H.B. 321

This document includes House Floor Amendments incorporated into the bill on Fri, Feb 8, 2008 at 3:31 PM by ddonat. --> 1

HIGHER EDUCATION SAVINGS INCENTIVE
2 PROGRAM AMENDMENTS
3 2008 GENERAL SESSION
4 STATE OF UTAH
5 Chief Sponsor: Kevin S. Garn
6 Senate Sponsor: Gregory S. Bell
7
8 LONG TITLE
9 General Description:
10 This bill modifies provisions relating to the Utah Educational Savings Plan Trust.
11 Highlighted Provisions:
12 This bill:
13 . deletes provisions making a beneficiary of a vested account eligible for resident
14 status for tuition purposes;
15 . deletes restrictions regarding when the payment of benefits under an account
16 agreement must begin;
17 . provides that money may be transferred from the endowment fund to the
18 administrative fund as approved by the board of directors of the Utah Educational
19 Savings Plan Trust;
20 . expands the uses of money in the endowment fund;
21 . clarifies provisions regarding:
22 . the permitted uses of account funds; and
23 . the ownership of funds in an account;
24 . modifies financial reporting requirements applicable to the Utah Educational
25 Savings Plan Trust;
26 . classifies certain records of the Utah Educational Savings Plan Trust as protected
27 records under Title 63, Chapter 2, Government Records Access and Management

28 Act; and
29 . makes technical amendments.
30 Monies Appropriated in this Bill:
31 None
32 Other Special Clauses:
33 None
34 Utah Code Sections Affected:
35 AMENDS:
36 53B-8a-101, as last amended by Laws of Utah 2005, Chapter 109
37 53B-8a-102, as last amended by Laws of Utah 2007, Chapter 100
38 53B-8a-106, as last amended by Laws of Utah 2007, Chapter 100
39 53B-8a-107, as last amended by Laws of Utah 2007, Chapter 100
40 53B-8a-108, as last amended by Laws of Utah 2007, Chapters 100 and 306
41 53B-8a-109, as last amended by Laws of Utah 2007, Chapter 100
42 53B-8a-111, as last amended by Laws of Utah 2007, Chapter 100
43 63-2-304, as last amended by Laws of Utah 2007, Chapters 66 and 352
44
45 Be it enacted by the Legislature of the state of Utah:
46 Section 1. Section 53B-8a-101 is amended to read:
47 53B-8a-101. Purpose.
48 (1) (a) The Legislature finds that the general welfare and well-being of the state are
49 directly related to educational levels and skills of the citizens of the state.
50 (b) Therefore, a vital and valid public purpose is served by the creation and
51 implementation of programs which encourage and make possible the attainment of higher
52 education by the greatest number of citizens of the state.
53 (2) (a) The Legislature finds that the state has limited resources to provide additional
54 programs for higher education funding and that the continued operation and maintenance of the
55 state's public institutions of higher education and the general welfare of the citizens of the state
56 will be enhanced by establishing a program which allows citizens of the state to invest money
57 in a public trust for future application to the payment of higher education costs.
58 (b) The Legislature further finds that [the creation of the means of encouragement for

