LRB-4652/1
MJL&MES:kmg:ch
1999 - 2000 LEGISLATURE
February 28, 2000 - Printed by direction of Senate Chief Clerk.
AB654-engrossed,2,2 1An Act to repeal 14.63 (3) (a) 1. and 3.; to amend 14.63 (title), 14.63 (1) (b), 14.63
2(3) (title), 14.63 (4), 14.63 (5) (a), 14.63 (5) (b) (intro.) and 2., 14.63 (8), 14.63 (11)
3(b), 14.63 (13), 16.75 (2m) (a), 20.585 (2) (a), 20.585 (2) (s) and 71.05 (6) (b) 23.;
4and to create 14.57, 14.63 (3) (c), 14.63 (11m), 14.64, 15.07 (1) (b) 2., 16.25,
520.585 (1) (gm), 71.05 (6) (b) 28. h., 71.05 (6) (b) 31., 71.05 (6) (b) 32., 71.05 (6)
6(b) 33. and 815.18 (3) (p) of the statutes; relating to: the college tuition
7prepayment program, creating a college savings program board and college
8savings program, creating a tax deduction for certain amounts contributed to
9the college tuition prepayment program, creating a tax deduction for certain
10amounts contributed to the college savings program, exempting from taxation

1certain gains derived from contributions to the college savings program,
2granting rule-making authority and making an appropriation.
Analysis by the Legislative Reference Bureau
Engrossment information:
The text of Engrossed 1999 Assembly Bill 654 consists of the following
documents adopted in the assembly on February 2, 2000: the bill as affected by
Assembly Amendment 2 and Assembly Amendment 3. The text also includes the
February 29, 2000, LRB correction to the bill.
Content of Engrossed 1999 Assembly Bill 654:
Under current law, the state treasurer administers a college tuition program
that allows a Wisconsin resident, trust or legal guardian to purchase tuition units
from the state treasurer that may be redeemed in the future to pay tuition and
mandatory student fees at any accredited institution of higher education in the
United States on behalf of a beneficiary who is a Wisconsin resident. The college
tuition program is a qualified state tuition plan under federal law; federal tax is
deferred until funds are withdrawn, after which the distributions are taxable as
ordinary income at the beneficiary's federal tax rate. Distributions are exempt from
state tax. A person who wishes to purchase tuition units must pay a $50
nonrefundable enrollment fee.
This bill repeals the residency requirements for purchasers and beneficiaries
of tuition units; permits, but does not require, the state treasurer to charge an
enrollment fee; and permits tuition units to be redeemed to cover tuition, fees and
the costs of room and board, books, supplies and equipment required for college
enrollment. Also under the bill, a distribution from the college tuition program is not
exempt from state taxation if the distribution results from the termination of the
contract under the tuition program for a number of reasons, such as the prospective
beneficiary's death, failure to graduate from high school, failure to gain admittance
to an institution of higher education or a decision to not attend an institution of
higher education.
The bill creates a tax deduction for amounts paid into a college tuition program
if the beneficiary of the account either is the claimant or is the claimant's child and
dependent. Generally, the deduction is limited to $3,000 each year per beneficiary.
The bill also creates a college savings program, which is administered primarily
by an eleven-member college savings program board (board) that is attached to the
office of the state treasurer. The college savings program allows an individual, trust
or legal guardian to establish and contribute money to a college savings account to
cover tuition, fees and the costs of room and board, books, supplies and equipment
required for enrollment or attendance of a beneficiary at any accredited institution
of higher education in the United States. (A tax-exempt nonprofit corporation and
a state or local governmental unit may also open a college savings account as part
of a scholarship program.) The board must ensure that the college savings program
meets federal requirements for a qualified state tuition plan and must invest the

contributions to college savings accounts and pay distributions to beneficiaries and
institutions of higher education. Under the bill, the department of administration
(DOA) selects a private entity to serve as program manager, based upon factors
specified in the bill and other factors determined by DOA. The contract between
DOA and the manager must, among other things, require the manager to reimburse
the state for all administrative costs that the state incurs for the college savings
program. The bill also prohibits a state agency, a University of Wisconsin System
institution or a technical college from including the balance of a college savings
account in the calculation of a beneficiary's eligibility for state financial aid for higher
education.
