Chapter 0280

Chapter 280 Oregon Laws 2003

AN ACT

HB 2664

Relating to qualified tuition savings; creating new provisions; amending ORS 316.680, 348.841, 348.844, 348.849, 348.853, 348.857, 348.860, 348.863, 348.867, 348.869, 348.870, 348.873, 458.685, 458.690 and 458.700; and prescribing an effective date.

Be It Enacted by the People of the State of Oregon:

SECTION 1. Section 2 of this 2003 Act is added to and made a part of ORS chapter 316.

SECTION 2. (1) There shall be subtracted from federal taxable income the amount contributed to a college savings network account established under ORS 348.841 to 348.873.

(2) Notwithstanding subsection (1) of this section, a subtraction under this section may not exceed the lesser of:

(a) $2,000 for the tax year or, in the case of a married individual filing separately, $1,000 for the tax year; and

(b) If an amount is carried forward to a succeeding tax year under subsection (3) of this section, the balance in the college savings network account at the close of the tax year for which the subtraction is being made.

(3) Any amounts contributed to a college savings network account that are not subtracted from federal taxable income because of the monetary limitations imposed by subsection (2) of this section may be carried forward for four succeeding tax years and subtracted from federal taxable income in any of those succeeding tax years in an amount that does not exceed the monetary limitations imposed by subsection (2) of this section.

(4) The amount contributed to a college savings network account may be subtracted from a preceding tax year if the contribution is made before the taxpayer files a return or before the 15th day of the fourth month following the closing of the taxpayer’s tax year, whichever is earlier.

SECTION 3. ORS 316.680, as amended by section 1, chapter 212, Oregon Laws 2001, is amended to read:

316.680. (1) There shall be subtracted from federal taxable income:

(a) The interest or dividends on obligations of the United States and its territories and possessions or of any authority, commission or instrumentality of the United States to the extent includable in gross income for federal income tax purposes but exempt from state income taxes under the laws of the United States. However, the amount subtracted under this paragraph shall be reduced by any interest on indebtedness incurred to carry the obligations or securities described in this paragraph, and by any expenses incurred in the production of interest or dividend income described in this paragraph to the extent that such expenses, including amortizable bond premiums, are deductible in determining federal taxable income.

(b) The amount of any federal income taxes accrued by the taxpayer during the taxable year as described in ORS 316.685, less the amount of any refunds of federal taxes previously accrued for which a tax benefit was received.

(c)(A) If the taxpayer does not qualify for the subtraction under subparagraph (B) of this paragraph, compensation (other than pension or retirement pay) received for active service performed by a member of the Armed Forces of the United States in an amount not to exceed $3,000 per annum.

(B) For the tax year of initial draft or enlistment into the Armed Forces of the United States or for the tax year of discharge from or termination of full-time active duty for the Armed Forces of the United States, compensation (other than pension or retirement pay or pay for service when on military reserve duty) paid by the Armed Forces of the United States for services performed outside this state, if the taxpayer is on active duty as a full-time officer, enlistee or draftee, with the Armed Forces of the United States.

(d) Amounts allowable under sections 2621(a)(2) and 2622(b) of the Internal Revenue Code to the extent that the taxpayer does not elect under section 642(g) of the Internal Revenue Code to reduce federal taxable income by those amounts.

(e) Any supplemental payments made to JOBS Plus Program participants under ORS 411.892.

(f)(A) Federal pension income that is attributable to federal employment occurring before October 1, 1991. Federal pension income that is attributable to federal employment occurring before October 1, 1991, shall be determined by multiplying the total amount of federal pension income for the tax year by the ratio of the number of months of federal creditable service occurring before October 1, 1991, over the total number of months of federal creditable service.

(B) The subtraction allowed under this paragraph applies only to federal pension income received at a time when:

(i) Benefit increases provided under chapter 569, Oregon Laws 1995, are in effect; or

(ii) Public Employees Retirement System benefits received for service prior to October 1, 1991, are exempt from state income tax.

(i) “Federal creditable service” means those periods of time for which a federal employee earned a federal pension.

(ii) “Federal pension” means any form of retirement allowance provided by the federal government, its agencies or its instrumentalities to retirees of the federal government or their beneficiaries.

