BILL NUMBER: AB 449 AMENDED
BILL TEXT
AMENDED IN SENATE SEPTEMBER 3, 2015
AMENDED IN SENATE AUGUST 17, 2015
AMENDED IN SENATE JULY 1, 2015
AMENDED IN ASSEMBLY MAY 5, 2015
AMENDED IN ASSEMBLY MARCH 19, 2015
INTRODUCED BY Assembly Member Irwin
(Principal coauthor: Assembly Member Wilk)
(Principal coauthors: Senators Hertzberg and Pavley)
(Coauthors: Assembly Members Baker, Brown, Chávez, Cristina
Garcia, Jones, Maienschein, Steinorth, and Waldron)
(Coauthors: Senators Allen, Anderson, and Vidak)
FEBRUARY 23, 2015
An act to add Sections 17140.4 and Section
23711.4 to the Revenue and Taxation Code, and to add
Chapter 15 (commencing with Section 4875) to Division 4.5 of
Sections 4877, 4878, 4880, 4882, and 4884 to the
Welfare and Institutions Code, relating to taxation, and making an
appropriation therefor.
LEGISLATIVE COUNSEL'S DIGEST
AB 449, as amended, Irwin. Income taxation: savings plans:
Qualified ABLE Program.
The Personal Income Tax Law and the Corporation Tax Law, in
specified conformity with federal income tax laws regarding qualified
tuition programs, provide that distributions from a qualified
tuition program are generally not included in the income of the donor
or the beneficiary, as specified.
Existing federal law, the Stephen Beck Jr., Achieving a Better
Life Experience Act of 2014 (ABLE Act), for taxable years beginning
on or after January 1, 2015, encourages and assists individuals and
families to save private funds for the purpose of supporting persons
with disabilities to maintain their health, independence, and quality
of life by excluding from gross income distributions used for
qualified disability expenses by a beneficiary of a Qualified ABLE
Program established and maintained by a state, as specified.
This bill would, for taxable years beginning on or after January
1, 2016, conform to these federal income tax law provisions relating
to the ABLE Act under the Personal Income Tax Law and
the Corporation Tax Law, as provided. The bill would also
establish in state government the ABLE program trust for purposes of
implementing the federal ABLE Act. The bill would create
authorize the ABLE Act Board and would
authorize the board to adopt regulations to implement the
program. The bill would create the program fund, a continuously
appropriated fund, thereby making an appropriation, and the
administrative fund, as specified. The bill would require the
Board board to administer the program
in compliance with the requirements of the federal ABLE Act.
This bill would become operative only if SB 324 is enacted and
takes effect on or before January 1, 2016.
Vote: majority. Appropriation: yes. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. It is the intent of the Legislature to further the
purposes of the federal Stephen Beck Jr., Achieving a Better Life
Experience Act to ensure that people with disabilities may save for
the future to achieve greater independence.
SEC. 2. This act shall be known, and may be cited, as the
California Achieving a Better Life Experience Act.
SEC. 3. Section 17140.4 is added to the Revenue
and Taxation Code, to read:
17140.4. For taxable years beginning on or after January 1, 2016,
Section 529A of the Internal Revenue Code, relating to qualified
ABLE programs, added by Section 102 of Division B of Public Law
113-295, shall apply, except as otherwise provided.
(a) Section 529A of the Internal Revenue Code is modified as
follows:
(1) By substituting the phrase "under this part and Part 11
(commencing with Section 23001)" in lieu of the phrase "under this
subtitle."
(2) By substituting "Article 2 (commencing with Section 23731)" in
lieu of "Section 511."
(b) A copy of the report required to be filed with the Secretary
of the Treasury under Section 529A(d) of the Internal Revenue Code,
relating to reports, shall be filed with the Franchise Tax Board at
the same time and in the same manner as specified in that section.
SEC. 4. SEC. 3. Section 23711.4 is
added to the Revenue and Taxation Code, to read:
23711.4. For taxable years beginning on or after January 1, 2016,
Section 529A of the Internal Revenue Code, relating to qualified
ABLE programs, added by Section 102 of Division B of Public Law
113-295, shall apply, except as otherwise provided.
(a) Section 529A 529A(a) of the
Internal Revenue Code is modified as follows:
(1) By substituting the phrase "under Part 10 (commencing with
Section 17001) and this part" in lieu of the phrase "under this
subtitle."
