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AB-1175 The Every Kid Counts (EKC) Act: state-funded investment accounts.(2017-2018)

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Date Published: 04/17/2017 09:00 PM
AB1175:v97#DOCUMENT

Amended  IN  Assembly  April 17, 2017
Amended  IN  Assembly  March 21, 2017

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Assembly Bill
No. 1175

Introduced by Assembly Member Ting

February 17, 2017

An act to add Title 19 (commencing with Section 99100) to the Government Code, and to add Section 17140.1 to the Revenue and Taxation Code, Code, relating to investment accounts.


LEGISLATIVE COUNSEL'S DIGEST


AB 1175, as amended, Ting. The Every Kid Counts (EKC) Act: state-funded investment accounts.
Existing law establishes various programs to provide financial assistance to California children and their families.
This bill would enact the Every Kid Counts (EKC) Act that would create in the State Treasury an investment account for every child born in California each year beginning on or after January 1, 2018, and would , upon appropriation by the Legislature in its Budget Act of 2018, provide for a one-time deposit by the state to each account in the amount of $100 at the child’s birth, as provided. The act would exempt from the personal income tax, as provided, any earnings in an EKC account and any qualified special purpose distribution amounts, as defined, made from that account, would allow other persons, as provided, to make additional contributions to an EKC account, and would restrict the purposes for which the funds in the account may be used once the accountholder reaches 18 years of age. would, upon appropriation by the Legislature, provide for a one-time deposit by the state to each account opened under the Golden State Scholarshare Trust Act.

This bill would require the Treasurer to prescribe rules and regulations to implement the provisions of the act.

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Title 19 (commencing with Section 99100) is added to the Government Code, to read:

TITLE 19. The Every Kid Counts (EKC) Act

99100.
 This act shall be known, and may be cited, as the Every Kid Counts (EKC) Act.

99101.
 The Legislature finds and declares all of the following:
(a) Children who have even small savings accounts for college are seven times more likely to attend and graduate from college.
(b) College enrollment among low-income students has risen but significantly lags behind the enrollment of middle- and high-income students. In 2012, about 51 percent of recent low-income high school graduates and equivalency holders were enrolled in college, while enrollment among middle- and high-income students had risen to nearly 65 percent and 81 percent, respectively.
(c) Recent pilot programs in California and throughout the nation have proven that low-income people can save if they have incentives and mechanisms encouraging them to do so.
(d) In San Francisco, the Kindergarten to College Program (K2C) is a college savings program by the City and County of San Francisco in partnership with the San Francisco Unified School District (SFUSD). A college savings account is automatically opened for each SFUSD student entering kindergarten with $50 and families have the opportunity to earn additional incentives by contributing their own money into the account. K2C is the most successful program of its kind with more than 27,000 kids in the SFUSD with accounts. Families have saved over $2.25 million of their own money and 50 percent of these families have children who qualify for free and reduced lunch.

99102.

(a)There is hereby established in the State Treasury the Every Kid Counts (EKC) college savings account for every child born in California on or after January 1, 2018. The account established in the State Treasury shall be a qualified tuition program, as defined in Section 529 of the Revenue and Taxation Code, relating to qualified tuition program, and as established pursuant to Article 19 (commencing with Section 69989) of Chapter 2 of Part 42 of Division 5 of Title 3 of the Education Code.

(b)

Upon appropriation by the Legislature in its Budget Act of 2018, the state shall deposit an amount of one hundred dollars ($100) to the account of each child, at his or her birth.

(c)A child, his or her parents, legal guardians, grandparents, local organizations, corporations, or others may make a voluntary contribution to the child’s account.

(d)An individual who is 18 years of age or older may withdraw funds from the account to pay for qualified higher education expenses. “Qualified higher education expenses” has the same meaning as that phrase is defined in Section 69980 of the Education Code. “Qualified high education expenses” also includes any costs associated with career technical education or training.

(e)(1)An EKC account shall be exempt from taxation under Part 10 (commencing with Section 17001) of Division 2 of the Revenue and Taxation Code.

(2)Except as otherwise provided, any amount paid or distributed out of an EKC account shall be included in the amount of gross income of the accountholder.

(f)The Treasurer shall prescribe rules and regulations to implement provisions of this section.

99102.
 (a) There is hereby established, as part of the Golden State Scholarshare Trust Act established in Article 19 (commencing with Section 69980) of Chapter 2 of Part 42 of Division 5 of Title 3 of the Education Code, the Every Kid Counts (EKC) college savings program.
(b) Upon appropriation by the Legislature, the state shall deposit an amount of one hundred dollars ($100) into each account opened under the Golden State Scholarshare Trust Act established in Article 19 (commencing with Section 69980) of Chapter 2 of Part 42 of Division 5 of Title 3 of the Education Code.

99103.
 Notwithstanding any other provision of law, the funds in an EKC deposited into an account pursuant to Section 99102 shall not be taken into account for purposes of determining the eligibility of an individual for a state program intended to provide assistance to low-income people.

SEC. 2.Section 17140.1 is added to the Revenue and Taxation Code, to read:
17140.1.

(a)For each taxable year beginning on or after January 1, 2018, except as otherwise provided in subdivision (b), the gross income of an accountholder of an Every Kid Counts (EKC) Account shall not include any of the following:

(1)Any earnings in the EKC account.

(2)Any contribution to the EKC account.

(3)Any qualified special purpose distribution amount.

(b)(1)Notwithstanding subdivision (a), in the case of any distribution from an EKC account that is not a qualified special purpose distribution, both of the following apply:

(A)Any earnings in that account shall be includible in the gross income of the accountholder for the taxable year in which the distribution is made, to the extent not excluded from gross income under this part, and shall be subject to a 10-percent penalty.

(B)An amount equal to the amount of initial deposit made by the state to the account, as provided for in Section 99102, shall be withheld by the Treasurer from the distribution amount.

(2)The value of the account, any earnings in that account, and investment in the account shall be computed as of the close of the calendar year in which the taxable year begins.

(3)The value of the account, any earnings in that account, and investment in the account shall be computed as of the close of the calendar year in which the taxable year begins.

(c)No deduction is allowed under this part or Part 11 (commencing with Section 23001) of Division 2 for a contribution to an EKC account.

(d)For purposes of this section, all of the following definitions apply:

(1)“Accountholder” means a child who is born in the State of California on or after January 1, 2018.

(2)“EKC account” means an investment account, as described in Title 19 (commencing with Section 99100) of the Government Code.

(3)“Qualified special purpose distribution” means any payment or distribution to an accountholder of an EKC account that is used by the accountholder for one of the qualified purposes, as defined in subdivision (d) of Section 99102.