59 citizens to invest in such] a program [represents the carrying out of] described in Subsection
60 (2)(a) serves a vital and valid public purpose.
61 (3) (a) In order to make available to the citizens of the state an opportunity to fund
62 future higher education needs, it is necessary that a public trust be established in which moneys
63 may be invested for future educational use.
64 (b) It may also be necessary to establish and create an endowment fund, which may be
65 funded with public funds, among other sources, the income from which may be made available
66 to account owners to enhance or encourage their savings invested for future higher education
67 costs or for use in scholarship or other college savings incentive programs.
68 Section 2. Section 53B-8a-102 is amended to read:
69 53B-8a-102. Definitions.
70 As used in this chapter:
71 (1) "Account agreement" means an agreement between an account owner and the Utah
72 Educational Savings Plan Trust entered into under this chapter.
73 (2) "Account owner" means a person, estate, or trust, if that person, estate, or trust has
74 entered into an account agreement under this chapter [for the advance payment of] to save for
75 the higher education costs on behalf of a beneficiary.
76 (3) "Administrative fund" means the moneys used to administer the Utah Educational
77 Savings Plan Trust.
78 (4) "Beneficiary" means the individual designated in an account agreement to benefit
79 from [payments] the amount saved for higher education costs [at an institution of higher
80 education].
81 [(5) "Benefits" means the payment of higher education costs on behalf of a beneficiary
82 by the Utah Educational Savings Plan Trust during the beneficiary's attendance at an institution
83 of higher education.]
84 [(6)] (5) "Board" means the board of directors of the Utah Educational Savings Plan
85 Trust which is the state Board of Regents acting in its capacity as the Utah Higher Education
86 Assistance Authority under Title 53B, Chapter 12.
87 [(7)] (6) "Endowment fund" means the endowment fund established under Section
88 53B-8a-107 which is held as a separate fund within the Utah Educational Savings Plan Trust.
89 [(8)] (7) "Higher education costs" means qualified higher education expenses as

90 defined in Section 529(e)(3), Internal Revenue Code.
91 [(9) "Institution of higher education" means a qualified proprietary school approved by
92 the board, a two-year or four-year public or regionally accredited private nonprofit college or
93 university, or a Utah college of applied technology, with regard to students enrolled in
94 postsecondary training or education programs.]
95 [(10)] (8) "Program administrator" means the administrator of the Utah Educational
96 Savings Plan Trust appointed by the board to administer and manage the Utah Educational
97 Savings Plan Trust.
98 [(11)] (9) "Program fund" means the program fund created under Section 53B-8a-107 ,
99 which is held as a separate fund within the Utah Educational Savings Plan Trust.
100 [(12)] (10) "Qualified investment" means an amount invested in accordance with an
101 account agreement established under this chapter.
102 [(13)] (11) "Tuition and fees" means the quarterly or semester charges imposed to
103 attend an institution of higher education and required as a condition of enrollment.
104 [(14)] (12) "Utah Educational Savings Plan Trust" means the Utah Educational Savings
105 Plan Trust created under Section 53B-8a-103 .
106 [(15) "Vested account" means an account agreement which has been in full force and
107 effect during eight continuous years of residency of the beneficiary in the state while
108 participating in the Utah Educational Savings Plan Trust.]
109 Section 3. Section 53B-8a-106 is amended to read:
110 53B-8a-106. Account agreements.
111 The Utah Educational Savings Plan Trust may enter into account agreements with
112 account owners on behalf of beneficiaries under the following terms and agreements:
113 (1) (a) An account agreement may require an account owner to agree to invest a
114 specific amount of money in the Utah Educational Savings Plan Trust for a specific period of
115 time for the benefit of a specific beneficiary, not to exceed an amount determined by the
116 program administrator.
117 (b) Account agreements may be amended to provide for adjusted levels of payments
118 based upon changed circumstances or changes in educational plans.
119 (c) An account owner may make additional optional payments as long as the total
120 payments for a specific beneficiary do not exceed the total estimated higher education costs as

