BILL ANALYSIS Ó
AB 449
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Date of Hearing: May 13, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
449 (Irwin) - As Amended May 5, 2015
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|Policy |Revenue and Taxation |Vote:|9 - 0 |
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill establishes a state Achieving a Better Life Experience
(ABLE) program, and generally conforms the personal income tax
and corporation tax laws to the federal tax treatment of ABLE
accounts. The ABLE program allows people to make contributions
to an ABLE account for the purpose of paying certain disability
expenses on behalf of eligible persons, based on blindness or
disability under the federal Social Security Act, and provides
that money in an ABLE account does not count towards determining
eligibility for state and local means-tested programs.
The bill requires the Treasurer to administer the ABLE program,
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ensuring compliance with federal ABLE Act requirements, and
remains in effect for taxable years beginning on or after
January 1, 2016, and before January 1, 2021.
FISCAL EFFECT:
1)Administrative costs of approximately $330,000 to the
Treasurer to administer the program; potentially significant
administrative costs to the Franchise Tax Board.
2)Estimated GF revenue decreases of approximately $900,000 per
fiscal year once the program becomes fully implemented.
COMMENTS:
1)Purpose. According to the author, many people with
disabilities and their families depend on a variety of public
benefits for income, health care, food, and housing. There
are strict eligibility requirements for many of these
benefits. For example, Supplemental Security Income/State
Supplementary Payment does not allow recipients to hold more
than $2,000 in assets. As a result, disabled individuals on
public benefits are discouraged from working and saving, as
they cannot remain eligible if they save more than the means
test allows.
2)ABLE Accounts. The federal ABLE Act is designed to recognize
the significant costs of living with a disability, including
raising children with disabilities or caring for adults with
disabilities. Eligible individuals and families can establish
and fund ABLE savings accounts with up to $100,000 without
jeopardizing their eligibility for public benefits. The ABLE
accounts are administered like federal 529 college savings
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accounts, and funds saved can be used only for
disability-related expenses. If the account value exceeds
$100,000, federal benefits are suspended.
This bill provides access to federally-recognized ABLE
accounts to eligible individuals with disabilities and
provides similar shielding from state benefit eligibility
tests. The program is administered by the Treasurer, who also
administers 529 college savings accounts.
3)A Big Help. The new federal ABLE program provides disabled
individuals and their families with a few key benefits. The
program effectively eliminates the asset tests for many of
means-tested federal benefits, excluding up to $100,000 from
the qualification standard. The ABLE program also provides a
useful alternative to more expensive and complicated special
needs trusts, the only previous structure that could shield
assets from the federal means test.
Similar to 529 accounts, interest and income earned on funds
in ABLE accounts, as well as distributions for qualifying
disability expenses, are not taxed. Unlike 529 accounts,
however, ABLE accounts are likely to be used to cover
immediate expenses such as health care and housing. Most
funds deposited in 529 accounts remain for years, earning
significant tax-free income that will be used to pay for
college. Tax-free growth in ABLE accounts will not provide a
similar benefit unless the funds can be saved for long periods
of time.
AB 449
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Analysis Prepared by:Joel Tashjian / APPR. / (916)
319-2081