SP0701
LD 1999
Session - 129th Maine Legislature
C "B", Filing Number S-431, Sponsored by
LR 3035
Item 3
Bill Tracking, Additional Documents Chamber Status

Amend the bill by inserting after the title and before the enacting clause the following:

Emergency preamble. Whereas,  acts and resolves of the Legislature do not become effective until 90 days after adjournment unless enacted as emergencies; and

Whereas,  the Legislature established the Maine Education Savings Program, also known as NextGen 529, as Maine's Section 529 plan, so-called after Section 529 of the federal Internal Revenue Code of 1986, to be administered by the Finance Authority of Maine; and

Whereas,  the Maine Education Savings Program provides account owners and beneficiaries the opportunity to realize potential tax advantages if assets are used for qualified higher education expenses; and

Whereas,  the United States Congress has recently expanded the federal definition of qualified higher education expenses to include certain expenses related to registered and certified apprenticeship programs and limited repayments of qualified education loans; and

Whereas,  under the Maine Revised Statutes, Title 20-A, section 11483, the authority is authorized to take necessary action to ensure that the Maine Education Savings Program complies with federal law, and the authority considers it prudent to make statutory changes to conform with the expanded federal definition and to make certain other amendments to the law; and

Whereas,  in order to avoid confusion in the application and use of the program, it is necessary that these conforming changes take effect as soon as possible; and

Whereas,  in the judgment of the Legislature, these facts create an emergency within the meaning of the Constitution of Maine and require the following legislation as immediately necessary for the preservation of the public peace, health and safety; now, therefore,

Amend the bill by striking out everything after the enacting clause and inserting the following:

Sec. 1. 20-A MRSA §11471,  as amended by PL 2017, c. 474, Pt. F, §§2, 3 and 9, is further amended to read:

§ 11471. Definitions

As used in this chapter, unless the context otherwise indicates, the following terms have the following meanings.

1. Advisory committee.   "Advisory committee" means the Advisory Committee on Education Savings established in this chapter.
2. Authority.   "Authority" means the Finance Authority of Maine, which serves as administrator of the Maine Education Savings Program.
3. Beneficiary.   "Beneficiary" means any person designated by a participation agreement to benefit from payments for higher education expenses at an institution of higher education.
4 Benefits.   "Benefits" means the payment of higher education expenses on behalf of a beneficiary by the Maine Education Savings Program during the beneficiary's attendance at an institution of higher education.
5. Board.   "Board" means the board of directors of the Finance Authority of Maine.
6. Contributions.   "Contributions" means amounts deposited by a participant to an account within the program fund.
7. Higher education expenses.   "Higher education expenses" means the certified expenses for attendance at an institution of higher education as those expenses are defined by rule of the authority consistent with applicable provisions of the federal Internal Revenue Code of 1986 and its regulations addressing qualified state tuition programs. Beginning January 1, 2018, "higher education expenses" has the same meaning as "qualified higher education expenses" as defined in Section 529 of the federal Internal Revenue Code of 1986 and amendments to that Code and its regulations addressing qualified state tuition programs.
8. Institution of higher education.   "Institution of higher education" means an institution of higher education that meets the requirements established by rule of the authority consistent with applicable provisions of the Internal Revenue Code and its regulations addressing qualified state tuition programs.
9. Participant.   "Participant" means any person who has entered into a participation agreement pursuant to this chapter.
10. Participation agreement.   "Participation agreement" means an agreement between a participant and the authority providing for the establishment by the participant of one or more accounts within the program fund and for the administration of those accounts for the benefit of the participant and of one or more beneficiaries.
11. Program earnings.   "Program earnings" means all interest, dividends, premiums, fees, profits upon disposition of assets and other revenue actually received by or on behalf of the program with respect to any assets held within the program fund to which that asset may be credited, less all administrative costs of the program and the program fund, as periodically determined by the authority.
12 Tuition.   "Tuition" means the charges imposed to attend an institution of higher education and required as a condition of enrollment.

Sec. 2. 20-A MRSA §11472,  as amended by PL 2017, c. 474, Pt. F, §4, is further amended to read:

§ 11472. Maine Education Savings Program

The Maine Education Savings Program, referred to in this chapter as the "program," is established to encourage the investment of funds to be used for higher education expenses at institutions of higher education and, beginning January 1, 2018, and as long as permitted by provisions of Section 529 of the federal Internal Revenue Code of 1986, expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private or religious school. The authority shall administer the program and act as administrator of the program fund.

Sec. 3. 20-A MRSA §11475, sub-§11,  as enacted by PL 1997, c. 732, §4, is amended to read:

11. No guaranty of admission.   The execution of a participation agreement by the authority does not guarantee in any way that higher education expenses will be equal to projections and estimates provided by the authority or that the beneficiary named in any participation agreement will:
A. Be admitted to an any elementary or secondary school, apprenticeship program or institution of higher education;
B. Be allowed to continue attendance at the any elementary or secondary school, apprenticeship program or institution of higher education following admission; or
C. Graduate from the any elementary or secondary school, apprenticeship program or institution of higher education.

