1 percent
14of the incoming funds for each fiscal year.

15(3) Funding for startup and administrative costs for the board
16shall be provided in the form of a loan from the General Fund
17sufficient to cover the board’s projected administrative costs for
18its first two years of implementing the program. Once the loan has
19been expended and revenues from the program are sufficient to
20cover the board’s ongoing costs, the board shall repay, within five
21years, the amount loaned, plus interest calculated at the rate earned
22by the Pooled Money Investment Account.

23(b) Not later than 30 days after the close of each month, the
24investment manager shall place on file for public inspection during
25business hours a report with respect to investment performance.
26The investment manager shall report the following information,
27to the extent applicable, to the board within 30 days following the
28end of each month:

29(1) The type of investment, name of the issuer, date of maturity,
30and the par and dollar amount invested in each security, investment,
31and money within the program fund.

32(2) The weighted average maturity of the investments within
33the program fund.

34(3) Any amounts in the program fund that are under the
35management of an investment manager.

36(4) The market value as of the date of the report and the source
37of this valuation for any security within the program fund.

38(5) A description of the compliance with the statement of
39investment policy.

P8    1(c) Moneys in the program fund may be invested or reinvested
2by the Treasurer or may be invested in whole or in part under
3contract with an investment manager, as determined by the board.

4(d) The board shall annually prepare and adopt a written
5statement of investment policy. The board shall consider the
6statement of investment policy and any changes in the investment
7policy at a public hearing. The board shall approve the investment
8management entity or entities consistent with subdivision (c).

9(e) Transfers may be made from the program fund to the
10administrative fund for the purpose of paying operating costs
11associated with administering the ABLE program trust and as
12required by this chapter. All costs of administration of the ABLE
13program trust shall be paid out of the administrative fund.

14(f) All moneys paid by designated beneficiaries or eligible
15individuals in connection with ABLE accounts shall be deposited
16as received into the program fund, and shall be promptly invested
17and accounted for separately. Deposits and interest thereon
18accumulated on behalf of designated beneficiaries in the program
19fund of the ABLE program trust may be used for qualified
20disability expenses.

21(g) The board shall maintain separate accounting for each
22designated beneficiary.

23(h) Any designated beneficiary may, directly or indirectly, direct
24the investment of any contributions to his or her ABLE account,
25or any earnings thereon, no more than two times in any calendar
26year.

27(i) The assets of the trust, including the program fund, shall at
28all times be preserved, invested, and expended solely and only for
29the purposes of the trust and shall be held in trust for the designated
30beneficiaries and no property rights therein shall exist in favor of
31the state. The assets shall not be transferred or used by the state
32for any purposes other than the purposes of the trust and consistent
33with the provisions of the federal ABLE Act.

begin delete
34

4879.  

(a) Under the program, a person may make contributions
35for a taxable year, for the benefit of an individual who is an eligible
36individual for that taxable year, to an ABLE account that is
37established for the purpose of meeting the qualified disability
38expenses of the designated beneficiary of the account if both of
39the following criteria are met:

P9    1(1) The designated beneficiary is limited to one ABLE account
2for purposes of this chapter.

3(2) The ABLE account is established only for a designated
4beneficiary who is a resident of this state.

5(b) A contribution to any ABLE account may only be accepted
6if one of the following conditions is met:

7(1) The contribution is in cash.

8(2) Except in the case of contributions under Section
9529A(c)(1)(C) of the Internal Revenue Code, if the contribution
10to an ABLE account would not result in aggregate contributions
11from all contributors to the ABLE account for the taxable year
12exceeding the amount in effect under Section 2503(b) of the
13Internal Revenue Code for the calendar year in which the taxable
14year begins.

15(c) The designated beneficiary shall retain ownership of all
16contributions made to the designated beneficiary’s ABLE account
17to the date of utilization for qualified disability expenses, and all
18interest derived from the investment of the contributions to the
19designated beneficiary’s ABLE account shall be deemed to be held
20in the ABLE program trust for the benefit of the designated
21 beneficiary. Neither the contributions, nor any interest derived
22therefrom, may be pledged as collateral for any loan.

