S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   9626
 
                           I N  A S S E M B L Y
 
                             January 28, 2020
                                ___________
 
 Introduced  by M. of A. SOLAGES -- read once and referred to the Commit-
   tee on Ways and Means
 
 AN ACT to amend the tax law, in relation to establishing  the  New  York
   state early childcare savings program
 
   THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
 BLY, DO ENACT AS FOLLOWS:

   Section 1. The tax law is amended by adding a new article 24-A to read
 as follows:
                               ARTICLE 24-A
                      NEW YORK STATE EARLY CHILDCARE
                              SAVINGS PROGRAM
 SECTION 860. PROGRAM ESTABLISHED.
         861. PURPOSES.
         862. DEFINITIONS.
         863. FUNCTIONS OF THE COMPTROLLER.
         864. POWERS OF THE COMPTROLLER.
         865. PROGRAM REQUIREMENTS; EARLY CHILDCARE SAVINGS ACCOUNT.
         866. PROGRAM LIMITATIONS; EARLY CHILDCARE SAVINGS.
   § 860. PROGRAM ESTABLISHED. THERE IS HEREBY ESTABLISHED THE  NEW  YORK
 STATE EARLY CHILDCARE SAVINGS PROGRAM.
   § 861. PURPOSES. THE PURPOSES OF THE PROGRAM SHALL BE TO AUTHORIZE THE
 ESTABLISHMENT  OF EARLY CHILDCARE SAVINGS ACCOUNTS AND TO PROVIDE GUIDE-
 LINES FOR THE MAINTENANCE OF SUCH ACCOUNTS TO:
   1. ENABLE RESIDENTS OF THIS STATE TO BENEFIT FROM  THE  TAX  INCENTIVE
 PROVIDED  FOR  QUALIFIED  EARLY CHILDCARE SAVINGS ACCOUNTS UNDER SECTION
 SIX HUNDRED TWELVE OF THIS CHAPTER;
   2. ALLOW MORE RESIDENTS TO STAY IN THE WORKFORCE BY PROVIDING A  MEANS
 TO SAVE AND PAY FOR CHILDCARE; AND
   3.  PROVIDE  OPPORTUNITIES  FOR ALL CHILDREN TO RECEIVE QUALITY CHILD-
 CARE.
   § 862. DEFINITIONS. AS USED IN THIS ARTICLE, THE FOLLOWING TERMS SHALL
 HAVE THE FOLLOWING MEANINGS:

