Amended in Assembly July 15, 2015

Amended in Senate April 15, 2015

Senate Bill No. 324

Introduced by Senator Pavley

(Coauthor: Senator Beall)

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(Coauthors: Assembly Members Dodd and Kim)

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(Principal coauthors: Assembly Members Irwin and Wilk)

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 begin delete taxation. end delete begin insert taxation, and making an appropriation therefor. end insert

LEGISLATIVE COUNSEL’S DIGEST

SB 324, as amended, Pavley. 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 conform to these federal income tax law provisions relating to the ABLE Act under the Personal Income Tax Law and the Corporation Tax Law, as provided. The bill would also establish in state government a Qualified ABLE Program and the begin delete Qualified end delete ABLE Fund for purposes of implementing the federal ABLE begin delete act. end delete begin insert Act. The bill would create the ABLE Act Board. The bill would authorize the Able Fund to accept moneys from ABLE accounts, to be segregated into the program account and the administrative account. The bill would continuously appropriate funds in the accounts to the board for specified purposes, thereby making an appropriation. end insert The bill would require the Treasurer to administer the program in compliance with the requirements of the federal ABLE Act.

Vote: majority. Appropriation:  begin delete no end delete begin insert yes end insert . 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, added by Section 102 of Division B
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(d) of the Internal Revenue
Code, relating to reports, 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, added by Section 102 of Division B
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(d) of the Internal Revenue
Code, relating to reports, 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 begin delete act. end delete begin insert Act. end insert

(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.

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begin insert 4876. end insert   

There is hereby created the ABLE Act Board that consists
of the Treasurer, the Director of Finance, the Controller, the
Director of Developmental Services, the chairperson of the State
Council on Developmental Disabilities, the Director of
Rehabilitation, and the chair of the State Independent Living
Council, or their designees.

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begin delete 4876. end delete
begin insert 4877. end insert   

(a) There is hereby established in state government a
Qualified ABLE Program and the begin delete Qualified end delete 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.

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(c) (1) The ABLE Fund shall accept moneys from all ABLE
accounts.

end insert begin insert

(2) The ABLE Act Board shall segregate moneys received by
the ABLE Fund into two accounts, which shall be identified as the
program account and the administrative account.

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(A) Notwithstanding Section 13340 of the Government Code,
the program account is hereby continuously appropriated, without
regard to fiscal years, to the ABLE Act Board for the purposes
specified in this act.

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(B) Notwithstanding Section 13340 of the Government Code,
the administrative account is hereby continuously appropriated,
without regard to fiscal years, to the ABLE Act Board for
administration of the act. Administrative costs shall not exceed 1
percent of the incoming funds for the fiscal year.

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(d) Funding for startup and first-year administrative costs shall
be appropriated from the General Fund in the annual Budget Act.
The board shall repay, within five years, the amount appropriated,
plus interest calculated at the rate earned by the Pooled Money
Investment Account. Necessary administrative costs in future years
shall be paid out of the administrative fund pursuant to
subparagraph (B) of paragraph (2) of subdivision (c).

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begin delete 4877. end delete
begin insert 4878. end insert   

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.

begin delete 4878. end delete
begin insert 4879. end insert   

The Treasurer may adopt regulations to implement this
chapter.

begin delete 4879. end delete
begin insert 4880. end insert   

Notwithstanding any other law, moneys begin delete in end delete begin insert in,
contributions to, and any distribution for qualified disability
expenses from, end insert an ABLE account, not to exceed one hundred
thousand dollars ($100,000) shall not count toward determining
eligibility for the Medi-Cal program pursuant to Chapter 7
(commencing with Section 14000) of Part 3 of Division 9.