(g) Any amount included in federal taxable income for the tax year that is attributable to the conversion of a regular individual retirement account into a Roth individual retirement account described in section 408A of the Internal Revenue Code, to the extent that:

(A) The amount was subject to the income tax of another state or the District of Columbia in a prior tax year; and

(B) The taxpayer was a resident of the other state or the District of Columbia for that prior tax year.

(h) Any amounts awarded to the taxpayer by the Public Safety Memorial Fund Board under ORS 243.954 to 243.970 to the extent that the taxpayer has not taken the amount as a deduction in determining the taxpayer’s federal taxable income for the tax year.

[(i) If included in taxable income for federal tax purposes, the amount contributed to a qualified tuition savings program account established under ORS 348.841 to 348.873, except that a subtraction under this paragraph may not exceed:]

[(A) $2,000 for the tax year; or]

[(B) In the case of a married individual filing separately, $1,000 for the tax year.]

[(j)] (i) If included in taxable income for federal tax purposes, the amount withdrawn during the tax year in qualified withdrawals from a [qualified tuition savings program] college savings network account established under ORS 348.841 to 348.873.

(2) There shall be added to federal taxable income:

(a) Interest or dividends, exempt from federal income tax, on obligations or securities of any foreign state or of a political subdivision or authority of any foreign state. However, the amount added under this paragraph shall be reduced by any interest on indebtedness incurred to carry the obligations or securities described in this paragraph and by any expenses incurred in the production of interest or dividend income described in this paragraph.

(b) Interest or dividends on obligations of any authority, commission, instrumentality and territorial possession of the United States [which] that by the laws of the United States are exempt from federal income tax but not from state income taxes. However, the amount added under this paragraph shall be reduced by any interest on indebtedness incurred to carry the obligations or securities described in this paragraph and by any expenses incurred in the production of interest or dividend income described in this paragraph.

(d) The amount of any allowance for depletion in excess of the taxpayer’s adjusted basis in the property depleted, deducted on the taxpayer’s federal income tax return for the taxable year, pursuant to sections 613, 613A, 614, 616 and 617 of the Internal Revenue Code.

(e) For taxable years beginning on or after January 1, 1985, the dollar amount deducted under section 151 of the Internal Revenue Code for personal exemptions for the taxable year.

(f) The amount taken as a deduction on the taxpayer’s federal return for unused qualified business credits under section 196 of the Internal Revenue Code.

(g) The amount of any increased benefits paid to a taxpayer under chapter 569, Oregon Laws 1995, under the provisions of chapter 796, Oregon Laws 1991, and under section 26, chapter 815, Oregon Laws 1991, that is not includable in the taxpayer’s federal taxable income under the Internal Revenue Code.

(h) The amount of any long term care insurance premiums paid or incurred by the taxpayer during the tax year if:

(A) The amount is taken into account as a deduction on the taxpayer’s federal return for the tax year; and

(B) The taxpayer claims the credit allowed under ORS 315.610 for the tax year.

(i) Any amount taken as a deduction under section 1341 of the Internal Revenue Code in computing federal taxable income for the tax year, if the taxpayer has claimed a credit for claim of right income repayment adjustment under ORS 315.068.

[(j) The amount of a nonqualified withdrawal, as defined in ORS 348.841, from a qualified tuition savings program account established under ORS 348.841 to 348.873, to the extent the amount added to federal taxable income under this paragraph does not exceed the lesser of:]

[(A) The total amount contributed to the account within 12 months preceding the date of the nonqualified withdrawal; or]

[(B) $2,000.]

(j) If the taxpayer makes a nonqualified withdrawal, as defined in ORS 348.841, from a college savings network account established under ORS 348.841 to 348.873, the amount of the withdrawal that is attributable to contributions that were subtracted from federal taxable income under section 2 of this 2003 Act.

(3) Discount and gain or loss on retirement or disposition of obligations described under subsection (2)(a) of this section issued on or after January 1, 1985, shall be treated for purposes of this chapter in the same manner as under sections 1271 to 1283 and other pertinent sections of the Internal Revenue Code as if the obligations, although issued by a foreign state or a political subdivision of a foreign state, were not tax exempt under the Internal Revenue Code.

SECTION 4. Section 2 of this 2003 Act and the amendments to ORS 316.680 by section 3 of this 2003 Act apply to contributions made to a college savings network account for tax years beginning on or after January 1, 2004.

