S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   5297
 
                        2019-2020 Regular Sessions
 
                           I N  A S S E M B L Y
 
                             February 8, 2019
                                ___________
 
 Introduced  by M. of A. CRESPO -- Multi-Sponsored by -- M. of A. ARROYO,
   DAVILA, DILAN, ENGLEBRIGHT, PICHARDO, RAMOS, RIVERA, RODRIGUEZ -- read
   once and referred to the Committee on Higher Education
 
 AN ACT to amend the education law, in relation to establishing  the  New
   York college debt repayment program

   THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section 1. The education law is amended by adding a new section  355-d
 to read as follows:
   §  355-D.  NEW  YORK COLLEGE DEBT REPAYMENT PROGRAM. 1. A COLLEGE DEBT
 REPAYMENT PROGRAM MAY BE ESTABLISHED BY ANY RESIDENT OF THIS STATE.  THE
 EARNINGS  FROM  THE  PROGRAM SHALL GROW FEDERALLY AND STATE TAX-DEFERRED
 AND WITHDRAWALS FOR QUALIFIED EXPENSES SHALL NOT BE SUBJECT TO STATE  OR
 FEDERAL INCOME TAX.
   2. FOR PURPOSES OF THIS SECTION:
   (A)  THE  TERM "COLLEGE DEBT REPAYMENT PROGRAM" MEANS A PROGRAM ESTAB-
 LISHED AND MAINTAINED BY THIS STATE OR AGENCY OR INSTRUMENTALITY THEREOF
 OR BY ONE OR  MORE  ELIGIBLE  EDUCATIONAL  INSTITUTIONS  UNDER  WHICH  A
 PERSON:
   I.  MAY  PAY  OFF  DEBT INCURRED BY TUITION CREDITS OR CERTIFICATES ON
 BEHALF OF A DESIGNATED BENEFICIARY WHICH ENTITLE THE BENEFICIARY TO  THE
 WAIVER OR PAYMENT OF DEBT INCURRED FROM HIGHER EDUCATION EXPENSES OF THE
 BENEFICIARY, OR
   II.  IN THE CASE OF A PROGRAM ESTABLISHED AND MAINTAINED BY THIS STATE
 OR AGENCY OR INSTRUMENTALITY  THEREOF,  MAY  MAKE  CONTRIBUTIONS  TO  AN
 ACCOUNT  WHICH  IS  ESTABLISHED  FOR  THE  PURPOSE  OF  MEETING THE DEBT
 INCURRED BY QUALIFIED HIGHER EDUCATION EXPENSES OF THE DESIGNATED  BENE-
 FICIARY OF THE ACCOUNT.
   (B)  THE  TERM  "MEMBER OF THE FAMILY" MEANS ANY SPOUSE, CHILD, GRAND-
 CHILD OR FIRST DEGREE COUSIN OF ANY DESIGNATED BENEFICIARY.
   (C) THE TERM "DESIGNATED BENEFICIARY" MEANS:
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
              

