BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 324|
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UNFINISHED BUSINESS
Bill No: SB 324
Author: Pavley (D), et al.
Amended: 9/4/15
Vote: 21
SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 4/8/15
AYES: Hertzberg, Nguyen, Bates, Beall, Hernandez, Lara, Pavley
SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/28/15
AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen
SENATE FLOOR: 40-0, 6/1/15
AYES: Allen, Anderson, Bates, Beall, Berryhill, Block,
Cannella, De León, Fuller, Gaines, Galgiani, Glazer, Hall,
Hancock, Hernandez, Hertzberg, Hill, Hueso, Huff, Jackson,
Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning,
Moorlach, Morrell, Nguyen, Nielsen, Pan, Pavley, Roth, Runner,
Stone, Vidak, Wieckowski, Wolk
ASSEMBLY FLOOR: 79-0, 9/8/15 - See last page for vote
SUBJECT: Income taxation: savings plans: Qualified ABLE
Program
SOURCE: Author
DIGEST: This bill partially conforms state law to the recently
enacted Stephen Beck, Jr., Achieving a Better Life Experience
Act of 2014 (ABLE Act).
Assembly Amendments create the ABLE Act Board, specify its
membership, add provisions necessary for the State Treasurer to
implement this bill, and delete items currently in AB 449
(Irwin) to resolve conflicts.
SB 324
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ANALYSIS:
Existing law:
1)Does not automatically conform to changes to federal tax law,
except for specific retirement provisions.
2)Conforms to federal law as of a specified date, currently
January 1, 2009.
3)Conforms with modifications to educations savings accounts
authorized by Section 529 of the Internal Revenue Code (529s),
and directs the State Treasurer's Office to implement
California's 529 program, currently known as "ScholarShare."
4)Does not conform to the ABLE Act, which allows individuals who
became blind or disabled before reaching 26 years of age to
create tax-free savings accounts similar to 529s.
5)Applies income and asset tests for some programs allowing
disabled individuals to receive Medi-Cal benefits.
This bill:
1)Enacts the California Achieving a Better Life Experience Act,
which conforms the Personal Income Tax Law to the ABLE Act,
thereby allowing the creation of ABLE accounts in California
and ensuring that ABLE account earnings and distributions for
qualified services are not included in the eligible
individual's income for state tax purposes.
2)Creates the California ABLE Act Board (Board), consisting of
the following, or their designees:
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a) The State Treasurer, as Chair,
b) The Director of Finance,
c) The State Controller,
d) The Director of Developmental Services,
e) The Chairperson of the State Council on Developmental
Disabilities,
f) The Director of Rehabilitation, and
g) The Chair of the State Independent Living Council.
3)Allows persons to make contributions for a taxable year, for
the benefit of eligible individuals, to an ABLE account
established for the purpose of meeting that person's qualified
disability expenses.
a) Limits accounts to one per individual,
b) Allows accounts only for residents of the state,
c) Requires contributions to be in cash,
d) Limits total contributions to a single account for a
taxable year at an amount less than the threshold for
taxable gifts under federal law ($14,000 in 2015), and
e) Provides that the eligible individual retains ownership
of all contributions in the account, deems any interest
derived from the investments as held in the ABLE program
trust for the beneficiary's benefit, and prohibits
contributions and interest from being pledged as loan
collateral.
4)Requires the Board to:
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a) Report to the Franchise Tax Board (FTB) any distribution
to any individual with respect to an interest in an ABLE
account in a time and manner as required by FTB.
b) Report specified information to each designated
beneficiary.
c) Provide a means for designated beneficiaries to express
concerns, or comments regarding the ABLE program trust as
well as any other information.
5)Defines several terms, including:
a) "Eligible individual" as an individual who is blind or
disabled,
with onset before 26 years of age. The individual must be
entitled to Social Security Disability Insurance benefits,
or have a disability certificate on file with the Internal
Revenue Service.
b) "Qualified services" include education, housing,
transportation, employment training and support, assistive
technology and personal support services, health,
prevention, and wellness, financial management and
administrative services, legal fees, oversight and
monitoring, and funeral and burial services.
6)States that its provisions shall be liberally construed to
effectuate its intent.
7)Provides that its provisions only go into effect should AB 449
(Irwin) also be enacted.
Background
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On December 19, 2014, President Obama signed the ABLE Act, which
allows individuals who became blind or disabled before reaching
age 26, to create tax-free savings accounts. ABLE accounts
generally follow the same rules as 529s: individuals can make
nondeductible cash contributions to an ABLE account in the name
of a specified beneficiary, and earnings can grow tax free.
ABLE account distributions are also not included in the
beneficiary's income, so long as they're used for qualified
services for the beneficiary and distributions don't exceed the
cost of those services.
The ABLE Act directs states to establish one ABLE account for
each beneficiary who is a resident of the state. The ABLE Act
additionally directs the IRS to issue regulations by June 19,
2015, to implement the program to guide states as they enact
legislation creating ABLE accounts. AB 449 implements the ABLE
Act in California, and directs the State Treasurer to administer
ABLE accounts on behalf of qualified Californians.
Related Legislation
Currently, AB 449 (Irwin) contains provisions recently amended
out of SB 324, so should these two complementary measures be
enacted, California will have a comprehensive statute conforming
to the ABLE Act. AB 449 is currently pending action on the
Senate Floor.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
According to the Assembly Appropriations Committee, SB 324
results in a General Fund revenue loss of $100,000 in 2015-16,
$400,000 in 2016-17, and $900,000 in 2017-18. FTB would incur
minor costs to implement its provisions of this bill, while the
Treasurer's Office would incur one-time costs of $500,000, and
ongoing costs of approximately $330,000 annually.
SUPPORT: (Verified9/8/15)
SB 324
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State Treasurer John Chiang
Association of Regional Center Agencies
Autism Speaks
California Association for Health Services at Home
California Disability Services Association
California Taxpayers Association
Center for Autism and Related Disorders
Down Syndrome Society of Orange County
National Down Syndrome Society
The Arc and United Cerebral Palsy
OPPOSITION: (Verified9/8/15)
None received
ARGUMENTS IN SUPPORT: According to the author, "SB 324
establishes an ABLE Act program, within the State Treasurer's
office, that will provide financial tools for individuals with
disabilities. The measure also ensures that these ABLE savings
accounts are tax free. This new program will ensure that
individuals with developmental disabilities and their families
will be able to save without fear of losing eligibility for
public assistance programs."
ASSEMBLY FLOOR: 79-0, 9/8/15
AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,
Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang,
Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd,
Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia,
Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray,
Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones,
Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low,
Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin,
Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea,
Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago,
Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,
Wilk, Williams, Wood, Atkins
NO VOTE RECORDED: Chávez
SB 324
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Prepared by:Colin Grinnell / GOV. & F. / (916) 651-4119
9/8/15 21:55:26
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