Bill Text: CA SB292 | 2023-2024 | Regular Session | Amended
Bill Title: Education expenses: Education Savings Account Act of 2024.
Spectrum: Moderate Partisan Bill (Republican 9-1)
Status: (Failed) 2024-02-01 - Returned to Secretary of Senate pursuant to Joint Rule 62(a). [SB292 Detail]
Download: California-2023-SB292-Amended.html
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Amended
IN
Senate
March 30, 2023 |
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Amended
IN
Senate
March 08, 2023 |
CALIFORNIA LEGISLATURE—
2023–2024 REGULAR SESSION
Senate Bill
No. 292
| Introduced by Senator Grove (Coauthors: Senators Dahle, Jones, Nguyen, Niello, Seyarto, and Wilk) (Coauthors: Assembly Members Dixon, Blanca Rubio, and Ta) |
February 02, 2023 |
An act to add Article 19.1 (commencing with Section 69995) to Chapter 2 of Part 42 of Division 5 of Title 3 of the Education Code, and to add Section 17132.2 to the Revenue and Taxation Code, relating to education expenses, and making an appropriation therefor.
LEGISLATIVE COUNSEL'S DIGEST
SB 292, as amended, Grove.
Education expenses: Education Savings Account Act of 2024.
(1) Existing law establishes a system of elementary and secondary education in this state. This system consists of the public and private schools that provide instruction in kindergarten and in grades 1 to 12, inclusive. Existing law establishes a system of higher education in this state, consisting of 4 segments: the University of California, under the administration of the Regents of the University of California; the California State University, under the administration of the Trustees of the California State University; the California Community Colleges, under the administration of the Board of Governors of the California Community Colleges; and independent institutions of higher education.
This bill would enact the Education Savings Account Act of 2024 and establish the Education Savings Account (ESA) Trust, to be
known as the ESA Trust, as a fund within the State Treasury to be administered by the ESA Trust Board. During the first 4 school years following the operative date of the act, the bill would authorize certain children eligible to be enrolled in kindergarten, or in an elementary or secondary school, in any of grades 1 to 12, inclusive, to establish an ESA, based on parent or guardian income. The bill would remove these income eligibility limits after 4 school years following the operative date of the act, thereby entitling every child eligible to be enrolled in kindergarten, or in an elementary or secondary school, in any of grades 1 to 12, inclusive, to establish an ESA. The bill would specify that every child enrolled in an eligible school shall be entitled, pursuant to this act, to a credit to the child’s account for tuition, elementary and secondary eligible education expenses, and undergraduate or graduate eligible education expenses, as defined. Commencing with the first fiscal year following the
operative date of the act, the bill would require the Department of Finance to determine, on July 1 of each year, the annual ESA deposit amount for the upcoming school year. The bill would specify the procedure for calculating the ESA deposit amount and would require the Controller to transfer an amount of money from the General Fund to the ESA Trust equal to the ESA deposit amount multiplied by the number of ESAs established, as provided.
The bill would require the ESA Trust Board to be composed of specified members and would vest the ESA Trust Board with certain powers and duties. The bill would establish 2 accounts within the ESA Trust, the ESA Trust Program Account and the ESA Trust Administrative Account, and would continuously appropriate the moneys in the program account to the ESA Trust Board for purposes of the bill, thereby making an appropriation.
The bill would require the Superintendent of Public Instruction to
establish a procedure for the parents and legal guardians of eligible students to apply to establish an ESA and submit an executed participation agreement. The bill would authorize the ESA Trust Board to disburse funds from ESAs to eligible schools. The bill would define “eligible school” as a campus of the California Community Colleges, the California State University, and the University of California, a full-time private school, a private college or university, a public college or university, or a vocational educational or training institution, as specified. The bill would specify the procedures for participating eligible schools to receive funds disbursed by the ESA Trust Board. Once an eligible student graduates from high school or obtains a high school equivalency certification, the bill would impose a $60,000 cap on the balance in any ESA available for an eligible student’s use for tuition, undergraduate or graduate eligible education expenses, or expenses associated with vocational education. The bill
would require the Department of Finance to adjust this limit annually for inflation using the California Consumer Price Index.
