103RD GENERAL ASSEMBLY
State of Illinois
2023 and 2024
HB5615

 

Introduced 2/9/2024, by Rep. Tim Ozinga

 

SYNOPSIS AS INTRODUCED:
 
15 ILCS 505/16.11 new

    Amends the State Treasurer Act. Provides that the State Treasurer may establish and administer the Education Scholarship Account as a qualified tuition program under Section 529 of the Internal Revenue Code. Provides that distributions from an account in the Education Scholarship Account may be used for the designated beneficiary's qualified expenses; defines "qualified expenses". Provides who may open an account under the Program. Provides that the Treasurer and the State Board of Education shall each cooperate in providing each other with account information, as necessary, to prevent contributions in excess of those necessary to provide for the qualified expenses of the designated beneficiary. Sets forth provisions concerning funds for the Program. Sets forth provisions concerning investment policies for the Account. Provides that the Treasurer shall work with the State Board of Education to coordinate the marketing of the Education Scholarship Account. Sets forth other provisions concerning administering the Education Scholarship Account Program. Provides for rulemaking.


LRB103 38735 RJT 68872 b

 

 

A BILL FOR

 

HB5615LRB103 38735 RJT 68872 b

1    AN ACT concerning State government.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 1. The State Treasurer Act is amended by adding
5Section 16.11 as follows:
 
6    (15 ILCS 505/16.11 new)
7    Sec. 16.11. Education Scholarship Account Program.
8    (a) As used in this Section:
9    "Account owner" means any person or entity who has opened
10an account or to whom ownership of an account has been
11transferred, as allowed by the Internal Revenue Code, and who
12has authority to withdraw funds, direct withdrawal of funds,
13change the designated beneficiary, or otherwise exercise
14control over an account in the Education Scholarship Account.
15    "Donor" means any person or entity who makes contributions
16to an account in the Education Scholarship Account.
17    "Designated beneficiary" means any individual designated
18as the beneficiary of an account in the Education Scholarship
19Account by an account owner. A designated beneficiary must
20have a valid social security number or taxpayer identification
21number. In the case of an account established as part of a
22scholarship program permitted under Section 529 of the
23Internal Revenue Code, the designated beneficiary is any

 

 

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1individual receiving benefits accumulated in the account as a
2scholarship.
3    "Member of the family" has the same meaning ascribed to
4that term under Section 529 of the Internal Revenue Code.
5    "Nonqualified withdrawal" means a distribution from an
6account other than a distribution that: (i) is used for the
7qualified expenses of the designated beneficiary; (ii) results
8from the beneficiary's death or disability; (iii) is a
9rollover to another account in the Education Scholarship
10Account; or (iv) is a rollover to an ABLE account, as defined
11in Section 16.6 of this Act, or any distribution that, within
1260 days after such distribution, is transferred to an ABLE
13account of the designated beneficiary or a member of the
14family of the designated beneficiary to the extent that the
15distribution, when added to all other contributions made to
16the ABLE account for the taxable year, does not exceed the
17limitation under Section 529A(b) of the Internal Revenue Code.
18    "Qualified expenses" means all of the following:
19        (1) Tuition and fees at a qualified school, public
20    school, or other participating entity.
21        (2) Fees for:
22            (A) national norm referenced or criterion
23        referenced examinations;
24            (B) Advanced Placement examinations, Cambridge
25        International courses, International Baccalaureate
26        courses, or College-Level Examination Program

 

 

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1        examinations; or
2            (C) statewide assessments associated with industry
3        recognized credentials.
4        (3) Educational services for a student with a
5    disability.
6        (4) Payments associated with the use of
7    paraprofessional or educational aides.
8        (5) Services contracted for and provided by a school
9    district, charter school, or other school, including:
10            (A) individual classes;
11            (B) extracurricular activities or programs; or
12            (C) additional programs, resources, or staffing
13        defined in the student's education plan.
14        (6) Occupational therapy for a student with a
15    disability, provided in accordance with a student's
16    individualized education program or Section 504 plan under
17    the federal Rehabilitation Act of 1973.
18        (7) Fees for transportation paid to a fee-for-service
19    transportation provider for a student to travel to and
20    from an approved special education service provider.
21        (8) Tuition and fees to attend training programs and
22    camps that have a focus on:
23            (A) vocational skills;
24            (B) academic skills;
25            (C) life skills;
26            (D) independence; or

