HOUSE BILL 342
56th legislature - STATE OF NEW MEXICO - first session, 2023
T. Ryan Lane and Peter Wirth
RELATING TO EDUCATION; ALIGNING THE USES OF EDUCATION SAVINGS PLANS PROVIDED FOR IN THE EDUCATION TRUST ACT TO COMPLY WITH FEDERALLY ALLOWABLE USES OF THE SAVINGS.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
SECTION 1. Section 7-2-32 NMSA 1978 (being Laws 1997, Chapter 259, Section 8) is amended to read:
"7-2-32. DEDUCTION--PAYMENTS INTO EDUCATION TRUST FUND.--A taxpayer may claim a deduction from net income in an amount equal to the payments made by the taxpayer into the education trust fund pursuant to [a college] an education investment agreement or prepaid tuition contract under the Education Trust Act in the taxable year for which the deduction is being claimed. The amount of payments made on behalf of any one beneficiary that may be deducted shall not exceed in the aggregate the cost of attendance at the applicable institution of higher education, as determined by the education trust board. [A husband and wife] Married individuals who file separate returns for the taxable year in which they could have filed a joint return may each claim only one-half of the deduction that would have been allowed on the joint return. Individuals having income both within and without this state shall apportion this deduction in accordance with regulations of the secretary."
SECTION 2. Section 21-21K-2 NMSA 1978 (being Laws 2014, Chapter 76, Section 2) is amended to read:
"21-21K-2. DEFINITIONS.--As used in the Education Trust Act:
A. "account" means an individual trust account pursuant to [a college] an education investment agreement entered into pursuant to the [college] education savings program;
B. "account owner" means the person who has entered into [a college] an education investment agreement with the board and is designated as having the right to withdraw money from the account before the account is disbursed to or for the benefit of the beneficiary;
C. "beneficiary" means the person who is designated at the time the account is opened, or the person who replaces a designated beneficiary, as the person whose qualified higher education expenses are expected to be paid from the account;
D. "board" means the education trust board;
E. "[college] education investment agreement" means an agreement entered into by the board and an account owner to participate in the [college] education savings program and establish an account to be used for the qualified higher education expenses of a beneficiary [at an eligible institution of higher education];
F. "department" means the higher education department;
G. "eligible educational institution" means any college, university, vocational school or other post-secondary institution recognized by the United States department of education;
[G.] H. "financial institution" means a bank, broker-dealer, insurance company, mutual fund, savings and loan association or other financial entity;
[H. "institution of higher education" means a post-secondary educational institution eligible to participate in student financial aid programs administered by the United States department of education;]
I. "Internal Revenue Code" means the federal Internal Revenue Code of 1986, as amended; [and]
J. "manager" means a financial institution under contract with the board to serve as manager of [a college] an education savings plan in the [college] education savings program and receive contributions on behalf of the program; and
K. "qualified higher education expenses" means federally allowable qualified expenses set out in the Internal Revenue Code Section 529 and includes other expenses allowed under that section as qualified education expenses."
SECTION 3. Section 21-21K-3 NMSA 1978 (being Laws 2014, Chapter 76, Section 3) is amended to read:
"21-21K-3. [COLLEGE] EDUCATION SAVINGS PROGRAM CREATED--EDUCATION TRUST FUND CREATED--PURPOSE--INVESTMENT OF ACCOUNTS BY THIRD PARTIES--BOARD REVIEW--PROGRAM ADMINISTRATION FUND CREATED--PURPOSE.--
A. The "[college] education savings program" is created to allow interested persons to enter into [college] education investment agreements with the board as a means to save money to pay a beneficiary's eligible expenses for [a college] an education. The [college] education savings program may consist of one or more [college] education savings plans. The board shall administer the [college] education savings program through accounts established in the education trust fund pursuant to [college] education investment agreements. Money in an account may be used by the beneficiary [at any eligible institution of higher education in New Mexico or any other state] for qualified higher education expenses.
B. The board shall develop and administer the [college] education savings program in a manner that allows account owners and beneficiaries to obtain and maintain federal income tax benefits or treatment provided by the Internal Revenue Code for qualified [state] tuition programs and exemptions under the federal securities laws.
C. The "education trust fund" is created as a nonreverting fund in the state treasury. The fund shall be administered by the board to carry out the [college] education savings program. The fund consists of separate trust accounts held in the name of account owners. Income from investment of the fund shall be credited to the separate accounts.
D. The board may contract with one or more managers to invest the contributions deposited to the education trust fund. The board and the managers shall account for each contribution by an account owner.
