BILL ANALYSIS �
AB 2625
Page 1
ASSEMBLY THIRD READING
AB 2625 (Solorio)
As Amended May 1, 2012
Majority vote
REVENUE & TAXATION 5-2 APPROPRIATIONS 12-5
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|Ayes:|Perea, Beall, Charles |Ayes:|Fuentes, Blumenfield, |
| |Calderon, Wieckowski, | |Bradford, Charles |
| |Fuentes | |Calderon, Campos, Davis, |
| | | |Gatto, Ammiano, Hill, |
| | | |Lara, Mitchell, Solorio |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Wagner, Nestande |Nays:|Harkey, Donnelly, |
| | | |Nielsen, Norby, Wagner |
| | | | |
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SUMMARY : Allows an individual to designate on his/her tax return,
that an amount in excess of their tax liability be deposited by the
Franchise Tax Board (FTB) into the individual's Scholarshare
Qualified Tuition Program (SQTP) or other Qualified Tuition Program
(QTP). Specifically, this bill :
1)Requires the Scholarshare Investment Board and the FTB to include
information regarding the direct deposit program on their Internet
Web sites and in their marketing materials.
2)Requires the FTB to revise the individual tax forms to allow
taxpayers to request information regarding the SQTP under the
Golden State Scholarshare College Savings Trust (Trust) Program.
3)Requires the request for information to be located on the tax form
near the voluntary contribution checkoffs and to include the
following written information: "If you are interested in
receiving information regarding the Scholarshare qualified tuition
program and how to sign up for a Scholarshare qualified tuition
program, please check here."
4)Requires the FTB, with the Trust's assistance, to provide
taxpayers with the requested information regarding the SQTP and
other QTPs.
AB 2625
Page 2
5)Allows an individual to designate on his/her personal income tax
(PIT) return that an amount, in excess of tax liability, and of at
least $1, shall be deposited into the individual's SQTP or other
QTP.
6)Defines "qualified tuition program" by reference to Internal
Revenue Code (IRC) Section 529.
7)Sunsets the direct deposit provisions on January 1, 2020.
EXISTING LAW :
1)Requires the FTB to make a refund to a taxpayer of any overpayment
of taxes and allows taxpayers to contribute their refunds for the
support of specified funds or accounts.
2)Provides tax-exempt status to QTPs governed by IRC Section 529.
QTPs are programs established and maintained by a state (or by an
eligible educational institution) under which a person may
purchase tuition credits or make cash contributions to meet the
qualified higher education expenses of a designated beneficiary.
Contributions to a QTP cannot exceed the amount necessary to
provide for the beneficiary's qualified higher education expenses.
Distributions to a beneficiary are excluded from income.
However, contributions made to a QTP are not deductible.
FISCAL EFFECT : The FTB estimates this bill will not impact the
state's General Fund revenues. This bill will require significant
processing charges for FTB. The estimated administrative costs are
approximately $250,000.
COMMENTS :
The author has provided the following statement in support of this
bill:
A 529 college savings plan is an investment vehicle designed to
encourage taxpayers to save for the future higher education
expenses of a designated beneficiary. A specialized
tax-advantaged plan, where earnings on investments grow
tax-deferred and disbursements are federal and state tax-free,
funds from a 529 plan can be used for tuition, fees, books,
supplies, and equipment required for study at accredited higher
education institutions.
AB 2625
Page 3
Assembly Bill 2625 encourages taxpayers to save for the future
education expenses of their dependents.
Specifically, AB 2625 would allow taxpayers to designate on
their personal income tax return an amount in excess of tax
liability to be deposited directly into a 529 savings account.
Assembly Revenue and Taxation Committee Staff Comments:
This bill's purpose : Existing law already allows individual
taxpayers to designate a QTP for the deposit of their PIT refund.
To do so, taxpayers need only provide their account and routing
numbers. This bill, however, would require the FTB to revise the
PIT returns to allow taxpayers to explicitly designate contributions
to a SQTP or other QTP. This bill would also require the FTB to
revise the forms to allow taxpayers to request information regarding
the SQTP. Finally, this bill would require the Scholarshare
Investment Board and FTB to include information regarding the direct
deposit program on their internet websites and marketing materials.
Committee staff appreciates the goal of increasing college savings
opportunities. It is important to note, however, that while this
bill may increase awareness of the SQTP and other QTPs, this bill
will not enable an individual to establish the SQTP or QTP. The
explicit reference to these college savings accounts on the tax
returns could conceivably incentivize filers to explore these plans
as a potential vehicle for college savings.
Analysis Prepared by : Rosailda Perez and M. David Ruff / REV. &
TAX. / (916) 319-2098
FN: 0003855