  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD14228-01-9
              

 A. 9626                             2
 
   1. "ACCOUNT" OR "EARLY CHILDCARE SAVINGS ACCOUNT" SHALL MEAN AN  INDI-
 VIDUAL  SAVINGS ACCOUNT ESTABLISHED IN ACCORDANCE WITH THE PROVISIONS OF
 THIS ARTICLE.
   2.  "ACCOUNT  OWNER"  SHALL  MEAN  A TAXPAYER WHO ENTERS INTO AN EARLY
 CHILDCARE SAVINGS AGREEMENT PURSUANT TO THE PROVISIONS OF THIS  ARTICLE,
 INCLUDING  A  PERSON WHO ENTERS INTO SUCH AN AGREEMENT AS A FIDUCIARY OR
 AGENT ON BEHALF OF A TRUST, ESTATE, PARTNERSHIP, ASSOCIATION, COMPANY OR
 CORPORATION.
   3. "DESIGNATED BENEFICIARY" SHALL MEAN, WITH RESPECT TO AN ACCOUNT  OR
 ACCOUNTS,  THE  DESIGNATED INDIVIDUAL WHOSE EARLY CHILDCARE EXPENSES ARE
 EXPECTED TO BE PAID FROM THE ACCOUNT OR ACCOUNTS.
   4. "FINANCIAL ORGANIZATION" SHALL MEAN AN ORGANIZATION  AUTHORIZED  TO
 DO  BUSINESS  IN  THE STATE, AND (A) WHICH IS AN AUTHORIZED FIDUCIARY TO
 ACT AS A TRUSTEE PURSUANT TO THE PROVISIONS OF AN ACT OF CONGRESS  ENTI-
 TLED  "EMPLOYEE  RETIREMENT  INCOME  SECURITY  ACT  OF  1974",  AS  SUCH
 PROVISIONS MAY BE AMENDED FROM TIME TO TIME, OR  AN  INSURANCE  COMPANY;
 AND  (B)(I)  IS  LICENSED  OR  CHARTERED  BY THE DEPARTMENT OF FINANCIAL
 SERVICES, (II) IS CHARTERED BY AN  AGENCY  OF  THE  FEDERAL  GOVERNMENT,
 (III)  IS  SUBJECT  TO THE JURISDICTION AND REGULATION OF THE SECURITIES
 AND EXCHANGE COMMISSION OF THE FEDERAL GOVERNMENT,  (IV)  IS  ANY  OTHER
 ENTITY  OTHERWISE  AUTHORIZED TO ACT IN THIS STATE AS A TRUSTEE PURSUANT
 TO THE PROVISIONS OF AN ACT OF CONGRESS  ENTITLED  "EMPLOYEE  RETIREMENT
 INCOME  SECURITY  ACT  OF  1974", AS SUCH PROVISIONS MAY BE AMENDED FROM
 TIME TO TIME, OR (V) IS ANY BANKING ORGANIZATION AS DEFINED IN  SUBDIVI-
 SION  ELEVEN OF SECTION TWO OF THE BANKING LAW, NATIONAL BANKING ASSOCI-
 ATION, STATE CHARTERED CREDIT UNION, FEDERAL MUTUAL SAVINGS BANK, FEDER-
 AL SAVINGS AND LOAN ASSOCIATION OR FEDERAL CREDIT UNION.
   5. "ELIGIBLE CHILDCARE FACILITIES" SHALL MEAN  ANY  LICENSED  FULL-DAY
 CHILDCARE  AND  EARLY  EDUCATION PROGRAM AND CENTERS, LICENSED PART TIME
 CHILDCARE AND EARLY EDUCATION  PROGRAM  AND  CENTERS;  FAMILY  CHILDCARE
 HOMES; AND AFTERSCHOOL PROGRAMS FOR CHILDREN AGED FIVE THROUGH TWELVE.
   6.  "PROGRAM"  SHALL MEAN THE NEW YORK EARLY CHILDCARE SAVINGS PROGRAM
 ESTABLISHED PURSUANT TO THIS ARTICLE.
   7. "QUALIFIED EARLY CHILDCARE EXPENSES" SHALL MEAN MONIES APPLIED  FOR
 THE  SERVICES OF A LICENSED CHILD DAY CARE CENTER, GROUP FAMILY DAY CARE
 HOME, FAMILY DAY CARE HOME AND SCHOOL AGE CHILD CARE AS SUCH  TERMS  ARE
 DEFINED IN SECTION THREE HUNDRED NINETY OF THE SOCIAL SERVICES LAW.
   8.  "QUALIFIED  WITHDRAWAL" SHALL MEAN A WITHDRAWAL FROM AN ACCOUNT TO
 PAY THE QUALIFIED EARLY CHILDCARE EXPENSE OF THE DESIGNATED  BENEFICIARY
 OF THE ACCOUNT.
   9.  "NONQUALIFIED  WITHDRAWAL" SHALL MEAN A WITHDRAWAL FROM AN ACCOUNT
 INCLUDING BUT NOT LIMITED TO EXPENSES FOR PRIMARY, SECONDARY,  OR  POST-
 SECONDARY EDUCATION, BUT SHALL NOT INCLUDE:
   (A) A QUALIFIED WITHDRAWAL;
   (B) A WITHDRAWAL MADE AS THE RESULT OF DEATH;
   (C) AN UNFORESEEABLE EMERGENCY; OR
   (D) NEED BASED UPON QUALIFYING FOR MILITARY SERVICE IN THE ARMED FORC-
 ES  OF  THE UNITED STATES AS DETERMINED BY RULES AND REGULATIONS PROMUL-
 GATED BY THE COMPTROLLER.
   10. "MANAGEMENT CONTRACT" SHALL MEAN  THE  CONTRACT  EXECUTED  BY  THE
 COMPTROLLER AND A FINANCIAL ORGANIZATION SELECTED TO ACT AS A DEPOSITORY
 AND MANAGER OF THE PROGRAM.
   11.  "EARLY  CHILDCARE  SAVINGS  AGREEMENT"  SHALL  MEAN  AN AGREEMENT
 BETWEEN THE COMPTROLLER OR A  FINANCIAL  ORGANIZATION  AND  THE  ACCOUNT
 OWNER.

