71st OREGON LEGISLATIVE ASSEMBLY--2001 Regular Session
NOTE: Matter within { + braces and plus signs + } in an
amended section is new. Matter within { - braces and minus
signs - } is existing law to be omitted. New sections are within
{ + braces and plus signs + } .
LC 329-1
House Bill 2091
Ordered printed by the Speaker pursuant to House Rule 12.00A (5).
Presession filed (at the request of Representative Betsy Close)
SUMMARY
The following summary is not prepared by the sponsors of the
measure and is not a part of the body thereof subject to
consideration by the Legislative Assembly. It is an editor's
brief statement of the essential features of the measure as
introduced.
Establishes family education financing program. Authorizes
persons to establish education investment accounts. Permits
subtraction from taxable income for contributions to education
investment accounts and account earnings. Permits tax-free
withdrawal from accounts to pay eligible education expenses.
Defines eligible education expenses as public elementary and
secondary education expenses, home schooling expenses and higher
education expenses. Expands eligible education expenses to
include private elementary and secondary education expenses if
voters approve House Joint Resolution 2 (2001) at next regular
general election.
Refers Act to people for their approval or rejection at next
regular general election.
A BILL FOR AN ACT
Relating to taxation; and providing that this Act shall be
referred to the people for their approval or rejection.
Be It Enacted by the People of the State of Oregon:
{ +
FAMILY EDUCATION FINANCING ACT + }
SECTION 1. { + Short title. Sections 3 to 10 of this 2001 Act
may be cited as the Family Education Financing Act. + }
SECTION 2. { + Sections 3 to 10 of this 2001 Act are added to
and made a part of ORS chapter 316. + }
SECTION 3. { + Definitions. As used in sections 3 to 10 of
this 2001 Act:
(1) 'Course expenses' means the expenses for books, supplies
and other materials, including course and laboratory fees and
equipment, that are required or necessary in order to complete a
course of study in which the qualified beneficiary is enrolled.
(2) 'Education investment account' means an account that is
established to pay the eligible education expenses of a qualified
beneficiary and that is in compliance with sections 2 to 9 of
this 2001 Act.
(3) 'Educational institution' means:
(a) A public school within a common or union high school
district that is providing all or a portion of kindergarten
through grade 12 education; or
(b) An institution of higher education.
(4) 'Eligible education expense' means an expense paid by or on
behalf of a qualified beneficiary for:
(a) Tuition, course expenses or supplemental education expenses
incurred at an educational institution at which the qualified
beneficiary is matriculated;
(b) Room and board associated with the qualified beneficiary's
attendance at an institution of higher education; or
(c) Costs incurred in providing a home schooling program to the
qualified beneficiary including, but not limited to, teaching
supplies and training expenses for the home school provider.
Expenses described in this paragraph do not include any amount of
compensation for the home school provider.
(5) 'Home schooling program' means a kindergarten through grade
12 educational program provided to a qualified beneficiary in
which substantially all of the qualified beneficiary's
kindergarten through grade 12 education for the calendar year is
provided within the qualified beneficiary's household by one or
more members of the qualified beneficiary's family.
(6) 'Institution of higher education' means:
(a) A community college, college or university that is
accredited by a national or regional accrediting association of
community colleges or of colleges or universities; or
(b) A private career school that is licensed by the Department
of Education or equivalent state agency, if located in another
state.
(7) 'Interest' includes dividends, realized and unrealized
capital gains or other earnings of an education investment
account.
(8) 'Qualified beneficiary' means the individual, under 18
years of age on the date the education investment account is
opened, who is designated the beneficiary of the account and for
whose educational benefit the account is opened.
(9) 'Supplemental education expenses' means expenses incurred
by or on behalf of the qualified beneficiary for extracurricular
activities associated with the educational institution including,
but not limited to, athletic fees, band or music instruction
fees, art or drama program fees, standardized test preparation
fees and tutoring expenses.
(10) 'Trustee' means a person authorized under section 5 of
this 2001 Act to administer an education investment account. + }
SECTION 4. { + Accounts; use of funds. + } { + (1) A person
may establish an education investment account with a trustee. The
person shall identify the qualified beneficiary on whose behalf
the account is being opened.
(2) An education investment account established under sections
3 to 10 of this 2001 Act shall be established as a trust under
the laws of this state.
(3) An education investment account established under sections
3 to 10 of this 2001 Act may not also be an account under ORS
348.841 to 348.873.
(4) The funds placed in an education investment account shall
be used to pay the eligible education expenses of the qualified
beneficiary. Education investment account moneys used to pay
eligible education expenses of the qualified beneficiary are not
subject to tax under this chapter.
(5) An individual may be named as a qualified beneficiary on
only one education investment account.
(6) The person establishing the education investment account is
the owner of the account. The qualified beneficiary may not be
considered the owner of the account.
(7) If funds are withdrawn from an account pursuant to
subsection (4) of this section, the account owner shall maintain
the records necessary to authenticate that moneys withdrawn from
an education investment account were used to pay eligible
education expenses. + }
SECTION 5. { + Account trustees. A person authorized to do
business in this state who is also authorized to serve as trustee
of an individual retirement account under section 408 of the
Internal Revenue Code shall be authorized to act as the trustee
of an education investment account. + }
SECTION 6. { + Maximum account deposits. (1) The total
deposits made to an education investment account may not exceed
$___ in any tax year.
(2) If total deposits to an education investment account for
the tax year exceed the amount described under subsection (1) of
this section, the account shall no longer be an education
investment account and, without regard to the age of the
qualified beneficiary, the account balance shall be treated as
provided in section 7 (3) of this 2001 Act.
