February 5, 2009, Introduced by Reps. Lindberg, Roberts, McDowell, Ebli, Sheltrown, Hansen, Terry Brown, Polidori and Mayes and referred to the Committee on Education.
A bill to amend 2000 PA 161, entitled
"Michigan education savings program act,"
by amending sections 2 and 7 (MCL 390.1472 and 390.1477), as
amended by 2007 PA 153.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 2. As used in this act:
(a) "Account" or "education savings account" means an account
established under this act.
(b) "Account owner" means any of the following:
(i) The individual who enters into a Michigan education savings
program agreement and establishes an education savings account. The
account owner may also be the designated beneficiary of the
account.
(ii) An A
state or local government agency or instrumentality,
an entity exempt from taxation under section 501(c)(3) of the
internal
revenue code, or an estate or trust, or a corporation that
enters into a Michigan education savings program agreement and
establishes an education savings account.
(c) "Board" means the board of directors of the Michigan
education trust described in section 10 of the Michigan education
trust act, 1986 PA 316, MCL 390.1430.
(d) "Department" means the department of treasury.
(e) "Designated beneficiary" means the individual designated
as the individual whose higher education expenses are expected to
be paid from the account.
(f) "Eligible educational institution" means that term as
defined in section 529 of the internal revenue code or a college,
university, community college, or junior college described in
section 4, 5, or 6 of article VIII of the state constitution of
1963 or established under section 7 of article VIII of the state
constitution of 1963.
(g) "Internal revenue code" means the United States internal
revenue code of 1986 in effect on January 1, 2002 or at the option
of the taxpayer, in effect for the current year.
(h) "Management contract" means the contract executed between
the treasurer and a program manager.
(i) "Member of the family" means a family member as defined in
section 529 of the internal revenue code.
(j) "Michigan education savings program agreement" means the
agreement between the program and an account owner that establishes
an education savings account.
(k) "Program" means the Michigan education savings program
established pursuant to this act.
(l) "Program manager" means an entity selected by the treasurer
to act as a manager of 1 or more of the savings plans offered under
the program.
(m) "Qualified higher education expenses" means qualified
higher education expenses as defined in section 529 of the internal
revenue code.
(n) "Qualified withdrawal" means a distribution that is not
subject to a penalty or an excise tax under section 529 of the
internal revenue code, a penalty under this act, or taxation under
the income tax act of 1967, 1967 PA 281, MCL 206.1 to 206.532, and
that meets any of the following:
(i) A withdrawal from an account to pay the qualified higher
education expenses of the designated beneficiary incurred after the
account is established.
(ii) A withdrawal made as the result of the death or disability
of the designated beneficiary of an account.
(iii) A withdrawal made because a beneficiary received a
scholarship that paid for all or part of the qualified higher
education expenses of the beneficiary to the extent the amount of
the withdrawal does not exceed the amount of the scholarship.
(iv) A withdrawal made because a beneficiary attended a service
academy to the extent that the amount of the withdrawal does not
exceed the costs of the advanced education attributable to the
beneficiary's attendance in the service academy.
(v) A transfer of funds due to the termination of the
management contract as provided in section 5.
(vi) A transfer of funds as provided in section 8.
(o) "Savings plan" or "plans" means a plan that provides
different investment strategies and allows account distributions
for qualified higher education expenses.
(p) "Service academy" means the United States military
academy, United States naval academy, United States air force
academy, United States coast guard academy, or United States
merchant marine academy.
(q) "Treasurer" means the state treasurer.
Sec. 7. (1) Beginning October 1, 2000, education savings
accounts may be established under this act.
(2) Any individual or entity described in section 2(b)(ii) may
open 1 or more education savings accounts to save money to pay the
qualified higher education expenses of 1 or more designated
beneficiaries. An account owner shall open only 1 account for any 1
designated beneficiary. Each account opened under this act shall
have only 1 designated beneficiary.
(3) To open an education savings account, the individual or
entity described in section 2(b)(ii) shall enter into a Michigan
education savings program agreement with the program. The Michigan
education savings program agreement shall be in the form prescribed
by a program manager and approved by the treasurer and contain all
of the following:
(a) The name, address, and social security number or employer
identification number of the account owner.
(b) A designated beneficiary. A state or local government
agency or instrumentality, a person exempt from taxation as an
organization described in section 501(c)(3) of the internal revenue
code, or a corporation, as part of a scholarship program, may defer
naming a designated beneficiary consistent with the terms of the
applicable Michigan education savings program agreement.
(c) The name, address, and social security number of the
designated beneficiary.
(d) Any other information that the treasurer or program
manager considers necessary.
(4) Any individual or entity described in section 2(b)(ii) may
make contributions to an account.
(5) Contributions to accounts shall only be made in cash, by
check,
by money order, by credit card, or by any similar method as
approved by the state treasurer but shall not be property.
(6) An account owner may withdraw all or part of the balance
from an account on 60 days' notice, or a shorter period as
authorized in the Michigan education savings program agreement.
(7) Distributions from an account shall be requested on a form
approved by the state treasurer. A program manager may retain from
the distribution the amount necessary to comply with federal and
state tax laws. Distributions may be made in the following manner:
(a) Directly to an eligible education institution.
(b) In the form of a check payable to both the designated
beneficiary and the eligible educational institution.
(c) In the form of a check payable to the designated
beneficiary or account holder.
(d) In the form of an electronic funds transfer to an account
specified by the designated beneficiary or account holder.
(8) Except as otherwise provided in this subsection for tax
years that begin before January 1, 2002, if the distribution is not
a qualified withdrawal, a program manager shall withhold an amount
equal to 10% of the distribution amount as a penalty and pay that
amount to the department for deposit into the general fund. For a
distribution made after December 31, 2001 that is not a qualified
withdrawal, if an excise tax or penalty is imposed under section
529 of the internal revenue code pursuant to section 530(d)(4) of
the internal revenue code, a penalty shall not be imposed under
this subsection for that distribution. If a distribution that is
not a qualified withdrawal is made after December 31, 2001 and an
excise tax or penalty is not imposed under section 529 of the
internal revenue code pursuant to section 530(d)(4) of the internal
revenue code on that distribution, a program manager shall withhold
an amount equal to 10% of the accumulated earnings attributable to
that distribution amount as a penalty and pay that amount to the
department for deposit into the general fund. The penalty under
this subsection may be increased or decreased if the treasurer and
the program manager determine that it is necessary to increase or
decrease the penalty to comply with section 529 of the internal
revenue code.
(9) Each savings plan under the program shall provide separate
accounting for each designated beneficiary.