121 determined by the program administrator.
122 (d) Subject to Subsection (1)(f), the maximum amount of a qualified investment that a
123 corporation that is an account owner may subtract from unadjusted income for a taxable year in
124 accordance with Title 59, Chapter 7, Corporate Franchise and Income Taxes, is $1,560 for each
125 individual beneficiary for the taxable year beginning on or after January 1, 2006, but beginning
126 on or before December 31, 2006.
127 (e) Subject to Subsection (1)(f), the maximum amount of a qualified investment that
128 may be subtracted from federal taxable income of a resident or nonresident individual for a
129 taxable year in accordance with Section 59-10-114 , a resident or nonresident estate or trust for
130 a taxable year in accordance with Section 59-10-202 , or used as the basis for claiming a tax
131 credit for a taxable year by a resident or nonresident individual in accordance with Section
132 59-10-1206.1 , is:
133 (i) for a resident or nonresident estate or trust that is an account owner, $1,560 for each
134 individual beneficiary for the taxable year beginning on or after January 1, 2006, but beginning
135 on or before December 31, 2006;
136 (ii) for a resident or nonresident individual that is an account owner, other than a
137 husband and wife who are account owners and file a single return jointly, $1,560 for each
138 individual beneficiary for the taxable year beginning on or after January 1, 2006, but beginning
139 on or before December 31, 2006; or
140 (iii) for a husband and wife who are account owners and file a single return jointly,
141 $3,120 for each individual beneficiary:
142 (A) for the taxable year beginning on or after January 1, 2006, but beginning on or
143 before December 31, 2006; and
144 (B) regardless of whether the Utah Educational Savings Plan Trust has entered into:
145 (I) a separate account agreement with each spouse; or
146 (II) a single account agreement with both spouses jointly.
147 (f) (i) For taxable years beginning on or after January 1, 2007, the program
148 administrator shall increase or decrease the maximum amount of a qualified investment
149 described in Subsections (1)(d) and (1)(e)(i) and (ii), by a percentage equal to the percentage
150 difference between the consumer price index for the preceding calendar year and the consumer
151 price index for the calendar year 2005.

152 (ii) After making an increase or decrease required by Subsection (1)(f)(i), the program
153 administrator shall:
154 (A) round the maximum amount of the qualified investments described in Subsections
155 (1)(d) and (1)(e)(i) and (ii) increased or decreased under Subsection (1)(f)(i) to the nearest ten
156 dollar increment; and
157 (B) increase or decrease the maximum amount of the qualified investment described in
158 Subsection (1)(e)(iii) so that the maximum amount of the qualified investment described in
159 Subsection (1)(e)(iii) is equal to the product of:
160 (I) the maximum amount of the qualified investment described in Subsection (1)(e)(ii)
161 as rounded under Subsection (1)(f)(ii)(A); and
162 (II) two.
163 (iii) For purposes of Subsections (1)(f)(i) and (ii), the program administrator shall
164 calculate the consumer price index as provided in Sections 1(f)(4) and 1(f)(5), Internal Revenue
165 Code.
166 (2) (a) [(i)] Beneficiaries designated in account agreements must be designated after
167 birth and before age 19 for an account owner to:
168 [(A)] (i) subtract a qualified investment from income under:
169 [(I)] (A) Title 59, Chapter 7, Corporate Franchise and Income Taxes;
170 [(II)] (B) Section 59-10-114 ; or
171 [(III)] (C) Section 59-10-202 ; or
172 [(B)] (ii) use a qualified investment as the basis for claiming a tax credit in accordance
173 with Section 59-10-1206.1 .
174 [(ii) If the beneficiary is designated after birth and before age 19, the payment of
175 benefits provided under the account agreement must begin not later than the beneficiary's 27th
176 birthday.]
177 (b) [(i)] Account owners may designate beneficiaries age 19 or older, but investments
178 for those beneficiaries are not eligible for subtraction from federal taxable income.
179 [(ii) If a beneficiary age 19 or older is designated, the payment of benefits provided
180 under the account agreement must begin not later than ten years from the account agreement
181 date.]
182 (3) Each account agreement shall state clearly that there are no guarantees regarding