(2) By substituting "Article 2 (commencing with Section 23731)" in
lieu of "Section 511."
(b) Section 529A(c)(3)(A) of the Internal Revenue Code is modified
by substituting "2.5 percent" in lieu of "10 percent."
(b)
(c) A copy of the report required to be filed with the
Secretary of the Treasury under Section 529A(d) of the Internal
revenue Code, relating to reports shall be filed with the Franchise
Tax Board at the same time and in the same manner as specified in
that section.
SEC. 5. Chapter 15 (commencing with Section
4875) is added to Division 4.5 of the Welfare and Institutions Code,
to read:
CHAPTER 15. QUALIFIED ABLE PROGRAM
4875. For purposes of this chapter:
(a) "ABLE account" or "account" means the account established and
owned by a designated beneficiary pursuant to this chapter for the
purpose of meeting the qualified disability expenses of the
designated beneficiary of the account.
(b) "Administrative fund" means the fund used to administer this
chapter.
(c) "Board" means the California ABLE Act Board established under
this chapter.
(d) "California ABLE Program Trust" or "ABLE program trust" means
the trust created pursuant to this chapter.
(e) "Designated beneficiary" means the eligible individual who
established an ABLE account and is the owner of the account.
(f) "Eligible individual" means an individual who is eligible
under the program for a taxable year if during that taxable year both
of the following criteria are met:
(1) The individual is entitled to benefits based on blindness or
disability under Title II or XVI of the federal Social Security Act,
and that blindness or disability occurred before the date on which
the individual attained 26 years of age.
(2) A disability certification, as defined in the federal ABLE
Act, with respect to the individual is filed pursuant to the
requirements set forth in the federal ABLE Act.
(g) "Federal ABLE Act" means the federal Stephen Beck Jr.,
Achieving a Better Life Experience Act of 2014.
(h) "Investment management" means the functions performed by a
manager contracted to perform functions delegated by the board.
(i) "Investment manager" means a manager contracted to perform
functions delegated by the board.
(j) "Program fund" means the program fund established by this
chapter, which shall be held as a separate fund within the California
ABLE Program Trust.
(k) "Qualified ABLE Program" or "program" means the program
established by this chapter to implement the federal ABLE Act
pursuant to Section 529A of the Internal Revenue Code.
(l) "Qualified disability expenses" means any expenses related to
the eligible individual's blindness or disability that are made for
the benefit of an eligible individual who is the designated
beneficiary, including expenses related to education, housing,
transportation, employment training and support, assistive technology
and personal support services, health, prevention and wellness,
financial management and administrative services, legal fees,
expenses for oversight and monitoring, funeral and burial expenses,
and other expenses, which are approved by the Secretary of the
Treasury under regulations and consistent with the purposes of the
federal ABLE Act.
4876. There is hereby created the California ABLE Act Board that
consists of the Treasurer, the Director of Finance, the Controller,
the Director of Developmental Services, the chairperson of the State
Council on Developmental Disabilities, the Director of
Rehabilitation, and the Chair of the State Independent Living
Council, or their designees. The Treasurer shall serve as chair of
the board.
SEC. 4. Section 4877 is added to the
Welfare and Institutions Code , to read:
4877. (a) There is hereby created an instrumentality of the State
of California to be known as the California ABLE Program Trust.
(b) The purposes, powers, and duties of the California ABLE
Program Trust are vested in, and shall be exercised by, the board.
(c) The board, in the capacity of trustee, shall have the power
and authority to do all of the following:
(1) Sue and be sued.
(2) Make and enter into contracts necessary for the administration
of the ABLE program trust, and engage personnel, including
consultants, actuaries, managers, counsel, and auditors, as necessary
for the purpose of rendering professional, managerial, and technical
assistance and advice.
(3) Adopt a corporate seal and change and amend it from time to
time.
(4) Cause moneys in the program fund to be held and invested and
reinvested.
(5) Accept any grants, gifts, appropriations, and other moneys
from any unit of federal, state, or local government or any other
person, firm, partnership, or corporation for deposit to the
administrative fund or the program fund. The board may not
accept any contribution by any nonpublic entity, person, firm,
partnership, or corporation that is not designated for a specified
designated beneficiary.
(6) Enter into agreements with designated beneficiaries or
eligible individuals to establish and maintain an ABLE account.
(7) Make provisions for the payment of costs of administration and
operation of the ABLE program trust.