Sec. 4. 20-A MRSA §11476,  as amended by PL 2011, c. 150, §4 and affected by §9, is further amended to read:

§ 11476. Investment options and parameters

The authority, with the advice of the advisory committee, may provide investment options for a participant within the program fund to the extent permitted by Internal Revenue Code provisions addressing qualified state tuition programs. The authority, with the advice of the advisory committee, shall invest, or cause to be invested, the amounts on deposit in the program fund in a reasonable manner to achieve the objectives of each fund, exercising the discretion and care of a prudent person in similar circumstances with similar objectives. A participant or designated beneficiary may not direct the investment of any amounts on deposit in the program fund, except to the extent allowed pursuant to provisions of the Internal Revenue Code addressing qualified state tuition programs. The authority shall give due consideration to rate of return, term or maturity, diversification and liquidity of investments within the program fund or any account in the program fund pertaining to the projected disbursements and expenditures from the program fund and the expected payments, deposits, contributions and gifts to be received.

Sec. 5. 20-A MRSA §11478, sub-§1,  as enacted by PL 1997, c. 732, §4, is amended to read:

1. Participant retains ownership.   The participant retains ownership of all contributions and all program earnings credited to a participant's account under a participation agreement up to the date of utilization for payment of higher education expenses for the beneficiary and, notwithstanding any other provision of law, an amount credited to any account is not susceptible to levy, execution, judgment or other operation of law, garnishment or other judicial enforcement and the amount is not an asset or property of either the participant or the beneficiary for purposes of any state insolvency laws. Notwithstanding this subsection, an amount credited to the participant's account may not be included in any gross estate of the participant for purposes of state tax law, except to the extent that the amount may be includable in any gross estate for purposes of federal tax law.

Sec. 6. 20-A MRSA §11479,  as amended by PL 2017, c. 474, Pt. F, §6, is further amended to read:

§ 11479. Tax exemption

The assets of the program fund, all program earnings and any income from operations are exempt from all taxation by the State or any of its political subdivisions. A deposit to any account, transfer of that account to a successor participant, designation of a successor beneficiary of that account, credit of program earnings to that account or qualified distribution from that account used for the purpose of paying higher education expenses of the designated beneficiary of that account pursuant to this chapter, as long as that distribution does not exceed the limits established in Section 529 of the federal Internal Revenue Code of 1986 , as amended, or rollover distributions permitted under Section 529 of the federal Internal Revenue Code of 1986 , as amended, does not subject that participant, the estate of that participant or any beneficiary to any state income or estate tax liability. In the event of cancellation or termination of a participation agreement and distribution of funds to a participant, the increase in value over the amount deposited in the program fund by that participant may be taxable to that participant in the year distributed.

Sec. 7. 20-A MRSA §11483,  as enacted by PL 1997, c. 732, §4, is amended to read:

§ 11483. Compliance with federal law

The authority may take any action necessary to ensure that the program complies with the federal Internal Revenue Code of 1986, Section 529, as amended, and any successor provisions and other applicable laws, rules and regulations adopted pursuant to that provision to the extent necessary for the program fund to constitute a qualified state tuition program with the benefits of eligibility under provisions of the federal Internal Revenue Code addressing qualified state tuition programs.

Sec. 8. 20-A MRSA §11485,  as enacted by PL 1997, c. 732, §4, is amended to read:

§ 11485. Rulemaking

The authority must shall establish rules for the implementation of the program established by this chapter, including rules establishing fees and penalties and rules necessary to ensure treatment as a qualified state tuition program for federal tax purposes. Rules adopted pursuant to this section, including those setting fees and penalties, are routine technical rules as defined by Title 5, chapter 375, subchapter II-A 2-A. The authority shall submit a report to the joint standing committee of the Legislature having jurisdiction over education and cultural affairs by January 30, 1999 on the rules and rule-making process to implement a program providing limits on future increases in the costs of education of participating institutions of higher education pursuant to section 11474, subsection 8.

Emergency clause. In view of the emergency cited in the preamble, this legislation takes effect when approved.

Amend the bill by relettering or renumbering any nonconsecutive Part letter or section number to read consecutively.

SUMMARY

This amendment, which is the minority report of the committee, removes the change from mandatory to permissive the investment of fund dollars by the Finance Authority of Maine in state-based financial institutions. This amendment only amends certain provisions of the law in order to conform elements of the Maine Education Savings Program to recent changes to federal law affecting so-called Section 529 programs. This amendment also adds an emergency preamble and emergency clause to the bill.

FISCAL NOTE REQUIRED
(See attached)


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