183 moneys in the Utah Educational Savings Plan Trust as to the return of principal and that losses
184 could occur.
185 (4) Each account agreement shall provide that:
186 (a) no contributor to, or designated beneficiary under, an account agreement may direct
187 the investment of any contributions or earnings on contributions;
188 (b) no part of the money in any account may be used as security for a loan; and
189 (c) no account owner may borrow from the Utah Educational Savings Plan Trust.
190 (5) The execution of an account agreement by the trust may not guarantee in any way
191 that higher education costs will be equal to projections and estimates provided by the Utah
192 Educational Savings Plan Trust or that the beneficiary named in any [participation] account
193 agreement will:
194 (a) be admitted to an institution of higher education;
195 (b) if admitted, be determined a resident for tuition purposes by the institution of
196 higher education[, unless the account agreement is vested];
197 (c) be allowed to continue attendance at the institution of higher education following
198 admission; or
199 (d) graduate from the institution of higher education.
200 (6) Beneficiaries may be changed as permitted by the rules and regulations of the board
201 upon written request of the account owner prior to the date of admission of any beneficiary
202 under an account agreement by an institution of higher education so long as the substitute
203 beneficiary is eligible for participation.
204 (7) Account agreements may be freely amended throughout their terms in order to
205 enable account owners to increase or decrease the level of participation, change the designation
206 of beneficiaries, and carry out similar matters as authorized by rule.
207 (8) Each account agreement shall provide that:
208 (a) the account agreement may be canceled upon the terms and conditions, and upon
209 payment of the fees and costs set forth and contained in the board's rules and regulations; and
210 (b) the program administrator may amend the agreement unilaterally and retroactively,
211 if necessary, to maintain the Utah Educational Savings Plan Trust as a qualified tuition
212 program under Section 529 Internal Revenue Code.
213 Section 4. Section 53B-8a-107 is amended to read:

214 53B-8a-107. Program, endowment, and administrative funds -- Investment and
215 payments from funds.
216 (1) [(a)] The board shall segregate moneys received by the Utah Educational Savings
217 Plan Trust into three funds, the program fund, [the endowment fund, and] the administrative
218 fund, and the endowment fund.
219 [(b) No more than two percentage points of the interest earned annually in the
220 endowment fund may be transferred to the administrative fund for the purpose of paying
221 operating costs associated with administering the Utah Educational Savings Plan Trust and as
222 required under Sections 53B-8a-103 through 53B-8a-105 .]
223 [(c)] (2) Transfers may be made from the program fund to the administrative fund to
224 pay operating costs:
225 [(i)] (a) associated with administering the Utah Educational Savings Plan Trust and as
226 required under Sections 53B-8a-103 through 53B-8a-105 ; and
227 [(ii)] (b) as included in the budget approved by the board of directors of the Utah
228 Educational Savings Plan Trust.
229 [(d)] (3) (a) All moneys paid by account owners in connection with account agreements
230 shall be deposited as received into separate accounts within the program fund which shall be
231 promptly invested and accounted for separately.
232 (b) Moneys accrued by account owners in the program fund of the Utah Educational
233 Savings Plan Trust may be used for:
234 (i) payments to any institution of higher education;
235 (ii) payments to the account owner or beneficiary;
236 (iii) payments to another 529 plan; or
237 (iv) other expenditures or transfers made in accordance with the account agreement.
238 [(e)] (4) (a) All moneys received by the Utah Educational Savings Plan Trust from the
239 proceeds of gifts and other endowments for the purposes of the Utah Educational Savings Plan
240 Trust shall be deposited as received into the endowment fund, which shall be promptly
241 invested and accounted for separately.
242 [(f)] (b) Any gifts, grants, or donations made by any governmental unit or any person,
243 firm, partnership, or corporation to the Utah Educational Savings Plan Trust for deposit to the
244 endowment fund [shall be] is a grant, gift, or donation to the state for the accomplishment of a