E. Amounts may be withdrawn or transferred from trust accounts in the education trust fund only as provided in the related [college] education investment agreements. All money contributed to accounts established in the fund are held in trust by the board and the respective managers for the sole benefit of the respective account owners and beneficiaries.
F. The "program administration fund" is created as a nonreverting fund in the state treasury. The fund consists of all administrative and other fees received by the board pursuant to [college] education investment agreements and contracts with managers and any other money credited to the fund. The state treasurer shall invest the fund, and the investment income shall be credited to the fund. Money in the fund may be used to pay costs of establishing, marketing and otherwise administering the [college] education savings program in accordance with the Education Trust Act. Disbursements from the fund shall be by warrants of the secretary of finance and administration on vouchers signed by the director of the board or the director's authorized representative."
SECTION 4. Section 21-21K-4.1 NMSA 1978 (being Laws 2014, Chapter 76, Section 5) is amended to read:
"21-21K-4.1. BOARD--POWERS AND DUTIES.--
A. The board may:
(1) adopt, amend or repeal and promulgate rules necessary to carry out the provisions of the Education Trust Act;
(2) sue and be sued;
(3) enter into contracts;
(4) employ or contract for professional, technical and clerical staff and independent counsel;
(5) contract with one or more financial institutions to manage the education trust fund and the separate trust accounts;
(6) enter into [college] education investment agreements with interested persons to participate in the [college] education savings program;
(7) charge, impose and collect administrative fees as provided in [a college] an education investment agreement or other contract relating to the [college] education savings program in amounts not exceeding the reasonable costs of establishing, marketing and otherwise administering the program; and
(8) do those things necessary or convenient in accordance with the Education Trust Act to carry out the provisions of that act.
B. The board shall adopt and promulgate education trust fund investment guidelines and otherwise administer the [college] education savings program in compliance with the Uniform Prudent Investor Act."
SECTION 5. Section 21-21K-5 NMSA 1978 (being Laws 2014, Chapter 76, Section 6) is amended to read:
"21-21K-5. [COLLEGE] EDUCATION INVESTMENT AGREEMENTS--ACCOUNTS.--
A. An account owner may enter into [a college] an education investment agreement with the board under which an account in the education trust fund is established and contributions may be made to the account from time to time, consistent with the terms of the agreement, to defray the cost of [eligible] qualified higher education expenses [at institutions of higher education]. Each account shall be accounted for separately from all other accounts in the education trust fund. An account owner may enter into [a college] an education investment agreement on behalf of any beneficiary.
B. Gifts and bequests by persons other than the account owner may be made to an account in the education trust fund for the benefit of the beneficiary in accordance with the terms of the [college] education investment agreement.
C. The board shall set forth procedures relating to the withdrawal of money from an account established in the education trust fund pursuant to [a college] an education investment agreement.
D. [A college] An education investment agreement may be terminated by the account owner at any time. The board shall specify by rule appropriate provisions for the term and termination of [college] education investment agreements.
E. Contributions made to an account in the education trust fund, together with accrued investment earnings and capital appreciation in such account, shall be excluded from any calculation of the respective beneficiary's student financial aid eligibility in New Mexico.
F. The board shall notify each account owner annually about the status of the account owner's account in the education trust fund."
SECTION 6. Section 21-21K-6 NMSA 1978 (being Laws 2014, Chapter 76, Section 7) is amended to read:
"21-21K-6. CLAIMS OF CREDITORS--EXEMPTION--LIABILITY IMMUNITY--STATE NOT LIABLE.--
A. Money credited to or expended from any account in the education trust fund by or on behalf of an account owner or beneficiary is exempt from all claims of creditors of the account owner, the beneficiary or the board.
B. If the board carries out its review responsibility of the manager's investment decisions consistent with the Uniform Prudent Investor Act, the board or an employee shall not be liable to anyone for any losses sustained as a result of investment decisions. A member of the board, while acting within the scope of the member's authority or while acting as a trustee of the education trust fund or any separate trust fund or account of the board, shall not be subject to any personal liability for any action taken or omitted within that scope of authority.
C. In no event shall any liability of or contractual obligation incurred by the [college] education savings program obligate or encumber any of the state's funds or treasury, including but not limited to the state's general fund, land grant permanent funds, the severance tax permanent fund or any other permanent fund or any money that is a part of a state-funded financial aid program. Nothing in the Education Trust Act creates any obligation, legal, moral or otherwise, to fulfill the terms of any [college] education investment agreement or any other obligation or liability out of any source other than the education trust fund or the program administration fund."
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