BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 2625 (Solorio) - Income taxes: voluntary contributions to
qualified tuition programs.
Amended: August 6, 2012 Policy Vote: G&F 6-2
Urgency: No Mandate: No
Hearing Date: August 6, 2012
Consultant: Mark McKenzie
This bill meets the criteria for referral to the Suspense File.
Bill Summary: AB 2625 would allow taxpayers to deposit an amount
in excess of their tax liability into a qualified tuition
program account until January 1, 2020.
Fiscal Impact:
Estimated administrative costs to the Franchise Tax Board
(FTB) of $112,000 in 2012-13, $55,000 in 2013-14, and
$46,000 ongoing (General Fund).
Likely minor costs to the Scholarshare Investment Board to
include information about the voluntary contribution program
in its website and marketing materials (Scholarshare
Administration Fund).
Background: Existing law provides tax exempt status to qualified
tuition programs (QTPs), commonly referred to as 529 Savings
Plans, which are established and maintained by the state or an
eligible education institution to encourage savings for
education. Contributions to a QTP, such as California's Golden
State Scholarshare Trust Program, are not deductible, but
account earnings and interest are tax-deferred, and
distributions from a QTP for qualified education expenses are
not taxable. Currently, there are 15 "check-off" programs on
the state personal income tax return which allow taxpayers to
donate their own funds for various purposes. When a taxpayer is
due a refund, FTB allows the refund to be directly deposited
into checking or savings accounts, including a 529 Savings Plan
account, if the taxpayer provides the correct routing and
account numbers.
Proposed Law: AB 2625 would authorize an individual to designate
AB 2625 (Solorio)
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on his or her tax return a contribution of $25 or more in excess
of tax liability for deposit into the individual's QTP account
until January 1, 2020. The bill would require FTB to revise tax
forms to include space for this designation, including the
amounts to be transferred and the routing and account numbers.
FTB and the Scholarshare Investment Board would both be required
to include information about this QTP voluntary deposit
designation program on their websites and within marketing
materials when timely and appropriate.
Related Legislation: This bill is similar to SB 323 (Oropeza,
2009) and SB 918 (Oropeza, 2007), both of which were held under
submission on the Assembly Appropriations Committee Suspense
File. One key difference between this bill and SB 323, however,
is that bill's provision that would have required the
Scholarshare Board to reimburse FTB for its administrative
costs.
Staff Comments: FTB indicates that this bill requires changes to
existing forms, instructions, and information systems, which
could be accomplished during normal annual updates. Current
fiscal year costs are estimated at $112,000, primarily
associated with the programming that would allow for additional
direct deposit of taxpayer funds into QTP accounts. FTB would
also incur costs of approximately $55,000 in 2013-14, and
ongoing costs of $46,000 ongoing for increased printing,
responding to respond to taxpayer inquiries, processing
contributions, and performing other administrative functions.
Costs to the Scholarshare Board and FTB to include information
about the new program on websites and in marketing materials are
anticipated to be minor and absorbable.
This bill is intended to increase awareness of the Scholarshare
program and encourage taxpayer participation in 529 college
savings plans for future education expenses. Considering
taxpayers may currently designate their tax refund to be
deposited into a QTP with a valid routing and account number,
the Committee may wish to consider whether the increased
awareness of 529 savings plans provided by the bill warrants a
General Fund expenditure.
AB 2625 (Solorio)
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