245 valid public eleemosynary, charitable, and educational purpose and [shall] is not [be] included
246 in the income of the donor for Utah tax purposes.
247 [(2) (a) Through March 31, 2005, each account owner under an account agreement may
248 receive an interest in a portion, as determined by policy, of the investment income derived by
249 the endowment fund in any year during which funds are invested in the program fund on behalf
250 of the beneficiary, to be payable as provided in Subsection (2)(c).]
251 [(b) The interest in the investment income derived by the endowment fund that accrues
252 to a beneficiary in any year shall be in the ratio that the principal amount paid by the account
253 owner under the account agreement and investment income earned to date under the agreement
254 bears to the principal amount of all moneys, funds, and securities then held in the program fund
255 during the year.]
256 [(c) (i) Except as provided in Subsection (2)(c)(ii), at the time any payments or
257 disbursements for higher education costs are made from the Utah Educational Savings Plan
258 Trust to any institution of higher education under an account agreement, the Utah Educational
259 Savings Plan Trust shall add to that payment from endowment fund income a pro rata portion
260 of the amount calculated pursuant to Subsection (2)(b), which shall be transferred directly to
261 the institution of higher education simultaneously with the payment made from the program
262 fund and shall be used for payment of the higher education costs of the beneficiary, but not to
263 exceed the amount which, in combination with the current payment due from the program
264 fund, equals the beneficiary's higher education costs for the current period of enrollment.]
265 [(ii) Effective March 31, 2005, any interest income on the endowment fund accruing to
266 a beneficiary that has not been transferred to an institution of higher education pursuant to
267 Subsection (2)(c)(i) shall be transferred to the beneficiary's program fund account.]
268 [(3) Beginning on April 1, 2005:]
269 [(a) interest income on the]
270 (c) The endowment fund may be used to enhance the savings of low income account
271 owners investing in the Utah Educational Savings Plan Trust, [as provided by rules of the
272 board ; and] for scholarships, or for other college savings incentive programs as approved by
273 the board.
274 [(b) the original principal in]
275 (d) Transfers may be made from the endowment fund [may be transferred] to the

276 administrative fund upon approval by the board.
277 [(4)] (e) Endowment fund earnings not accruing to a beneficiary under [a participation]
278 an account agreement or not transferred to the administrative fund shall be reinvested in the
279 endowment fund.
280 [(5) Moneys accrued by account owners in the program fund of the Utah Educational
281 Savings Plan Trust may be used for payments to any institution of higher education.]
282 [(6) No rights to any moneys derived from the endowment fund shall exist if moneys
283 payable under the account agreement are paid to an education institution which is not an
284 institution of higher education as defined in Section 53B-8a-102 .]
285 Section 5. Section 53B-8a-108 is amended to read:
286 53B-8a-108. Cancellation of agreements.
287 (1) Any account owner may cancel an account agreement at will.
288 (2) If an account agreement is cancelled by the account owner, the current account
289 balance shall be disbursed to the account owner less:
290 (a) an administrative refund fee, which may be charged by the Utah Educational
291 Savings Plan Trust, except as provided in Subsection (3); and
292 (b) any penalty or tax required to be withheld by the Internal Revenue Code.
293 (3) An administration refund fee may not be levied by the Utah Educational Savings
294 Plan Trust if the account agreement is cancelled due to:
295 (a) the death of the beneficiary; or
296 (b) the permanent disability or mental incapacity of the beneficiary.
297 [(4) The board shall make rules for the disposition of monies transferred to an account
298 pursuant to Subsection 53B-8a-107 (2)(c)(ii) and the earnings on those monies when an account
299 agreement is cancelled.]
300 Section 6. Section 53B-8a-109 is amended to read:
301 53B-8a-109. Repayment and ownership of payments and investment income --
302 Transfer of ownership rights.
303 (1) (a) The account owner retains ownership of [all payments made under] funds in the
304 account [agreement] until [utilized]:
305 (i) funds are used to pay higher education costs for the beneficiary[.];
306 (ii) funds are otherwise disbursed;