NOTE: Section 5 was deleted by amendment. Subsequent sections were not renumbered.

SECTION 6. ORS 348.841 is amended to read:

348.841. As used in ORS 348.841 to 348.873:

(1) “Account” means an individual [trust account or savings] account established in accordance with ORS 348.841 to 348.873.

(2) “Account owner” means the person who has the right to withdraw funds from the account. The account owner may also be the designated beneficiary of the account.

(3) “Board” means the [Oregon Qualified Tuition Savings Board] Oregon 529 College Savings Board established under ORS 348.849.

(4) “Designated beneficiary” means, except as provided in ORS 348.867, the individual designated at the time the account is opened as having the right to receive a qualified withdrawal for the payment of qualified higher education expenses, or if the designated beneficiary is replaced in accordance with ORS 348.867, the replacement.

(5) “Financial institution” means a bank, a commercial bank, a national bank, a savings bank, a savings and loan, a thrift institution, a credit union, an insurance company, a trust company, a mutual fund, an investment firm or other similar entity authorized to do business in this state.

(6) “Higher education institution” means an eligible education institution as defined in section 529(e)(5) of the Internal Revenue Code.

(7) “Internal Revenue Code” means the federal Internal Revenue Code, as amended and in effect [for the tax year of the taxpayer for whom the inclusion or exclusion of income from federal taxable income is being determined, in whole or part, under ORS 348.841 to 348.873] on December 31, 2002.

(8) “Member of the family” shall have the same meaning as contained in section 529(e) of the Internal Revenue Code.

(9) “Network” means the Oregon 529 College Savings Network established under ORS 348.841 to 348.873.

[(9)] (10) “Nonqualified withdrawal” means a withdrawal from an account that is not[:]

[(a)] a qualified withdrawal.[;]

[(b) A withdrawal made as the result of the death or disability of the designated beneficiary;]

[(c) A withdrawal made as the result of a scholarship, allowance or payment described in section 135(d)(1)(B) or (C) of the Internal Revenue Code that is received by the designated beneficiary, but only to the extent of the amount of the scholarship, allowance, or payment; or]

[(d) A rollover or change in the designated beneficiary described in ORS 348.867].

[(10) “Program” means the Oregon Qualified Tuition Savings Program established under ORS 348.841 to 348.873.]

(11) “Qualified higher education expenses” means tuition and other permitted expenses as set forth in section 529(e) of the Internal Revenue Code for the enrollment or attendance of a designated beneficiary at a higher education institution.

(12) “Qualified withdrawal” means a withdrawal made as prescribed under ORS 348.870 and made:

(a) From an account to pay the qualified higher education expenses of the designated beneficiary; [, but only if the withdrawal is also made in accordance with the requirements of ORS 348.870]

(b) As the result of the death or disability of the designated beneficiary;

(c) As the result of a scholarship, allowance or payment described in section 135(d)(1)(A), (B) or (C) of the Internal Revenue Code that is received by the designated beneficiary, but only to the extent of the amount of the scholarship, allowance or payment; or

(d) As a rollover or change in the designated beneficiary described in ORS 348.867.

SECTION 7. ORS 348.844 is amended to read:

348.844. It is the intent of the Legislative Assembly, in enacting ORS 348.841 to 348.873, to create a higher education qualified tuition savings program called the Oregon 529 College Savings Network:

(1) That increases the ability of families and individuals to save for higher education.

(2) In which the earnings on contributions of [program] network participants are exempt from [both federal and] state income taxation [until the moneys are withdrawn by the beneficiary for higher education expenses].

[(3) In which qualified withdrawals are subject to tax at the rate applicable to the beneficiary’s income bracket for both federal and state income tax purposes.]

[(4)] (3) That utilizes the private sector to administer and invest the contributions to the [program] network under the guidance of the [Oregon Qualified Tuition Savings Board] Oregon 529 College Savings Board.

[(5)] (4) In which the contributions and earnings are held by the [program] network in trust for the benefit of designated beneficiaries and account owners for the uses and purposes set forth in ORS 348.841 to 348.873, and for no other benefit, use or purpose.

SECTION 8. ORS 348.849 is amended to read:

348.849. (1) There is established the [Oregon Qualified Tuition Savings Board] Oregon 529 College Savings Board to administer ORS 348.841 to 348.873.