(3) Notwithstanding subsection (2) of this section, if the
excess contributions are withdrawn within six months after the
close of the tax year in which the excess contributions were
made, the account shall continue to be an education investment
account under sections 3 to 10 of this 2001 Act. Interest
attributable to the excess contributions shall be considered to
be taxable income of the account owner. + }
SECTION 7. { + Withdrawals for noneducational purposes. (1)
Notwithstanding section 4 (4) of this 2001 Act, moneys in an
education investment account may be withdrawn at any time for any
purpose. An amount withdrawn for a purpose other than as
described in section 4 (4) of this 2001 Act shall be considered
taxable income of the account owner under this chapter in the tax
year in which the amount is withdrawn.
(2) If an amount is withdrawn for a purpose other than one
described in section 4 (4) or 6 (3) of this 2001 Act and the
withdrawal occurs at a time when the qualified beneficiary is
less than 25 years of age, a penalty shall be imposed equal to
___ percent of the amount included in taxable income under
subsection (1) of this section.
(3) As of the day the qualified beneficiary turns 25 years of
age, the account shall cease to be an education investment
account and the entire account balance shall be subject to
taxation under this chapter. The penalty described in subsection
(2) of this section does not apply to accounts subject to tax
under this subsection. + }
SECTION 8. { + Subtraction from taxable income. The following
items shall be subtracted from federal taxable income:
(1) Amounts contributed to an education investment account; or
(2) Interest earned by an education investment account. + }
SECTION 9. { + Trustee duties. + } { + (1) The trustee of
an education investment account shall maintain separate records
of all deposits and withdrawals made by or on behalf of a
qualified beneficiary.
(2) At the time that an education investment account is
established, the trustee shall file a statement with the
Department of Revenue stating the name and taxpayer
identification number of the account owner and the qualified
beneficiary.
(3) The trustee shall at least annually mail a statement to the
account owner summarizing the account activity for the year and
stating that the account is an education investment account.
(4) An account shall cease to be an education investment
account if the trustee fails to comply with the requirements of
this section. + }
SECTION 10. { + Examination of records. The Department of
Revenue or its authorized representative, upon written demand,
may make such examinations of any books, papers or records as are
necessary to carry out the provisions of sections 3 to 10 of this
2001 Act. + }
SECTION 11. { + Applicability date. Sections 3 to 10 of this
2001 Act apply only to tax years beginning on or after January 1,
2003. + }
SECTION 12. { + Private schools. + } Section 3 of this 2001
Act is amended to read:
{ + Sec. 3. + } As used in sections 3 to 10 of this 2001 Act:
(1) 'Course expenses' means the expenses for books, supplies
and other materials, including course and laboratory fees and
equipment, that are required or necessary in order to complete a
course of study in which the qualified beneficiary is enrolled.
(2) 'Education investment account' means an account that is
established to pay the eligible education expenses of a qualified
beneficiary and that is in compliance with sections 2 to 9 of
this 2001 Act.
(3) 'Educational institution' means:
(a) A public school within a common or union high school
district that is providing all or a portion of kindergarten
through grade 12 education; { - or - }
{ + (b) A private school that has been registered under ORS
345.505 to 345.575 and that is providing all or a portion of
kindergarten through grade 12 education; or + }
{ - (b) - } { + (c) + } An institution of higher education.
(4) 'Eligible education expense' means an expense paid by or on
behalf of a qualified beneficiary for:
(a) Tuition, course expenses or supplemental education expenses
incurred at an educational institution at which the qualified
beneficiary is matriculated;
(b) Room and board associated with the qualified beneficiary's
attendance at an institution of higher education; or
(c) Costs incurred in providing a home schooling program to the
qualified beneficiary including, but not limited to, teaching
supplies and training expenses for the home school provider.
Expenses described in this paragraph do not include any amount of
compensation for the home school provider.
(5) 'Home schooling program' means a kindergarten through grade
12 educational program provided to a qualified beneficiary in
which substantially all of the qualified beneficiary's
kindergarten through grade 12 education for the calendar year is
provided within the qualified beneficiary's household by one or
more members of the qualified beneficiary's family.
(6) 'Institution of higher education' means:
(a) A community college, college or university that is
accredited by a national or regional accrediting association of
community colleges or of colleges or universities; or
(b) A private career school that is licensed by the Department
of Education or equivalent state agency, if located in another
state.
(7) 'Interest' includes dividends, realized and unrealized
capital gains or other earnings of an education investment
account.
(8) 'Qualified beneficiary' means the individual, under 18
years of age on the date the education investment account is
opened, who is designated the beneficiary of the account and for
whose educational benefit the account is opened.
(9) 'Supplemental education expenses' means expenses incurred
by or on behalf of the qualified beneficiary for extracurricular
activities associated with the educational institution including,
but not limited to, athletic fees, band or music instruction
fees, art or drama program fees, standardized test preparation
fees and tutoring expenses.
(10) 'Trustee' means a person authorized under section 5 of
this 2001 Act to administer an education investment account.
SECTION 13. { + Operative date. The amendments to section 3
of this 2001 Act by section 12 of this 2001 Act do not become
operative unless the amendment to the Oregon Constitution
proposed by House Joint Resolution 2 (2001) is approved by the
people at the next regular general election held throughout this
state. The amendments to section 3 of this 2001 Act by section 12
of this 2001 Act become operative on the effective date of that
constitutional amendment and apply only to tax years beginning on
or after January 1, 2003. + }
SECTION 14. { + Captions. The unit and section captions used
in this 2001 Act are provided only for the convenience of the
reader and do not become part of the statutory law of this state
or express any intent of the Legislative Assembly or the voters
in the enactment of this 2001 Act. + }
SECTION 15. { + Referendum clause. This 2001 Act shall be
submitted to the people for their approval or rejection at the
next regular general election held throughout this state. + }
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