 A. 9626                             3
 
   12.  "PROGRAM MANAGER" SHALL MEAN A FINANCIAL ORGANIZATION SELECTED BY
 THE COMPTROLLER TO ACT AS A DEPOSITORY AND MANAGER OF THE PROGRAM.
   §  863.  FUNCTIONS OF THE COMPTROLLER. 1. THE COMPTROLLER SHALL IMPLE-
 MENT THE PROGRAM UNDER THE TERMS  AND  CONDITIONS  ESTABLISHED  BY  THIS
 ARTICLE AND A MEMORANDUM OF UNDERSTANDING WITH THE COMMISSIONER RELATING
 TO  ANY TERMS OR CONDITIONS NOT OTHERWISE EXPRESSLY PROVIDED FOR IN THIS
 ARTICLE.
   2. IN FURTHERANCE OF SUCH IMPLEMENTATION THE COMPTROLLER SHALL:
   (A) DEVELOP AND IMPLEMENT THE PROGRAM IN A MANNER CONSISTENT WITH  THE
 PROVISIONS  OF THIS ARTICLE THROUGH RULES AND REGULATIONS ESTABLISHED IN
 ACCORDANCE WITH THE STATE ADMINISTRATIVE PROCEDURE ACT;
   (B) ENGAGE THE SERVICES OF CONSULTANTS ON A CONTRACT BASIS FOR RENDER-
 ING PROFESSIONAL AND TECHNICAL ASSISTANCE AND ADVICE;
   (C) MAKE CHANGES TO THE PROGRAM REQUIRED FOR THE PARTICIPANTS  IN  THE
 PROGRAM TO OBTAIN THE STATE INCOME TAX BENEFITS OR TREATMENT PROVIDED BY
 THIS ARTICLE;
   (D) CHARGE, IMPOSE AND COLLECT ADMINISTRATIVE FEES AND SERVICE CHARGES
 IN  CONNECTION  WITH  ANY AGREEMENT, CONTRACT OR TRANSACTION RELATING TO
 THE PROGRAM;
   (E) DEVELOP MARKETING PLANS AND PROMOTION MATERIALS;
   (F) ESTABLISH THE METHODS BY WHICH THE FUNDS HELD IN SUCH ACCOUNTS  BE
 DISPERSED;
   (G)  ESTABLISH THE METHOD BY WHICH FUNDS SHALL BE ALLOCATED TO PAY FOR
 ADMINISTRATIVE COSTS; AND
   (H) DO ALL THINGS NECESSARY AND PROPER TO CARRY OUT  THE  PURPOSES  OF
 THIS ARTICLE.
   § 864. POWERS OF THE COMPTROLLER. 1. THE COMPTROLLER MAY IMPLEMENT THE
 PROGRAM  THROUGH  USE OF FINANCIAL ORGANIZATIONS AS ACCOUNT DEPOSITORIES
 AND MANAGERS. UNDER THE PROGRAM, AN ACCOUNT OWNER MAY ESTABLISH ACCOUNTS
 DIRECTLY WITH AN ACCOUNT DEPOSITORY.
   2. THE COMPTROLLER MAY SOLICIT PROPOSALS FROM FINANCIAL  ORGANIZATIONS
 TO  ACT AS DEPOSITORIES AND MANAGERS OF THE PROGRAM. FINANCIAL ORGANIZA-
 TIONS SUBMITTING PROPOSALS  SHALL  DESCRIBE  THE  INVESTMENT  INSTRUMENT
 WHICH  WILL BE HELD IN ACCOUNTS. THE COMPTROLLER SHALL SELECT AS PROGRAM
 DEPOSITORIES AND MANAGERS THE FINANCIAL  ORGANIZATION,  FROM  AMONG  THE
 BIDDING  FINANCIAL ORGANIZATIONS THAT DEMONSTRATES THE MOST ADVANTAGEOUS
 COMBINATION, BOTH TO POTENTIAL PROGRAM PARTICIPANTS AND THIS  STATE,  OF
 THE FOLLOWING FACTORS:
   (A) FINANCIAL STABILITY AND INTEGRITY OF THE FINANCIAL ORGANIZATION;
   (B) THE SAFETY OF THE INVESTMENT INSTRUMENT BEING OFFERED;
   (C) THE ABILITY OF THE FINANCIAL ORGANIZATION TO SATISFY RECORDKEEPING
 AND REPORTING REQUIREMENTS;
   (D)  THE  FINANCIAL  ORGANIZATION'S PLAN FOR PROMOTING THE PROGRAM AND
 THE INVESTMENT IT IS WILLING TO MAKE TO PROMOTE THE PROGRAM;
   (E) THE FEES, IF ANY, PROPOSED TO BE CHARGED TO  PERSONS  FOR  OPENING
 ACCOUNTS;
   (F)  THE  MINIMUM  INITIAL  DEPOSIT AND MINIMUM CONTRIBUTIONS THAT THE
 FINANCIAL ORGANIZATION WILL REQUIRE;
   (G) THE ABILITY OF BANKING ORGANIZATIONS TO  ACCEPT  ELECTRONIC  WITH-
 DRAWALS, INCLUDING PAYROLL DEDUCTION PLANS; AND
   (H)  OTHER  BENEFITS  TO  THE  STATE  OR ITS RESIDENTS INCLUDED IN THE
 PROPOSAL, INCLUDING FEES PAYABLE TO THE STATE TO COVER EXPENSES OF OPER-
 ATION OF THE PROGRAM.
   3. THE COMPTROLLER MAY ENTER INTO A CONTRACT WITH A  FINANCIAL  ORGAN-
 IZATION.  SUCH FINANCIAL ORGANIZATION MANAGEMENT MAY PROVIDE ONE OR MORE
 TYPES OF INVESTMENT INSTRUMENT.