(2) The board shall consist of:

(a) The State Treasurer, who shall serve as the board chairperson;

(b) A member of the State Board of Higher Education, to be selected by the State Board of Higher Education;

(c) A representative of accredited private colleges and universities located in this state, who shall be appointed by the State Treasurer; and

(d) Two public members, who by reason of their education and experience are qualified to serve, and who shall be appointed by the State Treasurer.

(3)(a) The board member who is a member of the State Board of Higher Education shall serve at the pleasure of the State Board of Higher Education but may not serve on the board following the end of the member’s term on the State Board of Higher Education.

(b) The representative of private colleges and universities and the public members of the board shall serve at the pleasure of the State Treasurer for a term of office of three years. These members of the board may be reappointed to subsequent terms.

(4) The State Treasurer and the Department of Higher Education shall provide staff and assistance to the [Oregon Qualified Tuition Savings] board in the administration of the [program] Oregon 529 College Savings Network as directed by the board.

(5) A member of the board is entitled to compensation and expenses as provided in ORS 292.495.

(6) A majority of the members of the board constitutes a quorum for the transaction of business.

SECTION 9. ORS 348.853 is amended to read:

348.853. The [Oregon Qualified Tuition Savings Board] Oregon 529 College Savings Board shall have the following powers, duties, and functions:

(1) To establish, develop, implement and maintain the [Oregon Qualified Tuition Savings Program] Oregon 529 College Savings Network in a manner consistent with ORS 348.841 to 348.873 and section 529 of the Internal Revenue Code and to obtain the benefits of section 529 of the Internal Revenue Code for the [program] network and its participants.

(2) To adopt rules for the general administration of the [program] network, to administer ORS 348.841 to 348.873 and to ensure the [program’s] network’s compliance with section 529 of the Internal Revenue Code.

(3) To maintain, invest and reinvest the funds contributed into the [program] network consistent with the investment restrictions established by the board. The investment restrictions shall be consistent with the objectives of the [program] network, and the board shall exercise the judgment and care then prevailing that persons of prudence, discretion and intelligence exercise in the management of their own affairs with due regard to the probable income and level of risk from certain types of investments of money, in accordance with the policies established by the board.

(4) To make and enter into any and all contracts, agreements or arrangements, and to retain, employ and contract for the services of private and public financial institutions, depositories, consultants, investment advisors or managers and third-party plan administrators and for research, technical and other services necessary or desirable for carrying out the purposes of ORS 348.841 to 348.873.

SECTION 10. ORS 348.857 is amended to read:

348.857. (1) An account owner may establish an account by making an initial contribution to the [Oregon Qualified Tuition Savings Program] Oregon 529 College Savings Network in the name of the designated beneficiary. Once a contribution is made it becomes part of the [program] network and subject to the provisions of ORS 348.841 to 348.873.

(2) Any person may make a contribution to an account once an account is opened.

(3) Contributions to an account shall be made only in cash.

(4) Total contributions to all accounts established on behalf of a particular beneficiary may not exceed those reasonably necessary[, considering the return on contributions, the age and circumstances of the designated beneficiary,] to provide for the qualified higher education expenses of the designated beneficiary. The Oregon 529 College Savings Board shall establish maximum contribution limits applicable to [program] network accounts and shall require the provision of any information from the account owner and the designated beneficiary [as is] that the board deems necessary to establish [the limit as it relates to such account] these limits.

(5) Separate records and accounting shall be required for each account and reports shall be made no less frequently than annually to the account owner [and the designated beneficiary].

(6) The board may collect application, account or administrative fees to defray the costs of the [program] network.

SECTION 11. ORS 348.860 is amended to read:

348.860. (1) Except as permitted in section 529 of the Internal Revenue Code, no person other than the [Oregon Qualified Tuition Savings Board] Oregon 529 College Savings Board or a financial institution in which [Oregon Qualified Tuition Savings Program] Oregon 529 College Savings Network funds have been invested shall have the right to direct the investment of any contributions to or earnings from the [program] network.

(2) The [program] network, the board, each board member and the State of Oregon may not insure any account or guarantee any rate of return or any interest rate on any contribution. The [program] network, the board, each board member and the State of Oregon may not be liable for any loss incurred by any person as a result of participating in the [program] network.

