EDUCATION SAVINGS ACCOUNTS H.B. 4202:
COMMITTEE SUMMARY
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House Bill 4202 (as passed by the House)
Sponsor: Representative Steven Lindberg
House Committee: Education
Senate Committee: Education
Date Completed: 1-21-10
CONTENT
The bill would amend the Michigan Education Savings Program Act to permit a corporation or a State or local government agency or instrumentality to establish an education savings account, and permit these entities and nonprofit organizations to defer naming a beneficiary for an account.
The Act permits individuals and certain entities to open one or more education savings accounts to save money for the qualified higher education expenses of one or more designated beneficiaries, although an account owner may open only one account for any one beneficiary.
The entities that may open an account are an entity exempt from taxation under Section 501(c)(3) of the Internal Revenue Code and an estate or trust. Under the bill, a corporation or a State or local government agency or instrumentality also could establish an education savings account.
To open an education savings account, an individual or entity must enter into a Michigan Education Savings Program agreement with the Program. The agreement must contain a designated beneficiary, among other information.
Under the bill, a State or local government agency or instrumentality, a tax-exempt person under Section 501(c)(3), or a corporation, as part of a scholarship program, could defer naming a designated beneficiary, consistent with the terms of the agreement.
The bill also would permit distributions from accounts to be made in the form of an electronic funds transfer to an account specified by the designated beneficiary or account holder.
Contributions to accounts currently may be made only in cash or by check, money order, credit card, or any similar approved method. Under the bill, contributions could not be made by money order.
MCL 390.1472 & 390.1477 Legislative Analyst: Curtis Walker
FISCAL IMPACT
The bill would reduce State individual income tax revenue by an unknown and likely negligible amount. The bill would expand the entities allowed to establish a Michigan Education Savings Program account. Contributions to such accounts are tax deductible, subject to certain limits. However, the majority of entities that would be allowed to create accounts under the bill are not entities that would be subject to the individual income tax. The exception would be corporations organized as pass-through entities, such as S-corporations, where the business activity is also reported on the individual income tax returns of affected owners. The amount of reduced revenue would depend upon the number of accounts established under the bill's provisions, as well as the amounts contributed to those accounts. Lower individual income tax revenue would reduce both General Fund and School Aid Fund revenue, although the majority of the impact would be experienced by the General Fund.
Fiscal Analyst: David Zin
Analysis was prepared by nonpartisan Senate staff for use by the Senate in its deliberations and does not constitute an official statement of legislative intent. hb4202/0910