(2) The Classroom Instructional Improvement and Accountability Act, an initiative approved by the voters as Proposition 98 at the November 8, 1988, statewide general election, amended the California Constitution to, among other things, set forth a formula for computing the minimum amount of revenues that the state is required to appropriate for the support of school districts and community college districts based on one of 3 tests in any given fiscal year, one of which is based on the percentage of General Fund revenues appropriated for school districts and community college districts, respectively, in the 1986–87 fiscal year, and two 2
of which are based on, among other things, changes in enrollment.
This bill would require the Legislature to recalculate that minimum education funding guarantee by including eligible students not enrolled in a public elementary or secondary school before the operative date of the act in those minimum funding guarantee calculations based on average daily attendance, as provided. The bill would also require the costs of providing ESA deposit amounts for eligible students to be apportioned between the General Fund and the public school district in which those eligible students reside in the same ratio of General Fund and local property tax revenue that would have been used to educate those eligible students in their public school district.
(3) The Personal Income Tax Law, in modified conformity with federal law, generally defines “gross income” as income from whatever source derived, except as
specifically excluded, and provides various exclusions from gross income for purposes of computing tax liability.
This bill would, for taxable years beginning on or after January 1, 2025, exclude from gross income any amounts received as distribution from an ESA, as defined, as part of a participation agreement.
Existing law requires a bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives the tax expenditure will achieve, detailed performance indicators, and data collection requirements.
This bill would include additional information required for any bill authorizing a new tax expenditure.
(4) These provisions would become operative on January 1, 2025, only if Senate Constitutional Amendment ____
5 of the 2023–24 Regular Session is approved by the voters at the statewide general election on November 5, 2024.
Digest Key
Vote: 2/3 Appropriation: YES Fiscal Committee: YES Local Program: NOBill Text
The people of the State of California do enact as follows:
SECTION 1.
The Legislature finds and declares all of the following:(a) California’s civic, economic, and cultural future requires educational options that prepare every pupil and student for a worthwhile role in our vibrant state.
(b) Pupils and students are struggling under an outdated, one-size-fits-all system that is not focused on cultivating their unique talents and interests and has a bias toward four-year degrees as the only path to success. Parents watch their children struggle, with few who have any access or resources to help. Seasoned educators forced to “teach to the test” are
unable to identify and cultivate their pupils’ and students’ potential.
(c) Pupils, students, parents, and educators are increasingly demanding a more individualized approach to build a well-rounded, thoughtful, and resilient citizen. They want a learning environment where each pupil and student is uniquely known and valued, with customized learning experiences focused on children’s interests and aptitudes, and trust and respect for the parents’ role in developing and educating their children.
(d) Financial barriers have many parents feeling that they have no options but to send their children to neighborhood schools. Private schools, charter schools, and home schools are achieving better educational results at a much lower cost, but these options are unaffordable or unavailable
for most pupils. ZIP Codes and lotteries determine the educational options available for most low- and middle-income pupils.
(e) Before the COVID-19 pandemic, around 10 percent of pupils in California were using alternative education options, but the pandemic required families to try alternatives. Today more than 60 percent of families are interested in alternative learning options for their pupils beyond the traditional public school system.
(f) California now spends around $23,000 per year for each child in public school, including around $17,000 from state funds. Spending more on the current and outdated system will not yield better results. Letting parents decide the school that offers the best options and learning experiences for their pupil is a better use of education
funds. The increasing demand for alternatives will create a range of exciting educational opportunities that all pupils can enjoy.
(g) California is the fifth largest economy in the world, and needs to offer a world-class, individualized, and customized education to every K–12 pupil in our state in order to continue providing for a sustainable and vibrant economy. As such, the state needs to innovate its education system to encourage our
children to discover their unique talents, turn those talents into skills, and use those skills to create value for themselves and for others.
(h) Therefore, the people hereby enact the Education Savings Account Act of 2024. The act includes the following provisions:
(1) During the first year after the act is operative, $17,000 will be available to each pupil and each student, to be used toward tuition and education expenses at an accredited private school of their choice. The annual amount shall be adjusted each year. An Education Savings Account will be established at the request of the pupil or student’s parent or legal guardian.