 

 

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1            (E) soft job skills that are character traits and
2        interpersonal skills that characterize a person's
3        relationships with other people.
4        (9) Additional services and therapies prescribed by a
5    student's treating physician in accordance with generally
6    accepted standards of care to improve outcomes for the
7    student in addition to any services currently being
8    provided by the school, insurance, or the Medicaid
9    program.
10        (10) Expenses to enroll in and attend sequences,
11    courses, apprenticeships, and programs of study or career
12    coaching and navigation services, postsecondary education
13    and training, transportation and equipment, certification
14    and credentialing examinations, and any other expenses
15    approved by the State Treasurer.
16        (11) Fees for the management of the account.
17    (b) The State Treasurer may establish and administer the
18Education Scholarship Account as a qualified tuition program
19under Section 529 of the Internal Revenue Code. The Account
20may consist of one or more college savings programs. The State
21Treasurer, in administering the Education Scholarship Account,
22may: (1) receive, hold, and invest moneys paid into the
23Account; and (2) perform any other action he or she deems
24necessary to administer the Account, including any other
25actions necessary to ensure that the Account operates as a
26qualified tuition program in accordance with Section 529 of

 

 

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1the Internal Revenue Code.
2    (c) The State Treasurer may delegate duties related to the
3Education Scholarship Account to one or more contractors. The
4contributions deposited in the Account, and any earnings
5thereon, shall not constitute property of the State or be
6commingled with State funds and the State shall have no claim
7to or against, or interest in, such funds, provided that the
8fees collected by the State Treasurer in accordance with this
9Act, scholarship programs administered by the State Treasurer,
10and seed funds deposited by the State Treasurer under Section
1116.8 of the Act are State funds.
12    (d) The State Treasurer shall provide a separate
13accounting for each designated beneficiary. The separate
14accounting shall be provided to the account owner of the
15account for the designated beneficiary at least annually and
16shall show the account balance, the investment in the account,
17the investment earnings, and the distributions from the
18account.
19    (e) The State Treasurer may permit persons, including
20trustees of trusts and custodians under a Uniform Transfers to
21Minors Act or Uniform Gifts to Minors Act account, and certain
22legal entities to be account owners as part of a scholarship
23program, provided that: (1) an individual, trustee, or
24custodian must have a valid social security number or taxpayer
25identification number, be at least 18 years of age, and have a
26valid United States street address; and (2) a legal entity

 

 

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1must have a valid taxpayer identification number and a valid
2United States street address. In-state and out-of-state
3persons, trustees, custodians, and legal entities may be
4account owners and donors, and both in-state and out-of-state
5individuals may be designated beneficiaries in the Education
6Scholarship Account.
7    (f) Any fees, costs, and expenses, including investment
8fees and expenses and payments to third parties, related to
9the Education Scholarship Account, shall be paid from the
10assets of the Education Scholarship Account. The State
11Treasurer shall establish fees to be imposed on accounts to
12cover such fees, costs, and expenses, to the extent not paid
13directly out of the investments of the Education Scholarship
14Account, and to maintain an adequate reserve fund in line with
15industry standards for government operated funds. The
16Treasurer must use his or her best efforts to keep these fees
17as low as possible and consistent with administration of high
18quality competitive programs.
19    (g) To enhance the safety and liquidity of the Education
20Scholarship Account, to ensure the diversification of the
21investment portfolio of the Education Scholarship Account, and
22in an effort to keep investment dollars in the State of
23Illinois, the State Treasurer may make a percentage of each
24account available for investment in participating financial
25institutions doing business in the State.
26    (h) The Treasurer shall develop, publish, and implement an

 

 