                                                            LBD05607-01-9

 A. 5297                             2
 
   I. THE INDIVIDUAL DESIGNATED AT THE COMMENCEMENT OF  PARTICIPATION  IN
 THE  COLLEGE  DEBT  REPAYMENT PROGRAM AS THE BENEFICIARY OF AMOUNTS PAID
 (OR TO BE PAID) TO THE PROGRAM; OR
   II.  IN  THE  CASE OF A CHANGE IN BENEFICIARIES, THE INDIVIDUAL WHO IS
 THE NEW BENEFICIARY.
   (D) THE TERM "QUALIFIED HIGHER EDUCATION EXPENSES" MEANS:
   I. TUITION, ROOM AND  BOARD,  FEES,  BOOKS,  SUPPLIES,  AND  EQUIPMENT
 REQUIRED FOR THE ENROLLMENT OR ATTENDANCE OF A DESIGNATED BENEFICIARY AT
 AN ELIGIBLE EDUCATIONAL INSTITUTION;
   II. EXPENSES FOR SPECIAL NEEDS SERVICES IN THE CASE OF A SPECIAL NEEDS
 BENEFICIARY  WHICH  ARE  INCURRED  IN CONNECTION WITH SUCH ENROLLMENT OR
 ATTENDANCE; OR
   III. EXPENSES PAID OR INCURRED IN TWO THOUSAND NINE  OR  TWO  THOUSAND
 TEN  FOR  THE PURCHASE OF ANY COMPUTER TECHNOLOGY OR INTERNET ACCESS AND
 RELATED SERVICES, IF SUCH TECHNOLOGY, EQUIPMENT, OR SERVICES ARE  TO  BE
 USED  BY  THE BENEFICIARY AND THE BENEFICIARY'S FAMILY DURING ANY OF THE
 YEARS THE BENEFICIARY IS ENROLLED AT AN  ELIGIBLE  EDUCATIONAL  INSTITU-
 TION.
   (E)  THE  TERM "ELIGIBLE EDUCATIONAL INSTITUTION" MEANS AN INSTITUTION
 WHICH IS DESCRIBED IN SECTION 481 OF THE HIGHER EDUCATION  ACT  OF  1965
 (20 U.S.C. 1088), AS IN EFFECT ON THE EFFECTIVE DATE OF THIS PARAGRAPH.
   (F) A PROGRAM SHALL NOT BE TREATED AS A COLLEGE DEBT REPAYMENT PROGRAM
 UNLESS  IT  PROVIDES THAT PURCHASES OR CONTRIBUTIONS MAY ONLY BE MADE IN
 CASH.
   (G) A PROGRAM SHALL NOT BE TREATED AS A COLLEGE DEBT REPAYMENT PROGRAM
 UNLESS IT PROVIDES SEPARATE ACCOUNTING FOR EACH DESIGNATED BENEFICIARY.
   (H) A PROGRAM SHALL NOT BE TREATED AS A COLLEGE DEBT REPAYMENT PROGRAM
 UNLESS IT PROVIDES THAT ANY CONTRIBUTOR TO,  OR  DESIGNATED  BENEFICIARY
 UNDER,  SUCH  PROGRAM MAY, DIRECTLY OR INDIRECTLY, DIRECT THE INVESTMENT
 OF ANY CONTRIBUTIONS TO THE PROGRAM (OR ANY EARNINGS  THEREON)  NO  MORE
 THAN TWO TIMES IN ANY CALENDAR YEAR.
   (I) A PROGRAM SHALL NOT BE TREATED AS A COLLEGE DEBT REPAYMENT PROGRAM
 IF  IT  ALLOWS  ANY INTEREST IN THE PROGRAM OR ANY PORTION THEREOF TO BE
 USED AS SECURITY FOR A LOAN.
   (J) A PROGRAM SHALL NOT BE TREATED AS A COLLEGE DEBT REPAYMENT PROGRAM
 UNLESS IT PROVIDES  ADEQUATE  SAFEGUARDS  TO  PREVENT  CONTRIBUTIONS  ON
 BEHALF  OF  A  DESIGNATED  BENEFICIARY  IN  EXCESS OF THOSE NECESSARY TO
 PROVIDE FOR THE DEBT INCURRED BY THE QUALIFIED HIGHER EDUCATION EXPENSES
 OF THE BENEFICIARY.
   3. (A) EXCEPT AS OTHERWISE PROVIDED IN  THIS  SUBDIVISION,  NO  AMOUNT
 SHALL BE INCLUDIBLE IN GROSS INCOME OF:
   I. A DESIGNATED BENEFICIARY UNDER A COLLEGE DEBT REPAYMENT PROGRAM; OR
   II.  A CONTRIBUTOR TO SUCH PROGRAM ON BEHALF OF A DESIGNATED BENEFICI-
 ARY, WITH RESPECT TO ANY DISTRIBUTION OR EARNINGS UNDER SUCH PROGRAM.
   (B) ANY CONTRIBUTION TO A COLLEGE DEBT REPAYMENT PROGRAM ON BEHALF  OF
 ANY DESIGNATED BENEFICIARY SHALL:
   I.  BE  TREATED AS A COMPLETED GIFT TO SUCH BENEFICIARY WHICH IS NOT A
 FUTURE INTEREST IN PROPERTY; AND
   II. NOT BE TREATED AS A QUALIFIED TRANSFER UNDER  SECTION  2503(E)  OF
 THE INTERNAL REVENUE CODE.
   (C)  IF  THE  AGGREGATE AMOUNT OF CONTRIBUTIONS DESCRIBED IN PARAGRAPH
 (B) OF THIS SUBDIVISION DURING THE CALENDAR YEAR BY A DONOR EXCEEDS  THE
 LIMITATION  FOR  SUCH YEAR UNDER SECTION 2503(B) OF THE INTERNAL REVENUE
 CODE, SUCH AGGREGATE AMOUNT SHALL, AT THE  ELECTION  OF  THE  DONOR,  BE
 TAKEN  INTO  ACCOUNT  FOR PURPOSES OF SUCH SECTION RATABLY OVER THE FIVE
 YEAR PERIOD BEGINNING WITH SUCH CALENDAR YEAR.