(8) Carry out the duties and obligations of the ABLE program trust
pursuant to this chapter and the federal ABLE Act pursuant to
Section 529A of the Internal Revenue Code and federal regulations
issued pursuant to that code, and have any other powers as may be
reasonably necessary for the effectuation of the purposes,
objectives, and provisions of this chapter.
(9) Carry out studies and projections in order to advise
designated beneficiaries or eligible individuals regarding present
and estimated future qualified disability expenses and the levels of
financial participation in the ABLE program trust required in order
to assist designated beneficiaries or eligible individuals.
(10) Participate in any other way in any federal, state, or local
governmental program for the benefit of the ABLE program trust.
(11) Promulgate, impose, and collect administrative fees and
charges in connection with transactions of the ABLE program trust,
and provide for reasonable service charges, including penalties for
cancellations.
(12) Set minimum and maximum investment levels.
(13) Administer the funds of the ABLE program trust.
(14) Procure insurance against any loss in connection with the
property, assets, or activities of the ABLE program trust.
(15) Procure insurance indemnifying any member of the board from
personal loss or liability resulting from a member's action or
inaction as a member of the board.
(d) The Treasurer shall, on behalf of the board, appoint an
executive director, who shall not be a member of the board and who
shall serve at the pleasure of the board. The Treasurer shall
determine the duties of the executive director and other staff as
necessary and set his or her compensation. The board may authorize
the executive director to enter into contracts on behalf of the board
or conduct any business necessary for the efficient operation of the
board.
4878.
SEC. 5. Section 4878 is added to the
Welfare and Institutions Code , to read:
4878. (a) The board shall segregate moneys received by
the ABLE program trust into two funds, which shall be identified as
the program fund and the administrative fund.
(1) Notwithstanding Section 13340 of the Government Code, the
program fund is hereby continuously appropriated, without regard to
fiscal years, to the ABLE Act Board for the purposes specified in
this act.
(2) The moneys in the administrative fund shall be available for
the ABLE Act Board, upon appropriation, for administration of the
act. Administrative costs shall not exceed 3 percent of the incoming
funds for each fiscal year for the first five fiscal years following
the opening of the first ABLE Act account. After the five-year
period, administrative costs shall not exceed 1 percent of the
incoming funds for each fiscal year.
(3) Funding for startup and administrative costs for the board
shall be provided in the form of a loan from the General Fund
sufficient to cover the board's projected administrative costs for
its first two years of implementing the program. Once the loan has
been expended and revenues from the program are sufficient to cover
the board's ongoing costs, the board shall repay, within five years,
the amount loaned, plus interest calculated at the rate earned by the
Pooled Money Investment Account.
(b) Not later than 30 days after the close of each month, the
investment manager shall place on file for public inspection during
business hours a report with respect to investment performance. The
investment manager shall report the following information, to the
extent applicable, to the board within 30 days following the end of
each month:
(1) The type of investment, name of the issuer, date of maturity,
and the par and dollar amount invested in each security, investment,
and money within the program fund.
(2) The weighted average maturity of the investments within the
program fund.
(3) Any amounts in the program fund that are under the management
of an investment manager.
(4) The market value as of the date of the report and the source
of this valuation for any security within the program fund.
(5) A description of the compliance with the statement of
investment policy.
(c) Moneys in the program fund may be invested or reinvested by
the Treasurer or may be invested in whole or in part under contract
with an investment manager, as determined by the board.
(d) The board shall annually prepare and adopt a written statement
of investment policy. The board shall consider the statement of
investment policy and any changes in the investment policy at a
public hearing. The board shall approve the investment management
entity or entities consistent with subdivision (c).
(e) Transfers may be made from the program fund to the
administrative fund for the purpose of paying operating costs
associated with administering the ABLE program trust and as required
by this chapter. All costs of administration of the ABLE program
trust shall be paid out of the administrative fund.
(f) All moneys paid by designated beneficiaries or eligible
individuals in connection with ABLE accounts shall be deposited as
received into the program fund, and shall be promptly invested and
accounted for separately. Deposits and interest thereon accumulated
on behalf of designated beneficiaries in the program fund of the ABLE
program trust may be used for qualified disability expenses.
(g) The board shall maintain separate accounting for each
designated beneficiary.
(h) Any designated beneficiary may, directly or indirectly, direct
the investment of any contributions to his or her ABLE account, or
any earnings thereon, no more than two times in any calendar year.
