Senate Bill No. 324

Introduced by Senator Pavley

February 23, 2015

An act to add Sections 17140.4 and 23711.4 to the Revenue and Taxation Code, and to add Chapter 15 (commencing with Section 4875) to Division 4.5 of the Welfare and Institutions Code, relating to taxation.

LEGISLATIVE COUNSEL’S DIGEST

SB 324, as introduced, Pavley. Income taxation: savings plans: Qualified ABLE Program.

The Personal Income Tax Law and the Corporation Income 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 conform to these federal income tax law provisions relating to the ABLE Act under the Personal Income Tax Law and the Corporation Income Tax Law, as provided. The bill would also establish in state government a qualified ABLE program and the Qualified ABLE Fund for purposes of implementing the federal ABLE act. The bill would require the Treasurer to administer the program in compliance with the requirements of the federal ABLE act.

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

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

SECTION 1.  

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

17140.4.  

Section 529A of the Internal Revenue Code, relating
to qualified ABLE programs, as enacted by Section 102 of Public
Law 113-295, shall apply, except as otherwise provided.

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

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

(2) By substituting “Article 2 (commencing with Section
23731)” in lieu of “Section 511.”

(b) A copy of the report required to be filed with the Secretary
of the Treasury under Section 529A(g) of the Internal Revenue
Code shall be filed with the Franchise Tax Board at the same time
and in the same manner as specified in that section.

SEC. 2.  

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

23711.4.  

Section 529A of the Internal Revenue Code, relating
to qualified ABLE programs, as enacted by Section 102 of Public
Law 113-295, shall apply, except as otherwise provided.

(a) Section 529A of the internal Revenue Code is modified as
follows:

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

(2) By substituting “Article 2 (commencing with Section
23731)” in lieu of “section 511.”

(b) A copy of the report required to be filed with the Secretary
of the Treasury under Section 529A(g) of the Internal Revenue
Code shall be filed with the Franchise Tax Board at the same time
and in the same manner as specified in that section.

SEC. 3.  

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

 

Chapter  15. Qualified ABLE Program

 

4875.  

For purposes of this chapter:

(a) “ABLE account” or “account” means the account an eligible
individual makes contributions to pursuant to this chapter for the
purpose of meeting the qualified disability expenses of the
designated beneficiary of the account.

(b) “ABLE fund” or “fund” means the fund established by this
chapter for purposes of implementing the federal ABLE act.

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

(d) “Eligible individual” means an individual who is eligible
under the program for a taxable year if during that taxable year all
of the following criteria are met:

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

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

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

(f) “Qualified ABLE program” or “program” means the program
established by this chapter to implement the federal ABLE act
pursuant to Section 529A of the Internal Revenue Code.

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

4876.  

(a) There is hereby established in state government a
qualified ABLE program and the Qualified ABLE Fund for
purposes of implementing the federal ABLE act pursuant to Section
529A of the Internal Revenue Code.

(b) The qualified ABLE program shall be administered by the
Treasurer, who shall be responsible to ensure that the program is
administered in compliance with the requirements of the federal
ABLE act.

4877.  

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

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

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

4878.  

The Treasurer may adopt regulations to implement this
chapter.