307 (iii) funds are transferred for administrative costs; or
308 (iv) the account is closed.
309 (b) [All income derived from the investment of the payments made by the account
310 owner] Funds in the account shall be considered to be held in trust for the benefit of the
311 beneficiary.
312 [(2) The institution of higher education shall obtain ownership of the payments made
313 for the higher education costs paid to the institution at the time each payment is made to the
314 institution.]
315 [(3)] (2) Any amounts that may be paid pursuant to the Utah Educational Savings Plan
316 Trust that are not listed in this section are owned by the Utah Educational Savings Plan Trust.
317 [(4)] (3) (a) An account owner may transfer ownership rights to another eligible
318 person.
319 (b) The transfer shall be affected and the property distributed in accordance with
320 administrative regulations promulgated by the board or the terms of the account agreement.
321 Section 7. Section 53B-8a-111 is amended to read:
322 53B-8a-111. Annual audited financial report to governor, Legislature, and state
323 auditor.
324 [(1) The board shall submit an annual audited financial report, prepared in accordance
325 with generally accepted accounting principles, on the operations of the Utah Educational
326 Savings Plan Trust by November 1 to the governor, the Legislature, and the state auditor.]
327 [(2) The annual audit shall be made either by the state auditor or by an independent
328 certified public accountant designated by the state auditor and shall include direct and indirect
329 costs attributable to the use of outside consultants, independent contractors, and any other
330 persons who are not state employees.]
331 [(3) The annual audit shall be supplemented by the following information prepared by
332 the board:]
333 (1) The financial statements of the Utah Educational Savings Plan Trust H. [ as ]
333a shall be .H audited H. annually .H by
334 the state auditor or the state auditor's designee H. [ shall be included in the state's Comprehensive
335 Annual Financial Report ] and reported in accordance with generally accepted accounting
335a principles .H .
336 (2) The board shall submit to the governor and the Legislature:
337 (a) upon request, any studies or evaluations [prepared in the preceding year] of the

338 Utah Educational Savings Plan Trust;
339 (b) upon request, a summary of the benefits provided by the Utah Educational Savings
340 Plan Trust including the number of participants and beneficiaries in the Utah Educational
341 Savings Plan Trust; and
342 (c) upon request, any other information which is relevant in order to make a full, fair,
343 and effective disclosure of the operations of the Utah Educational Savings Plan Trust.
344 Section 8. Section 63-2-304 is amended to read:
345 63-2-304. Protected records.
346 The following records are protected if properly classified by a governmental entity:
347 (1) trade secrets as defined in Section 13-24-2 if the person submitting the trade secret
348 has provided the governmental entity with the information specified in Section 63-2-308 ;
349 (2) commercial information or nonindividual financial information obtained from a
350 person if:
351 (a) disclosure of the information could reasonably be expected to result in unfair
352 competitive injury to the person submitting the information or would impair the ability of the
353 governmental entity to obtain necessary information in the future;
354 (b) the person submitting the information has a greater interest in prohibiting access
355 than the public in obtaining access; and
356 (c) the person submitting the information has provided the governmental entity with
357 the information specified in Section 63-2-308 ;
358 (3) commercial or financial information acquired or prepared by a governmental entity
359 to the extent that disclosure would lead to financial speculations in currencies, securities, or
360 commodities that will interfere with a planned transaction by the governmental entity or cause
361 substantial financial injury to the governmental entity or state economy;
362 (4) records the disclosure of which could cause commercial injury to, or confer a
363 competitive advantage upon a potential or actual competitor of, a commercial project entity as
364 defined in Subsection 11-13-103 (4);
365 (5) test questions and answers to be used in future license, certification, registration,
366 employment, or academic examinations;
367 (6) records the disclosure of which would impair governmental procurement
368 proceedings or give an unfair advantage to any person proposing to enter into a contract or

369 agreement with a governmental entity, except that this Subsection (6) does not restrict the right
370 of a person to see bids submitted to or by a governmental entity after bidding has closed;
371 (7) records that would identify real property or the appraisal or estimated value of real
372 or personal property, including intellectual property, under consideration for public acquisition
373 before any rights to the property are