BEFORE THE DEPARTMENT OF REVENUE
OF THE STATE OF MONTANA
In the matter of the amendment of ARM 42.15.802 relating to family education savings program
TO: All Concerned Persons
1. On October 14, 2010, at 9:30 a.m., a public hearing will be held in the Third Floor Reception Area Conference Room of the Sam W. Mitchell Building, at Helena, Montana, to consider the amendment of the above-stated rules.
Individuals planning to attend the hearing shall enter the building through the east doors of the Sam W. Mitchell Building, 125 North Roberts, Helena, Montana.
2. The Department of Revenue will make reasonable accommodations for persons with disabilities who wish to participate in this public hearing or need an alternative accessible format of this notice. If you require an accommodation, contact the Department of Revenue no later than 5:00 p.m., October 4, 2010, to advise us of the nature of the accommodation that you need. Please contact Cleo Anderson, Department of Revenue, Director's Office, P.O. Box 7701, Helena, Montana 59604-7701; telephone (406) 444-5828; fax (406) 444-4375; or e-mail firstname.lastname@example.org.
3. The rule proposed to be amended provides as follows, stricken matter interlined, new matter underlined:
42.15.802 CONTRIBUTIONS TO FAMILY EDUCATION SAVINGS PROGRAM ACCOUNTS (1) The program administrator determines who can be an account owner and from whom it will accept contributions to an account. More information regarding the administration of the program can be found at montana.collegesavings.com/montana.
(1)(2) An taxpayer individual is allowed to deduct the reduce their Montana adjusted gross income by the lesser of the total contributions they actually made make to one or more Montana family education savings accounts during the tax year, or $3,000.
(a) Except as provided in (i) and (ii), a
A deduction is allowed only for contributions an individual makes to an to account s owned by the taxpayer, the individual (or jointly with their taxpayer's spouse) , or, if the taxpayer's.
(i) Section 15-62-207, MCA, provides that a qualifying contribution can also be made to an account owned by the individual's child or stepchild if that child or stepchild is a Montana resident
, the taxpayer's child or stepchild. The department interprets that provision to allow only a parent or stepparent to claim a deduction for an amount they contribute to an account owned by their minor child or stepchild as provided in (ii). This interpretation is based on the program administrator's refusal to accept other contributions to accounts not owned by the contributor, and the department may amend this rule and interpret the provision more broadly in the future if the program administrator permits other contributions to accounts not owned by the contributor.
(ii) If a parent or stepparent supplies the funds they use to establish an account under the Montana Uniform Transfers to Minors Act for which their minor child or stepchild is both the owner and designated beneficiary, and if the child or stepchild is a Montana resident, the parent or stepparent may elect to reduce their own Montana adjusted gross income by the amount they provided even if for other purposes the transaction would be treated as if they made a gift of cash to the child or stepchild who in turn contributed the money to a family education savings account they own entitling the child or stepchild to reduce the child or stepchild's Montana adjusted gross income.
(b) The reduction in Montana adjusted gross income for a contribution can be claimed only for the tax year the contribution is made.
(c) An account owner is not required to be a resident and a nonresident may reduce their Montana adjusted gross income, if any, for their contributions to an account they own. Except as provided in (1)(a), however, contributions to an account, whether by a resident or nonresident, if made to an account they do not own, cannot reduce their own Montana adjusted gross income.
(2) remains the same but is renumbered (3).
(4) A rollover from another state's 529 plan or other private family education savings account into a Montana family education savings account is considered a contribution for which a deduction may be claimed, provided all other provisions of the Family Education Savings Act are met. The rollover may, however, be treated by the other state or the other state's plan as an unqualified withdrawal.
(3) remains the same but is renumbered (5).
IMP: 15-30-2110, 15-62-201, 15-62-207, MCA
REASONABLE NECESSITY: The department is proposing to amend 42.15.802 to address questions regarding rollovers from another state's section 529, Internal Revenue Code, 26 U.S.C. 529 into the Montana plan and whether a nonresident may claim a reduction in their Montana adjusted gross income if they have Montana adjusted gross income.
The amendments explain that rollovers into the Montana plan are considered contributions for which a deduction may be claimed as long as all other conditions of the laws are met. The amendments also explain that it is the administrator of the Family Education Savings Program that determines who can own an account established with the program and from whom contributions to accounts will be accepted. The amendments also clarify that nonresidents, as well as residents, may claim a reduction in their Montana adjusted gross income for accounts that they own. They explain how parents and stepparents, whether residents or nonresidents, who establish and fund an account for their minor child or stepchild under the Montana Uniform Transfers to Minors Act may elect, if the child or stepchild is a Montana resident, to reduce their own Montana adjusted gross income in lieu of the child's reducing their adjusted gross income for contribution to an account the minor child owns. The department also explains that contributions by others to accounts of minor children or stepchildren may be interpreted more broadly in the future if the program administrator begins accepting other contributions from accounts not owned by the contributor.
The department is deleting the authority reference of 15-62-201, MCA, because that statute does not give the department rulemaking authority. That statute gives the Board of Regents rulemaking authority.
4. Concerned persons may submit their data, views, or arguments, either orally or in writing, at the hearing. Written data, views, or arguments may also be submitted to: Cleo Anderson, Department of Revenue, Director's Office, P.O. Box 7701, Helena, Montana 59604-7701; telephone (406) 444-5828; fax (406) 444-4375; or e-mail email@example.com and must be received no later than October 22, 2010.
5. Cleo Anderson, Department of Revenue, Director's Office, has been designated to preside over and conduct the hearing.
6. An electronic copy of this Notice of Public Hearing is available through the department's site on the World Wide Web at www.mt.gov/revenue, under "for your reference"; "DOR administrative rules"; and "upcoming events and proposed rule changes." The department strives to make the electronic copy of this Notice of Public Hearing conform to the official version of the notice, as printed in the Montana Administrative Register, but advises all concerned persons that in the event of a discrepancy between the official printed text of the notice and the electronic version of the notice, only the official printed text will be considered. In addition, although the department strives to keep its web site accessible at all times, concerned persons should be aware that the web site may be unavailable during some periods, due to system maintenance or technical problems.
7. The Department of Revenue maintains a list of interested persons who wish to receive notices of rulemaking actions proposed by this agency. Persons who wish to have their name added to the list shall make a written request, which includes the name and e-mail or mailing address of the person to receive notices and specifies that the person wishes to receive notices regarding particular subject matter or matters. Notices will be sent by e-mail unless a mailing preference is noted in the request. Such written request may be mailed or delivered to the person in 4 above or faxed to the office at (406) 444-4375, or may be made by completing a request form at any rules hearing held by the Department of Revenue.
8. The bill sponsor contact requirements of 2-4-302, MCA, do not apply.
/s/ Cleo Anderson /s/ Dan R. Bucks
CLEO ANDERSON DAN R. BUCKS
Rule Reviewer Director of Revenue
Certified to Secretary of State September 13, 2010