(2) The Education Savings Account will be available to the lowest income
families the first two years after the act is operative, middle income families the next two years after the act is operative, and all families four years after the act is operative.
(3) Any unused funds in the Education Savings Account, and the investment earnings of such funds, will be rolled over for use in future school years.
(4) Upon completion of high school or General Educational Development, general educational development, up to $60,000 remaining in the student’s Education Savings Account will be available for that child for college or vocational school.
(5) All of this will be achieved at no additional cost to taxpayers.
SEC. 2.
Article 19.1 (commencing with Section 69995) is added to Chapter 2 of Part 42 of Division 5 of Title 3 of the Education Code, to read:Article 19.1. Education Savings Account Act of 2024
69995.
This article shall be known, and may be cited, as the Education Savings Account Act of 2024.69995.169995.1.
For purposes of this article, the following definitions apply:(a) “Account beneficiary” means the eligible student for whom an ESA was established by the ESA Trust Board.
(b) “Administrative account” means the account established within the ESA Trust pursuant to subdivision (f) of Section 69995.2 from which the costs of administering the ESA Trust shall be paid.
(c) “Costs of
administration” means the actual costs of the ESA Trust Board to administer ESAs, subject to the limit established in subdivision (d) of Section 69995.3.
(d) “Elementary and secondary eligible education expenses” means the expenses typically associated with the education of an eligible student enrolled in a public elementary or secondary school or enrolled in an eligible school, other than tuition, including, but not limited to, books, school supplies and equipment, academic tutoring, academic testing fees, special needs services of a special needs account beneficiary, transportation to and from school, and school functions. Expenses incurred by an eligible student to attend a community college before high school graduation, including tuition, shall be elementary and secondary eligible education expenses.
(e) “Eligible school” means any of the following:
(1) A campus of the California Community Colleges, the California State University, or the University of California.
(2) A full-time private school, as described in Section 48222, operating in the state and accredited by a regional accrediting agency recognized by the state or the United States Department of Education, or a school that has applied for accreditation, but such application is pending, and the school has not been denied accreditation in the prior two years by the same accrediting agency.
(3) A private college or university accredited by a regional accrediting agency recognized by the state or
the United States Department of Education.
(4) A public college or university accredited by a regional accrediting agency recognized by the state that operates it or the United States Department of Education.
(5) A vocational education or training institution accredited by a regional accrediting agency recognized by the state or the United States Department of Education and operating in California.
(f) “Eligible student” means every child eligible to enroll in a public elementary or secondary school and enrolled in an eligible school, except as follows:
(1) During the first two school years following the operative date of this article, an eligible student is a child
whose parent or guardian’s taxable income is less than fifty thousand dollars ($50,000) per year for a single filer and one hundred thousand dollars ($100,000) per year for dual filers.
(2) During the two school years following the period described in paragraph (1), an eligible student is a child whose parent or guardian’s taxable income is less than one hundred thousand dollars ($100,000) per year for a single filer and two hundred thousand dollars ($200,000) per year for dual filers.
(3) After the periods described in paragraphs (1) and (2), there shall be no income limitation on eligibility.
(g) “ESA” means Education Savings Account.
(h) “ESA deposit
amount” means the amount calculated pursuant to subdivision (d) of Section 69995.2.
(i) “ESA Trust” means the Education Savings Account Trust established by subdivision (a) of Section 69995.2.
(j) “ESA Trust Board” means the Education Savings Account Trust Board established by subdivision (a) of Section 69995.3.
(k) “Participation agreement” means the uniform contract created by the ESA Trust Board that must be executed by the ESA Trust Board and the parent or legal guardian of an eligible student that directs the ESA Trust Board to disburse funds to an eligible school on behalf of the account beneficiary.
(l) “Program account” means the account created in the ESA Trust
pursuant to subdivision (f) of Section 69995.2 from which moneys transferred from the General Fund, investment earnings, and other grants, gifts, or appropriations are maintained and segregated into ESAs for eligible students.
(m) “Tuition” means the amount charged by an eligible school to enroll a pupil or student at the school for a particular grade level and registration fees associated with application and enrollment.
