AB 185

Under current law, there is a college tuition and expenses program, commonly

referred to as "EdVest I," under which a contributor may purchase "tuition units"

that can be used to pay qualified educational costs on behalf of a beneficiary. The

purchase of the units is limited to parents, grandparents, aunts, uncles, legal

guardians, trusts created on behalf of a beneficiary, or individuals purchasing units

for their own use. Contributions made to an account set up under the program, up

to a limit of $3,000 each year for each beneficiary, may be deducted from a

contributor's income in the calculation of his or her income taxes if the beneficiary

of the account is one of the following: the claimant; the claimant's child; the

claimant's grandchild; the claimant's great-grandchild; or the claimant's niece or

nephew.

Also, under current law, there exists a college savings program, commonly

referred to as "EdVest II," under which anyone may open an account for a prospective

student, regardless of the contributor's relationship to the beneficiary. Individuals

may open accounts for themselves, and a prospective student may be the beneficiary

of more than one college savings account. Contributions made to an account set up

under this program, up to a limit of $3,000 each year for each beneficiary, may be

deducted from a contributor's income in the calculation of his or her income taxes if

the beneficiary of the account is one of the following: the claimant; the claimant's

child; the claimant's grandchild; the claimant's great-grandchild; or the claimant's

niece or nephew.

Current law authorizes an income tax deduction for amounts contributed to

both EdVest I and EdVest II by a divorced or legally separated parent of a child. The

deduction may be claimed without regard to whether the child is his or her

dependent. The total annual deduction under these two programs, per beneficiary,

claimed by married parents who file jointly or separately, or by the divorced or legally

separated parents of a child, may not exceed $3,000. The total annual deduction

under these two programs, per beneficiary, claimed by a married person who files

separately may not exceed $1,500 per claimant. The total annual deduction under

these two programs, per beneficiary, claimed by a formerly married couple may not

exceed a total of $3,000, or $1,500 per claimant, except that the former couple's

divorce judgment may specify a different division of the $3,000 maximum that may

be claimed by each former spouse.

The only individuals who may purchase tuition units for an EdVest I account

or contribute to an EdVest II account, and receive income tax deductions for such a

purchase or contribution, are the owners of the accounts. Under this bill, an

authorized contributor to an EdVest I or EdVest II account who is not the owner of

the account may claim a tax deduction for his or her contribution, subject to the

current law limitations, if the claimant is the parent, grandparent,

great-grandparent, aunt, or uncle of the beneficiary.