 A. 9626                             4
 
   4. THE COMPTROLLER MAY SELECT MORE THAN ONE FINANCIAL ORGANIZATION FOR
 THE PROGRAM.
   5.  A MANAGEMENT CONTRACT SHALL INCLUDE, AT A MINIMUM, TERMS REQUIRING
 THE FINANCIAL ORGANIZATION TO:
   (A) TAKE ANY ACTION REQUIRED TO KEEP THE PROGRAM  IN  COMPLIANCE  WITH
 REQUIREMENTS OF SECTION EIGHT HUNDRED SIXTY-FIVE OF THIS ARTICLE AND ANY
 ACTIONS NOT CONTRARY TO ITS CONTRACT TO MANAGE THE PROGRAM TO QUALIFY AS
 AN "EARLY CHILDCARE SAVINGS ACCOUNT" UNDER THIS ARTICLE;
   (B)  KEEP  ADEQUATE  RECORDS OF EACH ACCOUNT, KEEP EACH ACCOUNT SEGRE-
 GATED FROM EACH OTHER ACCOUNT, AND  PROVIDE  THE  COMPTROLLER  WITH  THE
 INFORMATION  NECESSARY  TO  PREPARE  THE  STATEMENTS REQUIRED BY SECTION
 EIGHT HUNDRED SIXTY-FIVE OF THIS ARTICLE;
   (C) COMPILE AND TOTAL INFORMATION CONTAINED IN STATEMENTS REQUIRED  TO
 BE PREPARED UNDER SUBSECTION FIFTEEN OF SECTION EIGHT HUNDRED SIXTY-FIVE
 OF THIS ARTICLE AND PROVIDE SUCH COMPILATIONS TO THE COMPTROLLER;
   (D) IF THERE IS MORE THAN ONE PROGRAM MANAGER, PROVIDE THE COMPTROLLER
 WITH  SUCH  INFORMATION  NECESSARY  TO DETERMINE COMPLIANCE WITH SECTION
 EIGHT HUNDRED SIXTY-FIVE OF THIS ARTICLE;
   (E) PROVIDE THE COMPTROLLER OR HIS OR HER DESIGNEE ACCESS TO THE BOOKS
 AND RECORDS OF THE PROGRAM MANAGER TO THE  EXTENT  NEEDED  TO  DETERMINE
 COMPLIANCE WITH THE CONTRACT;
   (F) HOLD ALL ACCOUNTS FOR THE BENEFIT OF THE ACCOUNT OWNER;
   (G)  BE  AUDITED  AT  LEAST  ANNUALLY  BY  A  FIRM OF CERTIFIED PUBLIC
 ACCOUNTANTS SELECTED BY THE PROGRAM MANAGER AND THAT THE RESULTS OF SUCH
 AUDIT BE PROVIDED TO THE COMPTROLLER;
   (H) PROVIDE THE COMPTROLLER WITH COPIES OF ALL REGULATORY FILINGS  AND
 REPORTS  MADE  BY IT DURING THE TERM OF THE MANAGEMENT CONTRACT OR WHILE
 IT IS HOLDING ANY ACCOUNTS, OTHER THAN CONFIDENTIAL FILINGS  OR  REPORTS
 THAT WILL NOT BECOME PART OF THE PROGRAM. THE PROGRAM MANAGER SHALL MAKE
 AVAILABLE  FOR  REVIEW  BY  THE  COMPTROLLER THE RESULTS OF ANY PERIODIC
 EXAMINATION OF SUCH MANAGER BY ANY STATE OR FEDERAL  BANKING,  INSURANCE
 OR  SECURITIES  COMMISSION,  EXCEPT  TO  THE  EXTENT THAT SUCH REPORT OR
 REPORTS MAY NOT BE DISCLOSED UNDER APPLICABLE LAW OR THE RULES  OF  SUCH
 COMMISSION; AND
   (I)  ENSURE THAT ANY DESCRIPTION OF THE PROGRAM, WHETHER IN WRITING OR
 THROUGH THE USE OF ANY MEDIA, IS CONSISTENT WITH THE MARKETING  PLAN  AS
 DEVELOPED  PURSUANT  TO  THE  PROVISIONS OF SECTION EIGHT HUNDRED SIXTY-
 THREE OF THIS ARTICLE.
   6. THE COMPTROLLER MAY PROVIDE THAT AN AUDIT SHALL BE CONDUCTED OF THE
 OPERATIONS AND FINANCIAL POSITION OF THE PROGRAM DEPOSITORY AND  MANAGER
 AT  ANY TIME IF THE COMPTROLLER HAS ANY REASON TO BE CONCERNED ABOUT THE
 FINANCIAL POSITION,  THE  RECORDKEEPING  PRACTICES,  OR  THE  STATUS  OF
 ACCOUNTS OF SUCH PROGRAM DEPOSITORY AND MANAGER.
   7.  DURING  THE TERM OF ANY CONTRACT WITH A PROGRAM MANAGER, THE COMP-
 TROLLER SHALL CONDUCT AN EXAMINATION OF SUCH MANAGER AND ITS HANDLING OF
 ACCOUNTS. SUCH EXAMINATION SHALL BE CONDUCTED  AT  LEAST  BIENNIALLY  IF
 SUCH  MANAGER  IS  NOT  OTHERWISE SUBJECT TO PERIODIC EXAMINATION BY THE
 SUPERINTENDENT OF FINANCIAL  SERVICES,  THE  FEDERAL  DEPOSIT  INSURANCE
 CORPORATION OR OTHER SIMILAR ENTITY.
   8.  (A)  IF SELECTION OF A FINANCIAL ORGANIZATION AS A PROGRAM MANAGER
 OR DEPOSITORY IS NOT RENEWED, AFTER THE END OF ITS TERM:
   (I) ACCOUNTS PREVIOUSLY ESTABLISHED AND HELD IN INVESTMENT INSTRUMENTS
 AT SUCH FINANCIAL ORGANIZATION MAY BE TERMINATED;
   (II) ADDITIONAL CONTRIBUTIONS MAY BE MADE TO SUCH ACCOUNTS;
   (III) NO NEW ACCOUNTS MAY BE PLACED WITH SUCH FINANCIAL  ORGANIZATION;
 AND