The bill exempts from taxation any increase in the value of a college savings
account, unless the claimant makes an unqualified withdrawal, and creates a tax
deduction for amounts paid into a college savings account if the beneficiary of the
account either is the claimant or is the claimant's child and dependent. Generally,
the deduction is limited to $3,000 each year per beneficiary.
Under current law, an income tax "education" deduction exists for amounts
paid by a claimant for tuition expenses for the claimant or for a child of the claimant
who is also the claimant's dependent to attend any university, college or technical
college or a school approved by the educational approval board, that is located in
Wisconsin, or to attend a public vocational school or public institution of higher
education in Minnesota. The deduction that may be claimed is an amount up to
$3,000 each year for each student to whom the claim relates, although the maximum
amount that may be claimed is reduced to zero as the claimant's income increases
from $50,000 to $60,000 for a single or married head of household filer, from $80,000
to $100,000 for a married joint filer or from $40,000 to $50,000 for a married separate
filer. Under the bill, no "education" deduction may be claimed for any amounts paid
for tuition expenses if the source of the payment is an amount withdrawn from a
college savings account or from a college tuition program.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB654-engrossed, s. 1 1Section 1. 14.57 of the statutes is created to read:
AB654-engrossed,3,4 214.57 Same; attached boards. There is created a college savings program
3board that is attached to the office of the state treasurer under s. 15.03 and that
4consists of all of the following members:
AB654-engrossed,3,5 5(1) The state treasurer or his or her designee.
AB654-engrossed,3,7 6(2) The president of the board of regents of the University of Wisconsin System
7or his or her designee.
AB654-engrossed,4,2
1(3) The president of the Wisconsin Association of Independent Colleges and
2Universities or his or her designee.
AB654-engrossed,4,3 3(4) The chairperson of the investment board or his or her designee.
AB654-engrossed,4,4 4(5) The president of the technical college system board or his or her designee.
AB654-engrossed,4,5 5(6) Six other members, appointed for 4-year terms.
AB654-engrossed, s. 1g 6Section 1g. 14.63 (title) of the statutes, as affected by 1999 Wisconsin Act 9,
7is amended to read:
AB654-engrossed,4,8 814.63 (title) College tuition prepayment and expenses program.
AB654-engrossed, s. 1m 9Section 1m. 14.63 (1) (b) of the statutes, as affected by 1999 Wisconsin Act 9,
10is amended to read:
AB654-engrossed,4,1511 14.63 (1) (b) "Institution of higher education" means a public or private
12institution of higher education that is accredited by an accrediting association
13recognized by the state treasurer, and a proprietary school approved by the
14educational approval board under s. 45.54
an eligible educational institution, as
15defined under 26 USC 529
.
AB654-engrossed, s. 1r 16Section 1r. 14.63 (3) (title) of the statutes, as affected by 1999 Wisconsin Act
179
, is amended to read:
AB654-engrossed,4,1818 14.63 (3) (title) Tuition prepayment College tuition and expenses contracts.
AB654-engrossed, s. 2 19Section 2. 14.63 (3) (a) 1. and 3. of the statutes, as affected by 1999 Wisconsin
20Act 9
, are repealed.
AB654-engrossed, s. 3 21Section 3. 14.63 (3) (c) of the statutes is created to read:
AB654-engrossed,4,2222 14.63 (3) (c) The state treasurer may charge a purchaser an enrollment fee.