 A. 5297                             3
 
   4. (A) ANY DISTRIBUTION UNDER A COLLEGE DEBT REPAYMENT  PROGRAM  SHALL
 BE  INCLUDIBLE  IN  THE GROSS INCOME OF THE DISTRIBUTEE IN THE MANNER AS
 PROVIDED UNDER SECTION 72 OF THE INTERNAL REVENUE CODE.
   (B)  NO AMOUNT SHALL BE INCLUDIBLE IN GROSS INCOME UNDER PARAGRAPH (A)
 OF THIS SUBDIVISION BY  REASON  OF  A  DISTRIBUTION  WHICH  CONSISTS  OF
 PROVIDING A BENEFIT TO THE DISTRIBUTEE WHICH, IF PAID FOR BY THE DISTRI-
 BUTEE, WOULD CONSTITUTE PAYMENT OF A QUALIFIED HIGHER EDUCATION EXPENSE.
   (C)  IN  THE  CASE  OF DISTRIBUTIONS NOT DESCRIBED IN PARAGRAPH (B) OF
 THIS SUBDIVISION, IF:
   I. SUCH DISTRIBUTIONS DO NOT EXCEED THE DEBT INCURRED BY THE QUALIFIED
 HIGHER EDUCATION EXPENSES (REDUCED BY EXPENSES  DESCRIBED  IN  PARAGRAPH
 (B) OF THIS SUBDIVISION), NO AMOUNT SHALL BE INCLUDIBLE IN GROSS INCOME;
 AND
   II. IN ANY OTHER CASE, THE AMOUNT OTHERWISE INCLUDIBLE IN GROSS INCOME
 SHALL  BE REDUCED BY AN AMOUNT WHICH BEARS THE SAME RATIO TO SUCH AMOUNT
 AS SUCH EXPENSES BEAR TO SUCH DISTRIBUTIONS.
   (D) ANY BENEFIT FURNISHED TO A DESIGNATED BENEFICIARY UNDER A  COLLEGE
 DEBT REPAYMENT PROGRAM SHALL BE TREATED AS A DISTRIBUTION TO THE BENEFI-
 CIARY FOR PURPOSES OF THIS SUBDIVISION.
   (E)  PARAGRAPH (A) OF THIS SUBDIVISION SHALL NOT APPLY TO THAT PORTION
 OF ANY DISTRIBUTION WHICH, WITHIN SIXTY DAYS OF  SUCH  DISTRIBUTION,  IS
 TRANSFERRED:
   I.  TO  ANOTHER  COLLEGE DEBT REPAYMENT PROGRAM FOR THE BENEFIT OF THE
 DESIGNATED BENEFICIARY; OR
   II. TO THE CREDIT OF ANOTHER DESIGNATED BENEFICIARY  UNDER  A  COLLEGE
 DEBT  REPAYMENT  PROGRAM WHO IS A MEMBER OF THE FAMILY OF THE DESIGNATED
 BENEFICIARY WITH RESPECT TO WHICH THE DISTRIBUTION WAS MADE.
   (F) ANY CHANGE IN THE DESIGNATED  BENEFICIARY  OF  AN  INTEREST  IN  A
 COLLEGE  DEBT  REPAYMENT  PROGRAM SHALL NOT BE TREATED AS A DISTRIBUTION
 FOR PURPOSES OF PARAGRAPH (A) OF THIS SUBDIVISION IF THE NEW BENEFICIARY
 IS A MEMBER OF THE FAMILY OF THE OLD BENEFICIARY.
   5. (A) ALL COLLEGE DEBT REPAYMENT PROGRAMS OF WHICH AN INDIVIDUAL IS A
 DESIGNATED BENEFICIARY SHALL BE TREATED AS ONE PROGRAM;
   (B) ALL DISTRIBUTIONS DURING A TAXABLE YEAR SHALL BE  TREATED  AS  ONE
 DISTRIBUTION; AND
   (C)  THE VALUE OF THE CONTRACT, INCOME ON THE CONTRACT, AND INVESTMENT
 IN THE CONTRACT SHALL BE COMPUTED AS OF THE CLOSE OF THE  CALENDAR  YEAR
 IN WHICH THE TAXABLE YEAR BEGINS.
   6.  (A) NO AMOUNT SHALL BE INCLUDIBLE IN THE GROSS ESTATE OF ANY INDI-
 VIDUAL FOR PURPOSES OF CHAPTER 11 OF THE INTERNAL REVENUE CODE BY REASON
 OF AN INTEREST IN A COLLEGE DEBT REPAYMENT PROGRAM.
   (B) PARAGRAPH (A) OF THIS  SUBDIVISION  SHALL  NOT  APPLY  TO  AMOUNTS
 DISTRIBUTED ON ACCOUNT OF THE DEATH OF A BENEFICIARY.
   (C)  IN  THE CASE OF A DONOR WHO MAKES THE ELECTION DESCRIBED IN PARA-
 GRAPH (C) OF SUBDIVISION THREE OF THIS SECTION AND WHO DIES  BEFORE  THE
 CLOSE  OF  THE  FIVE YEAR PERIOD REFERRED TO IN SUCH PARAGRAPH, NOTWITH-
 STANDING PARAGRAPH (A) OF THIS SUBDIVISION,  THE  GROSS  ESTATE  OF  THE
 DONOR SHALL INCLUDE THE PORTION OF SUCH CONTRIBUTIONS PROPERLY ALLOCABLE
 TO PERIODS AFTER THE DATE OF DEATH OF THE DONOR.
   (D)  EXCEPT  AS  PROVIDED  IN PARAGRAPH (E) OF THIS SUBDIVISION, IN NO
 EVENT SHALL A DISTRIBUTION FROM A  COLLEGE  DEBT  REPAYMENT  PROGRAM  BE
 TREATED AS A TAXABLE GIFT.
   (E)  THE  TAXES  IMPOSED BY CHAPTERS 12 AND 13 OF THE INTERNAL REVENUE
 CODE SHALL APPLY TO A TRANSFER BY REASON OF A CHANGE IN  THE  DESIGNATED
 BENEFICIARY  UNDER  THE  PROGRAM  (OR A ROLLOVER TO THE ACCOUNT OF A NEW
 BENEFICIARY) UNLESS THE NEW BENEFICIARY IS:

 A. 5297                             4
 
   I. ASSIGNED TO THE SAME GENERATION AS (OR A  HIGHER  GENERATION  THAN)
 THE  OLD  BENEFICIARY (DETERMINED IN ACCORDANCE WITH SECTION 2651 OF THE
 INTERNAL REVENUE CODE); AND
   II. A MEMBER OF THE FAMILY OF THE OLD BENEFICIARY.
   7.  THE  TAX IMPOSED BY SECTION 530(D)(4) OF THE INTERNAL REVENUE CODE
 SHALL APPLY TO ANY PAYMENT OR DISTRIBUTION FROM A COLLEGE DEBT REPAYMENT
 PROGRAM IN THE SAME MANNER AS SUCH TAX APPLIES TO A PAYMENT OR  DISTRIB-
 UTION FROM A COVERDELL EDUCATION SAVINGS ACCOUNT. THIS SUBDIVISION SHALL
 NOT  APPLY  TO ANY PAYMENT OR DISTRIBUTION IN ANY TAXABLE YEAR BEGINNING
 BEFORE JANUARY FIRST, TWO THOUSAND FOUR, WHICH IS  INCLUDIBLE  IN  GROSS
 INCOME  BUT  USED  FOR QUALIFIED HIGHER EDUCATION EXPENSES OF THE DESIG-
 NATED BENEFICIARY.
   8. A CONTRIBUTOR SHALL MAKE AN INITIAL INVESTMENT OF AT LEAST  TWENTY-
 FIVE  DOLLARS  AND MAY CONTRIBUTE UP TO THREE HUNDRED SEVENTY-FIVE THOU-
 SAND DOLLARS TO A COLLEGE DEBT REPAYMENT PROGRAM.
   9. ANY DESIGNATED BENEFICIARY WHO WITHDRAWS FUNDS TO PAY FOR NONQUALI-
 FIED EXPENSES SHALL PAY A TEN PERCENT PENALTY TAX ON EARNINGS AS WELL AS
 FEDERAL AND STATE INCOME TAX.
   10. THE COMPTROLLER SHALL BE AUTHORIZED TO OFFER AGE-BASED OPTIONS FOR
 PARTICIPANTS OF THE PROGRAM SIMILAR TO THOSE OFFERED IN THIS STATE'S 529
 COLLEGE SAVINGS PROGRAM.
   11. (A) INDIVIDUAL TAXPAYERS MAY DEDUCT THE CONTRIBUTIONS THEY MAKE TO
 A COLLEGE DEBT REPAYMENT PROGRAM, UP TO FIVE THOUSAND DOLLARS ANNUALLY.
   (B) MARRIED INDIVIDUAL TAXPAYERS THAT  FILE  JOINTLY  MAY  DEDUCT  THE
 CONTRIBUTIONS  THEY  MAKE TO A COLLEGE DEBT REPAYMENT PROGRAM, UP TO TEN
 THOUSAND DOLLARS ANNUALLY.
   § 2. This act shall take effect on the one hundred eightieth day after
 it shall have become a law.