 A. 9626                             5
 
   (IV) EXISTING ACCOUNTS HELD BY SUCH DEPOSITORY SHALL REMAIN SUBJECT TO
 ALL OVERSIGHT AND REPORTING REQUIREMENTS ESTABLISHED BY THE COMPTROLLER.
   (B)  IF  THE  COMPTROLLER  TERMINATES  A  FINANCIAL  ORGANIZATION AS A
 PROGRAM MANAGER OR DEPOSITORY, HE OR SHE SHALL TAKE CUSTODY OF  ACCOUNTS
 HELD  BY SUCH FINANCIAL ORGANIZATION AND SHALL SEEK TO PROMPTLY TRANSFER
 SUCH ACCOUNTS TO ANOTHER FINANCIAL ORGANIZATION THAT IS  SELECTED  AS  A
 PROGRAM MANAGER OR DEPOSITORY AND INTO INVESTMENT INSTRUMENTS AS SIMILAR
 TO THE ORIGINAL INSTRUMENTS AS POSSIBLE.
   9. THE COMPTROLLER MAY ENTER INTO SUCH CONTRACTS AS IT DEEMS NECESSARY
 AND PROPER FOR THE IMPLEMENTATION OF THE PROGRAM.
   § 865. PROGRAM REQUIREMENTS; EARLY CHILDCARE SAVINGS ACCOUNT. 1. EARLY
 CHILDCARE  SAVINGS  ACCOUNTS  ESTABLISHED  PURSUANT TO THE PROVISIONS OF
 THIS ARTICLE SHALL BE GOVERNED BY THE PROVISIONS OF THIS SECTION.
   2. AN EARLY CHILDCARE SAVINGS ACCOUNT MAY BE OPENED BY ANY PERSON  WHO
 DESIRES  TO  SAVE MONEY FOR THE PAYMENT OF THE QUALIFIED EARLY CHILDCARE
 EXPENSES OF THE DESIGNATED BENEFICIARY. AN ACCOUNT OWNER  MAY  DESIGNATE
 ANOTHER  PERSON  AS  SUCCESSOR  OWNER OF THE ACCOUNT IN THE EVENT OF THE
 DEATH OF THE ORIGINAL ACCOUNT OWNER. SUCH PERSON WHO OPENS AN ACCOUNT OR
 ANY SUCCESSOR OWNER SHALL BE CONSIDERED THE ACCOUNT OWNER.
   (A) AN APPLICATION FOR SUCH ACCOUNT SHALL BE IN THE FORM PRESCRIBED BY
 THE PROGRAM AND CONTAIN THE FOLLOWING:
   (I) THE NAME, ADDRESS AND SOCIAL SECURITY NUMBER OR EMPLOYER IDENTIFI-
 CATION NUMBER OF THE ACCOUNT OWNER;
   (II) THE DESIGNATION OF A DESIGNATED BENEFICIARY;
   (III) THE NAME, ADDRESS, AND SOCIAL SECURITY NUMBER OF THE  DESIGNATED
 BENEFICIARY; AND
   (IV) SUCH OTHER INFORMATION AS THE PROGRAM MAY REQUIRE.
   (B)  THE  COMPTROLLER  AND THE CORPORATION MAY ESTABLISH A NOMINAL FEE
 FOR SUCH APPLICATION.
   3. ANY PERSON, INCLUDING THE ACCOUNT OWNER, MAY MAKE CONTRIBUTIONS  TO
 THE ACCOUNT AFTER THE ACCOUNT IS OPENED.
   4. CONTRIBUTIONS TO ACCOUNTS MAY BE MADE ONLY IN CASH.
   5.  AN  ACCOUNT  OWNER MAY WITHDRAW ALL OR PART OF THE BALANCE FROM AN
 ACCOUNT AS AUTHORIZED UNDER RULES GOVERNING THE  PROGRAM.    SUCH  RULES
 SHALL INCLUDE PROVISIONS THAT WILL GENERALLY ENABLE THE DETERMINATION AS
 TO  WHETHER  A  WITHDRAWAL  IS  A NONQUALIFIED WITHDRAWAL OR A QUALIFIED
 WITHDRAWAL.
   6. (A) AN ACCOUNT OWNER MAY CHANGE THE DESIGNATED  BENEFICIARY  OF  AN
 ACCOUNT  IN  ACCORDANCE WITH PROCEDURES ESTABLISHED BY THE MEMORANDUM OF
 UNDERSTANDING PURSUANT  TO  THE  PROVISIONS  OF  SECTION  EIGHT  HUNDRED
 SIXTY-THREE OF THIS ARTICLE.
   (B)  AN  ACCOUNT  OWNER MAY TRANSFER ALL OR A PORTION OF AN ACCOUNT TO
 ANOTHER EARLY CHILDCARE SAVINGS ACCOUNT.
   (C) CHANGES IN  DESIGNATED  BENEFICIARIES  AND  TRANSFERS  UNDER  THIS
 SUBDIVISION  SHALL  NOT BE PERMITTED TO THE EXTENT THAT THEY WOULD CAUSE
 ALL ACCOUNTS FOR THE SAME BENEFICIARY TO EXCEED THE PERMITTED  AGGREGATE
 MAXIMUM ACCOUNT BALANCE.
   7.  THE  PROGRAM SHALL PROVIDE SEPARATE ACCOUNTING FOR EACH DESIGNATED
 BENEFICIARY.
   8. NO ACCOUNT OWNER OR DESIGNATED BENEFICIARY OF ANY ACCOUNT SHALL  BE
 PERMITTED TO DIRECT THE INVESTMENT OF ANY CONTRIBUTIONS TO AN ACCOUNT OR
 THE EARNINGS THEREON MORE THAN TWO TIMES IN ANY CALENDAR YEAR.
   9.  NEITHER  AN  ACCOUNT OWNER NOR A DESIGNATED BENEFICIARY MAY USE AN
 INTEREST IN AN ACCOUNT AS SECURITY FOR A LOAN. ANY PLEDGE OF AN INTEREST
 IN AN ACCOUNT SHALL BE OF NO FORCE AND EFFECT.