(3) The board, in the exercise of its sole discretion and without liability, may remove the [program’s] network’s funds from any financial institution and reinvest the funds in a similar or different investment alternative at another financial institution pursuant to a contract, agreement or arrangement entered into under ORS 348.853 (4).

SECTION 12. ORS 348.863 is amended to read:

348.863. (1) An account and any interest in an account may not be assignable or pledged or otherwise used to secure or obtain a loan or other advancement.

(2) The right of a designated beneficiary to the payment of qualified higher education expenses or of an account owner to a withdrawal, payments and withdrawals made in exercise of those rights and moneys or property held within an account shall be exempt from garnishment and may not be subject to execution, attachment or any other process or to the operation of any bankruptcy or insolvency law.

(3) A refund of a qualified educational expense payment may not be paid by a higher education institution directly to the designated beneficiary or to the account owner. Any refund of qualified tuition expenses owed by a higher education institution on account of an overpayment of educational expenses must be refunded to the [program] Oregon 529 College Savings Network for credit to an account of the designated beneficiary [beneficiary’s account].

(4) A qualified withdrawal that is used to pay for qualified higher education expenses must be paid as prescribed by section 529 of the Internal Revenue Code and rules adopted by the [Oregon Qualified Tuition Savings Board] Oregon 529 College Savings Board. [The board may by rule establish, among other matters:]

[(a) Requirements for proof that the moneys involved in a qualified withdrawal are to be used only to pay qualified higher education expenses;]

[(b) Procedures and conditions for qualified withdrawals; and]

[(c) The parties that may receive payment of moneys that are the subject of qualified withdrawals.]

[(5) Total contributions to all accounts established on behalf of a particular beneficiary in excess of those reasonably necessary to meet the designated beneficiary’s qualified higher education expenses are prohibited.]

SECTION 13. ORS 348.867 is amended to read:

348.867. (1) An account owner shall have the right at any time to change the designated beneficiary of an account to another individual who is a member of the family of the former designated beneficiary.

(2) An account owner shall have the right at any time to direct that all or a portion of an account be transferred to the account of another designated beneficiary [if the designated beneficiaries are members] who is a member of the [same] family of the former designated beneficiary.

(3) The right to change the designated beneficiary or to transfer between accounts contained in subsections (1) and (2) of this section may be denied if, under rules adopted by the [Oregon Qualified Tuition Savings Board] Oregon 529 College Savings Board, the exercise of the right would result in either excess contributions to an account or the exercise of impermissible investment direction by the account owner.

(4) Individual account information, including but not limited to names, addresses, telephone numbers, personal identification information, amounts contributed and earnings on amounts contributed, is confidential and must be maintained as confidential:

(a) Except to the extent necessary to administer the [Oregon Qualified Tuition Savings Program] Oregon 529 College Savings Network in a manner consistent with ORS 348.841 to 348.873, Oregon tax laws and the Internal Revenue Code; or

(b) Unless the person who provides the information or is the subject of the information expressly agrees in writing that the information may be disclosed.

SECTION 14. ORS 348.869 is amended to read:

348.869. The State of Oregon has no proprietary interest in the contributions or earnings of the [Oregon Qualified Tuition Savings Program] Oregon 529 College Savings Network. Except as otherwise provided by law, the [Oregon Qualified Tuition Savings Board] Oregon 529 College Savings Board is the trustee of the contributions and earnings.

SECTION 15. ORS 348.870 is amended to read:

348.870. (1) Withdrawal from an account may be made as prescribed by the rules adopted by the Oregon 529 College Savings Board. [on 30 days’ written notice to the Oregon Qualified Tuition Savings Board, or on such shorter notice as the board may by rule provide. A withdrawal shall be designated as a qualified withdrawal or a nonqualified withdrawal, and the application shall provide such information and be made on such forms as the board shall find are necessary to enable the board to determine the nature of the withdrawal.]

(2) [An account withdrawal paid to or for the benefit of any person] A financial institution shall report an account withdrawal during any calendar year [shall be reported to the person] to the account owner and the federal Internal Revenue Service. The report shall be made at the time and contain such information as required by law.

[(3) The board shall establish a penalty, at the minimum amount necessary to satisfy the requirements of section 529 of the Internal Revenue Code, for a nonqualified withdrawal on the portion of the withdrawal that constitutes income under section 529 of the Internal Revenue Code.]