AB654-engrossed, s. 4m 23Section 4m. 14.63 (4) of the statutes, as affected by 1999 Wisconsin Act 9, is
24amended to read:
AB654-engrossed,5,10
114.63 (4) Number of tuition units purchased. A person who enters into a
2contract under sub. (3) may purchase tuition units at any time and in any number,
3except that the total number of tuition units purchased on behalf of a single
4beneficiary may not exceed the number necessary to pay for 4 years of full-time
5attendance, including mandatory student fees, as a resident undergraduate at the
6institution within the University of Wisconsin System that has the highest resident
7undergraduate tuition, as determined by the state treasurer, in the anticipated
8academic years of their use
cover tuition, fees and the costs of room and board, books,
9supplies and equipment required for enrollment or attendance of the beneficiary at
10an institution of higher education
.
AB654-engrossed, s. 5 11Section 5. 14.63 (5) (a) of the statutes, as affected by 1999 Wisconsin Act 9, is
12amended to read:
AB654-engrossed,5,2113 14.63 (5) (a) Except as provided in sub. (7m), if an individual named as
14beneficiary in a contract under sub. (3) attends an institution of higher education in
15the United States, each tuition unit purchased on his or her behalf entitles that
16beneficiary to apply toward the payment of tuition and mandatory student, fees and
17the costs of room and board, books, supplies and equipment required for enrollment
18or attendance
at the institution an amount equal to 1% of the anticipated weighted
19average tuition of bachelor's degree-granting institutions within the University of
20Wisconsin System for the year of attendance, as estimated under sub. (2) in the year
21in which the tuition unit was purchased.
AB654-engrossed, s. 6 22Section 6. 14.63 (5) (b) (intro.) and 2. of the statutes, as affected by 1999
23Wisconsin Act 9
, are amended to read:
AB654-engrossed,6,3
114.63 (5) (b) (intro.) Upon request by the beneficiary, the state treasurer shall
2pay to the institution or beneficiary, whichever is appropriate, in each semester of
3attendance the lesser of the following:
AB654-engrossed,6,54 2. An amount equal to the sum of the institution's tuition and mandatory
5student
, fees and the costs described in par. (a) for that semester.
AB654-engrossed, s. 7 6Section 7. 14.63 (8) of the statutes, as affected by 1999 Wisconsin Act 9, is
7amended to read:
AB654-engrossed,6,118 14.63 (8) Exemption from garnishment, attachment and execution. Moneys
9deposited in the tuition trust fund and a beneficiary's right to the payment of tuition
10and mandatory student, fees and the costs described in sub. (5) (a) under this section
11are not subject to garnishment, attachment, execution or any other process of law.
AB654-engrossed, s. 8 12Section 8. 14.63 (11) (b) of the statutes, as affected by 1999 Wisconsin Act 9,
13is amended to read:
AB654-engrossed,6,1714 14.63 (11) (b) The requirements to pay tuition and mandatory student, fees and
15the costs of room and board, books, supplies and equipment
under sub. (5) and to
16make refunds under sub. (7) are subject to the availability of sufficient assets in the
17tuition trust fund.
AB654-engrossed, s. 8m 18Section 8m. 14.63 (11m) of the statutes is created to read:
AB654-engrossed,6,2519 14.63 (11m) Financial aid calculations. The value of tuition units shall not
20be included in the calculation of a beneficiary's eligibility for state financial aid for
21higher education if the beneficiary notifies the higher educational aids board and the
22institution of higher education that the beneficiary is planning to attend that he or
23she is a beneficiary of a contract under this section and the contract owner agrees to
24release to the higher educational aids board and the institution of higher education
25information necessary for the calculation under this subsection.
AB654-engrossed, s. 8r
1Section 8r. 14.63 (13) of the statutes, as affected by 1999 Wisconsin Act 9, is
2amended to read:
AB654-engrossed,7,63 14.63 (13) Program termination. If the state treasurer determines that the
4program under this section is financially infeasible, the state treasurer shall
5discontinue entering into tuition prepayment contracts under sub. (3) and
6discontinue selling tuition units under sub. (4).
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