 A. 9626                             6
 
   10. THE COMPTROLLER SHALL PROMULGATE RULES OR REGULATIONS  TO  PREVENT
 CONTRIBUTIONS  ON  BEHALF  OF  A  DESIGNATED BENEFICIARY IN EXCESS OF AN
 AMOUNT THAT WOULD CAUSE THE AGGREGATE ACCOUNT BALANCE FOR  ALL  ACCOUNTS
 FOR  A  DESIGNATED  BENEFICIARY  TO EXCEED A MAXIMUM ACCOUNT BALANCE, AS
 ESTABLISHED FROM TIME TO TIME BY THE COMPTROLLER.
   11.  CONTRIBUTIONS  TO  AN  EARLY  CHILDCARE  SAVINGS ACCOUNT SHALL BE
 LIMITED TO ONE HUNDRED THOUSAND DOLLARS PER ACCOUNT. THIS  AMOUNT  SHALL
 NOT TAKE INTO CONSIDERATION ANY GAIN OR LOSS TO THE PRINCIPAL INVESTMENT
 INTO THE ACCOUNT.
   12.  IN THE EVENT THAT AN INDIVIDUAL MAKES A "NONQUALIFIED WITHDRAWAL"
 OF MONIES FROM THE EARLY CHILDCARE SAVINGS ACCOUNT SUCH INDIVIDUAL SHALL
 HAVE THE ENTIRE ACCOUNT TAXED, INCLUDING ANY INTEREST, AS THOUGH IT  WAS
 INCOME  AT  THE  ACCOUNT  OWNER'S  FEDERAL TAX RATE IN THE TAX YEARS THE
 MONIES WERE WITHDRAWN, AND INCUR AN ADDITIONAL TEN PERCENT STATE PENALTY
 ON THE AMOUNT OF EARNINGS. THE PENALTY SHALL BE IN ADDITION TO ANY TAXES
 DUE PURSUANT TO  A  NONQUALIFIED  WITHDRAWAL  FROM  AN  EARLY  CHILDCARE
 SAVINGS ACCOUNT.
   13.  PENALTIES MAY BE WAIVED BY THE COMMISSIONER IF THE INDIVIDUAL CAN
 SHOW PROOF THAT THE REASON THE INDIVIDUAL  DID  NOT  USE  THE  QUALIFIED
 CHILDCARE EXPENSES WAS DUE TO EITHER:
   (A)  AN  EMPLOYMENT  RELOCATION  OUTSIDE THE STATE AND SUCH RELOCATION
 REQUIRED THE INDIVIDUAL TO BECOME A RESIDENT OF ANOTHER STATE;
   (B) AN UNFORESEEABLE EMERGENCY;
   (C) AN ABSENCE DUE TO QUALIFYING MILITARY SERVICE; OR
   (D) DEATH.
   FOR PURPOSES OF THIS SUBDIVISION, AN "UNFORESEEABLE  EMERGENCY"  SHALL
 MEAN  A  SEVERE  FINANCIAL  HARDSHIP RESULTING FROM ILLNESS, ACCIDENT OR
 PROPERTY LOSS TO THE ACCOUNT OWNER, OR HIS OR HER  DEPENDENTS  RESULTING
 IN CIRCUMSTANCES BEYOND THEIR CONTROL. THE CIRCUMSTANCES THAT CONSTITUTE
 AN  UNFORESEEABLE  FINANCIAL  EMERGENCY WILL DEPEND ON THE FACTS OF EACH
 CASE, HOWEVER, WITHDRAWAL OF ACCOUNT FUNDS  MAY  NOT  BE  MADE,  WITHOUT
 PENALTY,  TO  THE  EXTENT  THAT  SUCH  HARDSHIP IS OR MAY BE RELIEVED BY
 EITHER:
   (I) REIMBURSEMENT OR COMPENSATION BY INSURANCE OR OTHERWISE; OR
   (II) LIQUIDATION OF THE INDIVIDUAL'S ASSETS TO THE EXTENT  THE  LIQUI-
 DATION OF SUCH ASSETS WOULD NOT ITSELF CAUSE SEVERE FINANCIAL HARDSHIP.
   14.  THE  COMMISSIONER  AND THE COMPTROLLER ARE DIRECTED TO PROMULGATE
 ALL RULES AND REGULATIONS NECESSARY TO IMPLEMENT THE PROVISIONS OF  THIS
 SUBSECTION  AND ARE HEREBY DIRECTED TO ESTABLISH, SUPERVISE AND REGULATE
 EARLY CHILDCARE SAVINGS  ACCOUNTS  AUTHORIZED  TO  BE  CREATED  BY  THIS
 SECTION.
   15.  (A)  IF THERE IS ANY DISTRIBUTION FROM AN EARLY CHILDCARE SAVINGS
 ACCOUNT TO ANY INDIVIDUAL OR FOR THE BENEFIT OF ANY INDIVIDUAL DURING  A
 CALENDAR YEAR, SUCH DISTRIBUTION SHALL BE REPORTED TO THE DEPARTMENT AND
 THE ACCOUNT OWNER, THE DESIGNATED BENEFICIARY, OR THE DISTRIBUTEE TO THE
 EXTENT REQUIRED BY LAW OR REGULATION.
   (B)  STATEMENTS  SHALL BE PROVIDED TO EACH ACCOUNT OWNER AT LEAST ONCE
 EACH YEAR WITHIN SIXTY DAYS AFTER THE END OF THE TWELVE-MONTH PERIOD  TO
 WHICH  THEY  RELATE. THE STATEMENT SHALL IDENTIFY THE CONTRIBUTIONS MADE
 DURING A PRECEDING TWELVE-MONTH PERIOD, THE TOTAL CONTRIBUTIONS MADE  TO
 THE  ACCOUNT  THROUGH THE END OF THE PERIOD, THE VALUE OF THE ACCOUNT AT
 THE END OF SUCH PERIOD, DISTRIBUTIONS MADE DURING SUCH  PERIOD  AND  ANY
 OTHER  INFORMATION  THAT THE COMPTROLLER SHALL REQUIRE TO BE REPORTED TO
 THE ACCOUNT OWNER.
   (C) STATEMENTS AND INFORMATION RELATING TO ACCOUNTS SHALL BE  PREPARED
 AND FILED TO THE EXTENT REQUIRED BY THIS CHAPTER.