(i) The assets of the trust, including the program fund, shall at
all times be preserved, invested, and expended solely and only for
the purposes of the trust and shall be held in trust for the
designated beneficiaries and no property rights therein shall exist
in favor of the state. The assets shall not be transferred or used by
the state for any purposes other than the purposes of the trust and
consistent with the provisions of the federal ABLE Act.
4879. (a) Under the program, a person may make contributions for
a taxable year, for the benefit of an individual who is an eligible
individual for that taxable year, to an ABLE account that is
established for the purpose of meeting the qualified disability
expenses of the designated beneficiary of the account if both of the
following criteria are met:
(1) The designated beneficiary is limited to one ABLE account for
purposes of this chapter.
(2) The ABLE account is established only for a designated
beneficiary who is a resident of this state.
(b) A contribution to any ABLE account may only be accepted if one
of the following conditions is met:
(1) The contribution is in cash.
(2) Except in the case of contributions under Section 529A(c)(1)
(C) of the Internal Revenue Code, if the contribution to an ABLE
account would not result in aggregate contributions from all
contributors to the ABLE account for the taxable year exceeding the
amount in effect under Section 2503(b) of the Internal Revenue Code
for the calendar year in which the taxable year begins.
(c) The designated beneficiary shall retain ownership of all
contributions made to the designated beneficiary's ABLE account to
the date of utilization for qualified disability expenses, and all
interest derived from the investment of the contributions to the
designated beneficiary's ABLE account shall be deemed to be held in
the ABLE program trust for the benefit of the designated beneficiary.
Neither the contributions, nor any interest derived therefrom, may
be pledged as collateral for any loan.
(d) The board shall develop adequate safeguards to prevent
aggregate contributions on behalf of a designated beneficiary in
excess of the maximum contribution limits necessary to provide for
the qualified disability expenses of the designated beneficiary. For
purposes of this subdivision, aggregate contributions include
contributions under any prior qualified ABLE program of any state or
agency or instrumentality thereof.
4880.
SEC. 6. Section 4880 is added to the
Welfare and Institutions Code , to read:
4880. Notwithstanding any other law, moneys in,
contributions to, and any distribution for qualified disability
expenses from, an ABLE account, not to exceed one hundred thousand
dollars ($100,000), shall not count toward determining eligibility
for a state or local means-tested program.
4881. (a) The board shall provide an annual listing of
distributions to individuals with respect to an interest in an ABLE
account to the Franchise Tax Board at a time and in a manner and form
as specified by the Franchise Tax Board. The taxpayers'
identification numbers obtained in connection with an ABLE account
shall be used exclusively for state and federal tax administration
purposes.
(b) The board shall make a report to the appropriate individual of
any distribution to any individual with respect to an interest in an
ABLE account, at a time and in a form and manner as required by the
Franchise Tax Board.
(c) The board shall report annually to each designated beneficiary
all of the following:
(1) The value of the designated beneficiary's account.
(2) The interest earned thereon.
(3) The rate of return of the investments in the designated
beneficiary's account for that reporting period.
(4) Information on investments and qualified disability expenses
that designated beneficiaries can use to set savings goals and
contribution amounts.
(d) The board shall provide a means for designated beneficiaries
to express concerns or comments regarding the ABLE program trust and
any information required to be reported by this section.
4882.
SEC. 7. Section 4882 is added to the
Welfare and Institutions Code , to read:
4882. (a) The board shall adopt regulations as it
deems necessary to implement this chapter consistent with the federal
Internal Revenue Code and regulations issued pursuant to that code
to ensure that this program meets all criteria for federal tax-exempt
benefits.
(b) The board may adopt regulations to implement this chapter as
emergency regulations in accordance with the rulemaking provisions of
the Administrative Procedure Act (Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code). The adoption of the regulations shall be deemed to be an
emergency and necessary for the immediate preservation of the public
peace, health and safety, or general welfare.
4883. This act shall be construed liberally in order to
effectuate its legislative intent. The purposes of this act and all
of its provisions with respect to powers granted shall be broadly
interpreted to effectuate the intent and purposes of the federal ABLE
Act and not as a limitation of those powers.
4884.
SEC. 8. Section 4884 is added to the
Welfare and Institutions Code , to read:
4884. The board shall market this program to residents
of the State of California to the extent funds are available to do
so.
SEC. 9. This act shall become operative only if
Senate Bill 324 of the 2015-16 Regular Session is enacted and takes
effect on or before January 1, 2016.