[(4) Penalties collected under this section may be used to defray the costs of the program.]

SECTION 16. ORS 348.873 is amended to read:

348.873. The [Oregon Qualified Tuition Savings Board] Oregon 529 College Savings Board shall publish a biennial report to the Governor and the Legislative Assembly detailing the board’s activities. The report shall be prepared on or before February 1 of each odd-numbered year.

SECTION 17. (1) The amendments to ORS 316.680, 348.841, 348.844, 348.849, 348.853, 348.857, 348.860, 348.863, 348.867, 348.869, 348.870 and 348.873 by sections 3 and 6 to 16 of this 2003 Act are intended to change the name of the Oregon Qualified Tuition Savings Program to the Oregon 529 College Savings Network and the Oregon Qualified Tuition Savings Board to the Oregon 529 College Savings Board.

(2) For the purpose of harmonizing and clarifying statute sections published in Oregon Revised Statutes, the Legislative Counsel may substitute for words designating the Oregon Qualified Tuition Savings Program, wherever they occur in Oregon Revised Statutes, other words designating the Oregon 529 College Savings Network.

(3) For the purpose of harmonizing and clarifying statute sections published in Oregon Revised Statutes, the Legislative Counsel may substitute for words designating the Oregon Qualified Tuition Savings Board, wherever they occur in Oregon Revised Statutes, other words designating the Oregon 529 College Savings Board.

SECTION 18. ORS 458.685 is amended to read:

458.685. (1) A person may establish an individual development account only for a purpose approved by a fiduciary organization. Purposes that the fiduciary organization may approve are:

(a) The acquisition of post-secondary education or job training.

(b) If the account holder has established the account for the benefit of a household member who is under the age of 18 years, the payment of extracurricular nontuition expenses designed to prepare the member for post-secondary education or job training.

(c) If the account holder has established a [qualified tuition savings program] college savings network account under ORS 348.841 to 348.873 on behalf of a designated beneficiary, the establishment of an additional [qualified tuition savings program] college savings network account on behalf of the same designated beneficiary.

(d) The purchase of a primary residence. In addition to payment on the purchase price of the residence, account moneys may be used to pay any usual or reasonable settlement, financing or other closing costs. The account holder must not have owned or held any interest in a residence during the three years prior to making the purchase. However, this three-year period shall not apply to displaced homemakers or other individuals who have lost home ownership as a result of divorce.

(e) The capitalization of a small business. Account moneys may be used for capital, plant, equipment and inventory expenses or for working capital pursuant to a business plan. The business plan must have been developed by a financial institution, nonprofit microenterprise program or other qualified agent demonstrating business expertise and have been approved by the fiduciary organization. The business plan must include a description of the services or goods to be sold, a marketing plan and projected financial statements.

(2)(a) If an emergency occurs, an account holder may withdraw all or part of the account holder’s deposits to an individual development account for a purpose not described in subsection (1) of this section. As used in this paragraph, an emergency includes making payments for necessary medical expenses, to avoid eviction of the account holder from the account holder’s residence and for necessary living expenses following a loss of employment.

(b) The account holder must reimburse the account for the amount withdrawn under this subsection within 12 months after the date of the withdrawal. Failure of an account holder to make a timely reimbursement to the account is grounds for removing the account holder from the individual development account program. Until the reimbursement has been made in full, an account holder may not withdraw any matching deposits or accrued interest on matching deposits from the account.

(3) If an account holder withdraws moneys from an individual development account for other than an approved purpose, the fiduciary organization may remove the account holder from the program.

(4) If an account holder moves from the area where the program is conducted or is otherwise unable to continue in the program, the fiduciary organization may remove the account holder from the program.

(5) If an account holder is removed from the program under subsection (2), (3) or (4) of this section, all matching deposits in the account and all interest earned on matching deposits shall revert to the fiduciary organization. The fiduciary organization shall use the reverted funds as a source of matching deposits for other accounts.

SECTION 19. ORS 458.690 is amended to read:

458.690. (1) Notwithstanding ORS 315.271, a fiduciary organization selected under ORS 458.695 may qualify as the recipient of account contributions that qualify the contributor for a tax credit under ORS 315.271 only if the fiduciary organization structures the accounts to have the following features:

(a) The fiduciary organization matches amounts deposited by the account holder according to a formula established by the fiduciary organization. The fiduciary organization shall deposit not less than $1 nor more than $5 into the account for each $1 deposited by the account holder.