 A. 9626                             7
 
   16.  AN ANNUAL FEE MAY BE IMPOSED UPON THE ACCOUNT OWNER FOR THE MAIN-
 TENANCE OF THE ACCOUNT.
   17. THE PROGRAM SHALL DISCLOSE THE FOLLOWING INFORMATION IN WRITING TO
 EACH ACCOUNT OWNER OF AN EARLY CHILDCARE SAVINGS ACCOUNT:
   (A)  THE  TERMS  AND  CONDITIONS  FOR  ESTABLISHING AN EARLY CHILDCARE
 SAVINGS ACCOUNT;
   (B) ANY RESTRICTIONS ON THE SUBSTITUTION OF BENEFICIARIES;
   (C) THE PERSON OR ENTITY ENTITLED TO  TERMINATE  THE  EARLY  CHILDCARE
 SAVINGS AGREEMENT;
   (D) THE PERIOD OF TIME DURING WHICH A BENEFICIARY MAY RECEIVE BENEFITS
 UNDER THE EARLY CHILDCARE SAVINGS AGREEMENT;
   (E)  THE  TERMS  AND  CONDITIONS  UNDER  WHICH  MONEY MAY BE WHOLLY OR
 PARTIALLY WITHDRAWN FROM THE PROGRAM, INCLUDING, BUT NOT LIMITED TO, ANY
 REASONABLE CHARGES AND FEES THAT MAY BE IMPOSED FOR WITHDRAWAL;
   (F) THE PROBABLE TAX CONSEQUENCES ASSOCIATED WITH CONTRIBUTIONS TO AND
 DISTRIBUTIONS FROM ACCOUNTS; AND
   (G) ALL OTHER RIGHTS  AND  OBLIGATIONS  PURSUANT  TO  EARLY  CHILDCARE
 SAVINGS  AGREEMENTS,  AND  ANY  OTHER  TERMS, CONDITIONS, AND PROVISIONS
 DEEMED NECESSARY AND APPROPRIATE BY  THE  TERMS  OF  THE  MEMORANDUM  OF
 UNDERSTANDING ENTERED INTO PURSUANT TO SECTION EIGHT HUNDRED SIXTY-THREE
 OF THIS ARTICLE.
   18.  EARLY  CHILDCARE  SAVINGS  AGREEMENTS SHALL BE SUBJECT TO SECTION
 FOURTEEN-C OF THE BANKING LAW  AND  THE  "TRUTH-IN-SAVINGS"  REGULATIONS
 PROMULGATED THEREUNDER.
   19.  NOTHING  IN THIS ARTICLE OR IN ANY EARLY CHILDCARE SAVINGS AGREE-
 MENT ENTERED INTO PURSUANT TO THIS ARTICLE SHALL BE CONSTRUED AS A GUAR-
 ANTEE BY THE STATE THAT THE ACCOUNT OWNER OR DESIGNATED BENEFICIARY WILL
 BE ADMITTED TO A LICENSED CHILDCARE,  EARLY  EDUCATION  PROGRAM,  FAMILY
 CHILDCARE HOME, OR AFTER SCHOOL PROGRAM.
   20.  MONIES  WITHDRAWN  FROM  EARLY CHILDCARE SAVINGS ACCOUNTS AND ANY
 INTEREST WHICH HAS ACCRUED SHALL NOT BE CONSIDERED AS TAXABLE INCOME  TO
 THE  ACCOUNT  OWNER FOR STATE PERSONAL INCOME TAXATION PURPOSES, SO LONG
 AS THE MONIES ARE APPLIED FOR THE QUALIFIED EARLY CHILDCARE EXPENSES  BY
 THE ACCOUNT OWNER OR DESIGNATED BENEFICIARY OF THE ACCOUNT.
   §  866.  PROGRAM  LIMITATIONS;  EARLY CHILDCARE SAVINGS. 1. NOTHING IN
 THIS ARTICLE SHALL BE CONSTRUED TO:
   (A) GIVE ANY DESIGNATED BENEFICIARY ANY RIGHTS OR LEGAL INTEREST  WITH
 RESPECT  TO  AN ACCOUNT UNLESS THE DESIGNATED BENEFICIARY IS THE ACCOUNT
 OWNER;
   (B) CREATE STATE RESIDENCY FOR AN INDIVIDUAL MERELY BECAUSE THE  INDI-
 VIDUAL IS A DESIGNATED BENEFICIARY; OR
   (C)  GUARANTEE  THAT  AMOUNTS  SAVED  PURSUANT  TO THE PROGRAM WILL BE
 SUFFICIENT TO COVER THE QUALIFIED EARLY CHILDCARE EXPENSES OF  A  DESIG-
 NATED BENEFICIARY.
   2.  (A) NOTHING IN THIS ARTICLE SHALL CREATE OR BE CONSTRUED TO CREATE
 ANY OBLIGATION OF THE COMPTROLLER, THE STATE, OR ANY AGENCY  OR  INSTRU-
 MENTALITY OF THE STATE TO GUARANTEE FOR THE BENEFIT OF THE ACCOUNT OWNER
 OR DESIGNATED BENEFICIARY WITH RESPECT TO:
   (I) THE RATE OF INTEREST OR OTHER RETURN ON ANY ACCOUNT; OR
   (II) THE PAYMENT OF INTEREST OR OTHER RETURN ON ANY ACCOUNT.
   (B)  THE  COMPTROLLER SHALL, BY RULE OR REGULATION, PROVIDE THAT EVERY
 CONTRACT, APPLICATION, DEPOSIT SLIP OR OTHER SIMILAR DOCUMENT  THAT  MAY
 BE USED IN CONNECTION WITH A CONTRIBUTION TO AN ACCOUNT CLEARLY INDICATE
 THAT  THE  ACCOUNT IS NOT INSURED BY THE STATE AND NEITHER THE PRINCIPAL
 DEPOSITED NOR THE INVESTMENT RETURN IS GUARANTEED BY THE STATE.

