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
NOTICE OF AMENDMENT
TO: All Concerned Persons
1. On September 23, 2010, the department published MAR Notice No. 42-2-847 regarding the proposed amendment of the above-stated rule at page 2181 of the 2010 Montana Administrative Register, issue no. 18.
2. A public hearing was held on October 14, 2010, to consider the proposed amendment. No one appeared at the hearing and no written comments were received.
3. Based on discussions with the new administrator for the Family Education Savings Program, the department further amends ARM 42.15.802 with the following changes, 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. Account ownership and the acceptance of contributions are not necessarily related to the ability to reduce Montana taxable income. A person is not necessarily entitled to reduce their Montana adjusted gross income because they made a contribution or are an account owner. Entitlement to the tax benefit depends on meeting specific statutory requirements set forth in Title 15, chapter 62, MCA, and these rules.
(2) An individual is allowed to reduce their Montana adjusted gross income by the lesser of the total contributions they actually 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), and (iii), a deduction is allowed only for contributions an individual makes to an account owned by the individual (or jointly with their spouse).
(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 department interprets that provision to allow
(A) 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
subsection (ii) .; and 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.
(B) a parent or stepparent to claim a deduction for an amount they contribute to an account owned by their adult child or stepchild as provided in (iii).
(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.
(iii) If a parent or stepparent contributes funds to an account owned by their adult child or stepchild and if that adult child or stepchild is a Montana resident when the contribution is made, the contributor may claim a deduction for their contribution. It does not matter whether the designated beneficiary of the account is:
(A) the contributor's adult child or step-child;
(B) a grandchild or other relative of the contributor;
(C) related to the account owner; or
(D) a resident or nonresident.
(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)(2)(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.
(3) through (5) remain as proposed.
AUTH: 15-30-2620, MCA
IMP: 15-30-2110, 15-62-201, 15-62-207, MCA
4. An electronic copy of this adoption notice 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 adoption notice 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.
/s/ Cleo Anderson /s/ Dan R. Bucks
CLEO ANDERSON DAN R. BUCKS
Rule Reviewer Director of Revenue
Certified to Secretary of State November 15, 2010