23(d) The board shall develop adequate safeguards to prevent
24aggregate contributions on behalf of a designated beneficiary in
25excess of the maximum contribution limits necessary to provide
26for the qualified disability expenses of the designated beneficiary.
27For purposes of this subdivision, aggregate contributions include
28contributions under any prior qualified ABLE program of any state
29or agency or instrumentality thereof.

30

4880.  

end delete
31begin insert

begin insertSEC. 6.end insert  

end insert

begin insertSection 4880 is added to the end insertbegin insertWelfare and Institutions
32Code
end insert
begin insert, to read:end insert

33begin insert

begin insert4880.end insert  

end insert

Notwithstanding any other law, moneys in, contributions
34to, and any distribution for qualified disability expenses from, an
35ABLE account, not to exceed one hundred thousand dollars
36($100,000), shall not count toward determining eligibility for a
37state or local means-tested program.

begin delete
38

4881.  

(a) The board shall provide an annual listing of
39distributions to individuals with respect to an interest in an ABLE
40account to the Franchise Tax Board at a time and in a manner and
P10   1form as specified by the Franchise Tax Board. The taxpayers’
2identification numbers obtained in connection with an ABLE
3account shall be used exclusively for state and federal tax
4administration purposes.

5(b) The board shall make a report to the appropriate individual
6of any distribution to any individual with respect to an interest in
7an ABLE account, at a time and in a form and manner as required
8by the Franchise Tax Board.

9(c) The board shall report annually to each designated
10beneficiary all of the following:

11(1) The value of the designated beneficiary’s account.

12(2) The interest earned thereon.

13(3) The rate of return of the investments in the designated
14beneficiary’s account for that reporting period.

15(4) Information on investments and qualified disability expenses
16that designated beneficiaries can use to set savings goals and
17contribution amounts.

18(d) The board shall provide a means for designated beneficiaries
19to express concerns or comments regarding the ABLE program
20trust and any information required to be reported by this section.

21

4882.  

end delete
22begin insert

begin insertSEC. 7.end insert  

end insert

begin insertSection 4882 is added to the end insertbegin insertWelfare and Institutions
23Code
end insert
begin insert, to read:end insert

24begin insert

begin insert4882.end insert  

end insert

(a) The board shall adopt regulations as it deems
25necessary to implement this chapter consistent with the federal
26Internal Revenue Code and regulations issued pursuant to that
27code to ensure that this program meets all criteria for federal
28tax-exempt benefits.

29(b) The board may adopt regulations to implement this chapter
30as emergency regulations in accordance with the rulemaking
31provisions of the Administrative Procedure Act (Chapter 3.5
32(commencing with Section 11340) of Part 1 of Division 3 of Title
332 of the Government Code). The adoption of the regulations shall
34be deemed to be an emergency and necessary for the immediate
35preservation of the public peace, health and safety, or general
36welfare.

begin delete
37

4883.  

This act shall be construed liberally in order to effectuate
38its legislative intent. The purposes of this act and all of its
39provisions with respect to powers granted shall be broadly
P11   1interpreted to effectuate the intent and purposes of the federal
2ABLE Act and not as a limitation of those powers.

end delete
begin delete
3

4884.  

end delete
4begin insert

begin insertSEC. 8.end insert  

end insert

begin insertSection 4884 is added to the end insertbegin insertWelfare and Institutions
5Code
end insert
begin insert, to read:end insert

6begin insert

begin insert4884.end insert  

end insert

The board shall market this program to residents of the
7State of California to the extent funds are available to do so.

8begin insert

begin insertSEC. 9.end insert  

end insert

begin insertThis act shall become operative only if Senate Bill 324
9of the 2015-16 Regular Session is enacted and takes effect on or
10before January 1, 2016.end insert



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    94