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1investment policy covering the investment of the moneys in
2each of the programs in the Education Scholarship Account. The
3policy shall be published each year as part of the audit of the
4Education Scholarship Account by the Auditor General, which
5shall be distributed to all account owners in such program.
6The Treasurer shall notify all account owners in such program
7in writing, and the Treasurer shall publish, in a newspaper of
8general circulation in both Chicago and Springfield, any
9changes to the previously published investment policy at least
1030 calendar days before implementing the policy. Any
11investment policy adopted by the Treasurer shall be reviewed
12and updated if necessary within 90 days following the date
13that the State Treasurer takes office.
14    (i) An account owner may, directly or indirectly, direct
15the investment of his or her account only as provided in
16Section 529(b)(4) of the Internal Revenue Code. Donors and
17designated beneficiaries, in those capacities, may not,
18directly or indirectly, direct the investment of an account.
19    (j) Distributions from an account in the Education
20Scholarship Account may be used for the designated
21beneficiary's qualified expenses, and if not used in that
22manner, may be considered a nonqualified withdrawal. Funds
23contained in a Education Scholarship Account account may be
24rolled over into an eligible ABLE account, as defined in
25Section 16.6 of this Act, or another qualified tuition
26program, to the extent permitted by Section 529 of the

 

 

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1Internal Revenue Code.
2    Distributions made from the Education Scholarship Account
3may be made directly to an educational institution, directly
4to a vendor, in the form of a check payable to both the
5designated beneficiary and the institution or vendor, directly
6to the designated beneficiary or account owner, or in any
7other manner that is permissible under Section 529 of the
8Internal Revenue Code.
9    (k) Contributions to the Education Scholarship Account
10shall be as follows:
11        (1) Contributions to an account in the Education
12    Scholarship Account may be made only in cash.
13        (2) The Treasurer shall limit the contributions that
14    may be made to the Education Scholarship Account on behalf
15    of a designated beneficiary, as required under Section 529
16    of the Internal Revenue Code, to prevent contributions for
17    the benefit of a designated beneficiary in excess of those
18    necessary to provide for the qualified expenses of the
19    designated beneficiary. The Account shall not permit any
20    additional contributions to an account as soon as the sum
21    of the aggregate balance in all accounts in the Account
22    for the designated beneficiary reaches the specified
23    balance limit established from time to time by the
24    Treasurer.
25    (l) The Treasurer and the State Board of Education shall
26each cooperate in providing each other with account

 

 

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1information, as necessary, to prevent contributions in excess
2of those necessary to provide for the qualified expenses of
3the designated beneficiary, as described in subsection (j).
4    The Treasurer shall work with the State Board of Education
5to coordinate the marketing of the Education Scholarship
6Account and the Illinois Prepaid Tuition Program when
7considered beneficial by the Treasurer and the State
8Superintendent of Education.
9    (m) No interest in the program, or any portion thereof,
10may be used as security for a loan. Moneys held in an account
11invested in the Education Scholarship Account shall be exempt
12from all claims of the creditors of the account owner, donor,
13or designated beneficiary of that account, except for the
14non-exempt Education Scholarship Account transfers to or from
15the account as defined under subsection (j) of Section 12-1001
16of the Code of Civil Procedure.
17    (n) The assets of the Education Scholarship Account and
18its income and operation shall be exempt from all taxation by
19the State of Illinois and any of its subdivisions. The accrued
20earnings on investments in the Account once disbursed on
21behalf of a designated beneficiary shall be similarly exempt
22from all taxation by the State of Illinois and its
23subdivisions, so long as they are used for qualified expenses.
24Contributions to a Education Scholarship Account account
25during the taxable year may be deducted from adjusted gross
26income as provided in Section 203 of the Illinois Income Tax

 

 

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1Act. The provisions of this paragraph are exempt from Section
2250 of the Illinois Income Tax Act.
3    (o) The Treasurer shall adopt rules he or she considers
4necessary for the efficient administration of the Education
5Scholarship Account. The rules shall provide whatever
6additional parameters and restrictions are necessary to ensure
7that the Education Scholarship Account meets all the
8requirements for a qualified tuition program under Section 529
9of the Internal Revenue Code.
10    Notice of any proposed amendments to the rules and
11regulations shall be provided to all account owners prior to
12adoption.
13    (p) The State Treasurer shall give bond with at least one
14surety, payable to and for the benefit of the account owners in
15the Education Scholarship Account, in the penal sum of
16$10,000,000, conditioned upon the faithful discharge of his or
17her duties in relation to the Education Scholarship Account.