State of Illinois
90th General Assembly
Legislation

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[ Engrossed ][ House Amendment 001 ]

90_HB0401

      35 ILCS 5/205.5 new
          Amends the Illinois Income Tax Act.  Provides that higher
      education saving  accounts  are  accounts  established  by  a
      qualified  taxpayer  for  the  purpose of saving for eligible
      education related expenses of the account holder, spouse,  or
      child   associated   with   attending  a  public  or  private
      institution of higher education.  Provides that  a  qualified
      taxpayer  shall  have an annual adjusted gross income of less
      than $100,000.  Provides that, beginning with  taxable  years
      ending  on  or after December 31, 1997, the principal and the
      income earned on these accounts is exempt from taxation under
      the Illinois Income Tax Act if the money in the  accounts  is
      used  for  eligible education related expenses. Provides that
      if the principal in or any income earned on money held in the
      higher education savings account  is  used  for  any  purpose
      other   than   eligible   education  related  expenses,  that
      principal or income shall be subject to  taxation  under  the
      Illinois  Income Tax Act and, in addition, the account holder
      shall incur a penalty in an  amount  equal  to  10%  of  that
      principal  or  income  used  for purposes other than eligible
      education related expenses. Provides that the  Department  of
      Revenue  shall  promulgate  rules  necessary  to  enforce and
      implement these provisions. Provides  that  these  provisions
      are   exempt   from  the  provisions  concerning  the  5-year
      automatic sunset. Effective immediately.
                                                    LRB9000154KDksD
                                              LRB9000154KDksD
 1        AN ACT to amend the Illinois Income  Tax  Act  by  adding
 2    Section 205.5.
 3        Be  it  enacted  by  the People of the State of Illinois,
 4    represented in the General Assembly:
 5        Section 5.  The Illinois Income Tax  Act  is  amended  by
 6    adding Section 205.5 as follows:
 7        (35 ILCS 5/205.5 new)
 8        Sec. 205.5.  Higher education savings account exemption.
 9        (a)  Definitions.  As used in this Section:
10        "Higher  education  savings  account"  means  an  account
11    established by a qualified taxpayer for the purpose of saving
12    for  eligible  education  related  expenses  associated  with
13    attending an institution of higher education.  These accounts
14    may be established with any of the following:
15             (1)  A  national  or state chartered bank, a federal
16        or  state  chartered  savings  and  loan  association,  a
17        federal or state chartered savings bank, or a federal  or
18        state chartered credit union.
19             (2)  A   trust   company  authorized  to  act  as  a
20        fiduciary.
21             (3)  An insurance company authorized to do  business
22        in this State under the Illinois Insurance Code.
23             (4)  A  dealer,  salesperson,  or investment adviser
24        registered under the Illinois Securities Law of 1953.
25        "Eligible education related  expense"  means  an  expense
26    paid  by the account holder for costs incurred by the account
27    holder or the spouse or a child  of  the  account  holder  to
28    attend  a  public  or  private college, community college, or
29    university  on  either  a  full-time  or   part-time   basis.
30    "Eligible  education related expense" shall not be limited to
31    tuition.
                            -2-               LRB9000154KDksD
 1        "Qualified taxpayer" means  a  taxpayer  with  an  annual
 2    adjusted gross income of less than $100,000.
 3        (b)  Beginning  with  taxable  years  ending  on or after
 4    December 31, 1997, except as provided in subsection (c),  the
 5    principal  in  and  the  income  earned on a higher education
 6    savings account is exempt from taxation under this Act.
 7        (c)  If any principal or income earned on  the  principal
 8    in  the  higher  education  savings  account  is used for any
 9    purpose other than eligible education related expenses,  that
10    principal  or  income shall be subject to taxation under this
11    Act; in addition, the account holder shall incur a penalty in
12    an amount equal to 10% of that principal or income  used  for
13    purposes other than eligible education related expenses.
14        (d)  The  Department  shall promulgate rules necessary to
15    implement and enforce the provisions of this Section.
16        (e)  This Section is exempt from the provisions regarding
17    the sunset of exemptions, credits, and deductions provided in
18    Section 250 of this Act.
19        Section 99.  Effective date.  This Act takes effect  upon
20    becoming law.

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