 A. 9626                             8

   § 2. Subsection (b) of section 612 of the tax law is amended by adding
 a new paragraph 43 to read as follows:
   (43)  (A)  EXCESS  DISTRIBUTIONS RECEIVED DURING THE TAXABLE YEAR BY A
 DISTRIBUTEE OF AN EARLY CHILDCARE SAVINGS ACCOUNT ESTABLISHED UNDER  THE
 NEW  YORK STATE EARLY CHILDCARE SAVINGS PROGRAM PROVIDED FOR UNDER ARTI-
 CLE TWENTY-FOUR-A OF THIS CHAPTER, TO THE EXTENT  SUCH  EXCESS  DISTRIB-
 UTIONS  ARE  DEEMED  ATTRIBUTABLE  TO THE DEDUCTIBLE CONTRIBUTIONS UNDER
 PARAGRAPH FORTY-FIVE OF SUBSECTION (C) OF THIS SECTION.
   (B) (I) THE TERM "EXCESS DISTRIBUTIONS" MEANS DISTRIBUTIONS WHICH  ARE
 NOT:
   (I)  QUALIFIED  WITHDRAWALS  WITHIN THE MEANING OF SUBSECTION EIGHT OF
 SECTION EIGHT HUNDRED SIXTY-TWO OF THIS CHAPTER;
   (II) WITHDRAWALS MADE AS A RESULT OF THE DEATH OR  DISABILITY  OF  THE
 DESIGNATED BENEFICIARY WITHIN THE MEANING OF SUBSECTION THREE OF SECTION
 EIGHT HUNDRED SIXTY-TWO OF THIS CHAPTER; OR
   (III)  TRANSFERS  DESCRIBED  IN  PARAGRAPH  (B)  OF  SUBSECTION SIX OF
 SECTION EIGHT HUNDRED SIXTY-FIVE OF THIS CHAPTER.
   (II) EXCESS DISTRIBUTIONS SHALL BE DEEMED ATTRIBUTABLE  TO  DEDUCTIBLE
 CONTRIBUTIONS  TO THE EXTENT THE AMOUNT OF ANY SUCH EXCESS DISTRIBUTION,
 WHEN ADDED TO  ALL  PREVIOUS  EXCESS  DISTRIBUTIONS  FROM  THE  ACCOUNT,
 EXCEEDS THE AGGREGATE OF ALL NONDEDUCTIBLE CONTRIBUTIONS TO THE ACCOUNT.
   § 3. Subsection (c) of section 612 of the tax law is amended by adding
 two new paragraphs 44 and 45 to read as follows:
   (44) CONTRIBUTIONS MADE DURING THE TAXABLE YEAR BY AN ACCOUNT OWNER TO
 ONE  OR  MORE EARLY CHILDCARE SAVINGS ACCOUNTS ESTABLISHED UNDER THE NEW
 YORK STATE EARLY CHILDCARE SAVINGS PROGRAM PROVIDED  FOR  UNDER  ARTICLE
 TWENTY-FOUR-A  OF THIS CHAPTER, TO THE EXTENT NOT DEDUCTIBLE OR ELIGIBLE
 FOR CREDIT FOR FEDERAL  INCOME  TAX  PURPOSES;  PROVIDED,  HOWEVER,  THE
 EXCLUSION  PROVIDED FOR IN THIS PARAGRAPH SHALL NOT EXCEED FIVE THOUSAND
 DOLLARS FOR AN INDIVIDUAL OR HEAD OF HOUSEHOLD, AND FOR MARRIED  COUPLES
 WHO  FILE  JOINT  TAX  RETURNS,  SHALL  NOT EXCEED TEN THOUSAND DOLLARS;
 PROVIDED, FURTHER THAT SUCH EXCLUSION SHALL BE  AVAILABLE  ONLY  TO  THE
 ACCOUNT OWNER AND NOT TO ANY OTHER PERSON.
   (45)  DISTRIBUTIONS  FROM  A  FAMILY  EARLY  CHILDCARE SAVINGS ACCOUNT
 ESTABLISHED UNDER THE NEW YORK STATE  EARLY  CHILDCARE  SAVINGS  PROGRAM
 PROVIDED  FOR UNDER ARTICLE TWENTY-FOUR-A OF THIS CHAPTER, TO THE EXTENT
 INCLUDIBLE IN GROSS INCOME FOR FEDERAL INCOME TAX PURPOSES.
   § 4. This act shall take effect on the one hundred eightieth day after
 it shall have become a law, and shall apply to taxable years  commencing
 on  or  after  the first of January next succeeding the date on which it
 shall have become a law; provided, however, that effective  immediately,
 the commissioner of taxation and finance and the comptroller are author-
 ized  and  directed  to promulgate any rules or regulations necessary to
 implement the provisions of this act on its effective date on or  before
 such date.