(b) The matching deposits by the fiduciary organization to the individual development account are placed in:

(A) A savings account jointly held by the account holder and the fiduciary organization and requiring the signatures of both for withdrawals;

(B) A savings account that is controlled by the fiduciary organization and is separate from the savings account of the account holder; or

(C) In the case of an account established for the purpose described in ORS 458.685 (1)(c), a [qualified tuition savings program] college savings network account under ORS 348.841 to 348.873, in which the fiduciary organization is the account owner as defined in ORS 348.841.

(2) Deposits by a fiduciary organization to an account may not exceed $2,000 in any 12-month period. A fiduciary organization may designate a lower amount as a limit on annual matching deposits to an account.

(3) The total amount paid into an individual development account during its existence, including amounts from deposits, matching deposits and interest or investment earnings, may not exceed $20,000.

SECTION 20. ORS 458.700 is amended to read:

458.700. (1) Subject to Housing and Community Services Department rules, a fiduciary organization has sole authority over, and responsibility for, the administration of individual development accounts. The responsibility of the fiduciary organization extends to all aspects of the account program, including marketing to participants, soliciting matching contributions, counseling account holders, providing financial literacy education, and conducting required verification and compliances activities. The fiduciary organization may establish program provisions as the organization believes necessary to ensure account holder compliance with the provisions of ORS 458.680 and 458.685. Notwithstanding ORS 458.670 (5) and 458.680 (2), a fiduciary organization may establish income and net worth limitations for account holders that are lower than the income and net worth limitations established by ORS 458.670 (5) and 458.680 (2).

(2) A fiduciary organization may act in partnership with other entities, including businesses, government agencies, nonprofit organizations, community development corporations, community action programs, housing authorities and congregations to assist in the fulfillment of fiduciary organization responsibilities under this section and ORS 458.685, 458.690 and 458.695.

(3) A fiduciary organization may use a reasonable portion of moneys allocated to the individual development account program for administration, operation and evaluation purposes.

(4) A fiduciary organization selected to administer moneys directed by the state to individual development account purposes or receiving tax deductible contributions shall provide the Housing and Community Services Department with an annual report of the fiduciary organization’s individual development account program activity. The report shall be filed no later than 90 days after the end of the fiscal year of the fiduciary organization. The report shall include, but is not limited to:

(a) The number of individual development accounts administered by the fiduciary organization;

(b) The amount of deposits and matching deposits for each account;

(d) The number of withdrawals made; and

(e) Any other information the department may require for the purpose of making a return on investment analysis.

(5) A fiduciary organization that is the account owner of a [qualified tuition savings program] college savings network account:

(a) May make a qualified withdrawal only at the direction of the designated beneficiary and only after the [qualified tuition savings program] college savings network account of the account holder that was established for the designated beneficiary has been reduced to a balance of zero exclusively through qualified withdrawals by the designated beneficiary; and

(b) May make nonqualified withdrawals only if the [qualified tuition savings program] college savings network account of the account holder that was established for the designated beneficiary has a balance of less than $100 or if the account holder or designated beneficiary has granted permission to make the withdrawal. Moneys received by a fiduciary organization from a nonqualified withdrawal made under this paragraph must be used for individual development account purposes.

(6) The department may make all reasonable and necessary rules to ensure fiduciary organization compliance with this section and ORS 458.685, 458.690 and 458.695.

SECTION 21. Section 22 of this 2003 Act is added to and made a part of ORS 348.841 to 348.873.

SECTION 22. (1) The Oregon 529 College Savings Network Fund is established in the State Treasury, separate and distinct from the General Fund. Interest earned by the Oregon 529 College Savings Network Fund shall be credited to the fund.

(2) The purpose of the fund is to serve as an operating account for the State Treasury for the administration of the Oregon 529 College Savings Network under ORS 348.841 to 348.873.

SECTION 23. This 2003 Act takes effect on the 91st day after the date on which the regular session of the Seventy-second Legislative Assembly adjourns sine die.

Approved by the Governor June 10, 2003

Filed in the office of Secretary of State June 11, 2003

Effective date November 26, 2003

__________