(n) “Unclaimed funds” means funds remaining in an ESA that are not disbursed to an eligible school after the eligible student attains 30 years of age.
(o) “Undergraduate or graduate eligible education expenses” means the expenses typically associated with the education of an undergraduate or
graduate student in an eligible school, other than tuition, including, but not limited to, books, school supplies and equipment, academic tutoring, special needs services of a special needs student, any additional school fees, and room and board.
69995.269995.2.
(a) There is hereby established an instrumentality of the State of California to be known as the Education Savings Account Trust.(b) Every child eligible to be enrolled in kindergarten, or in an elementary or secondary school, in any of grades 1 to 12, inclusive, and whose parent or guardian desires to enroll their child in an eligible school, may establish an ESA pursuant to this article.
(c) Every child enrolled in an eligible
school shall be entitled, pursuant to this article, to a credit to the child’s ESA for tuition, elementary and secondary eligible education expenses, and undergraduate or graduate eligible education expenses.
(d) Commencing with the first fiscal year following the operative date of this article, on July 1 of each year, the Department of Finance shall determine the annual ESA deposit amount for the upcoming school year. The ESA deposit amount for the 2025–26 school year shall be seventeen thousand dollars ($17,000). For subsequent school years, the Department of Finance shall adjust the annual ESA deposit amount by the same percentage increase or decrease in the total amount required to be applied by the state for the support of school districts in the current fiscal year, as required by Section 8 of Article XVI of the California
Constitution.
(e) Each school year the Controller shall transfer an amount of moneys from the General Fund to the ESA Trust equal to the ESA deposit amount determined pursuant to subdivision (d) multiplied by the number of ESAs established pursuant to subdivision (b). The ESA deposit amount may be adjusted for an ESA established after the start of the applicable school year and for a partial school year pursuant to an application submitted under subdivision (b) of Section 69995.4. The Controller shall make at least three transfers to the ESA Trust in each fiscal year, with the first transfer occurring on August 1 and the last transfer occurring on or before June 15. The Controller shall adjust the amount of moneys transferred from the General Fund to the ESA Trust to ensure that the total amount of moneys transferred in a school year
equals exactly the amount required to be transferred pursuant to this article. The Controller shall report to the Department of Finance and the Legislature the total amount of moneys transferred from the General Fund to the ESA Trust pursuant to this article on or before June 15 of each year. This article does not prohibit the Legislature from appropriating additional funds to the ESA Trust.
(f) The ESA Trust is hereby established as a fund in the State Treasury. The ESA Trust Program Account and the ESA Trust Administrative Account are hereby established as accounts within the ESA Trust. Notwithstanding Section 13340 of the Government Code, the program account is hereby continuously appropriated, without regard to fiscal years, to the ESA Trust Board for purposes of this article. Moneys in the administrative account shall be available
for expenditure, upon appropriation, for the purposes specified in this article. Moneys in the ESA Trust shall only be used for purposes of this article and shall not be taken, used, borrowed, or collateralized for any other purpose.
(g) Any unit of federal, state, or local government, or any other person, firm, partnership, or corporation, may make a grant, gift, or other appropriation for deposit into the administrative account, the program account, or the ESA of any individual account beneficiary.
69995.3.
(a) The purposes, powers, and duties of the ESA Trust are vested in, and shall be exercised by, the Education Savings Account Trust Board, which is hereby established.(b) The ESA Trust Board shall consist of the following members:
(1) The members of the Scholarshare Investment Board as provided in subparagraph (B) of paragraph (2) of subdivision (a) of Section 69984.
(2) The Superintendent.
(3) One member representing private elementary and secondary schools, appointed by the
Governor.
(4) One member representing parochial and religious elementary and secondary schools, appointed by the Governor.
(c) The ESA Trust Board shall have all the necessary powers and duties provided to the Scholarshare Investment Board under Article 19 (commencing with Section 69980), including, but not limited to, all of the following:
(1) The power to invest moneys in the ESA Trust for the benefit of the ESA Trust and account beneficiaries.
(2) The duty to report publicly investments and investment performance.
(3) The duty to distribute funds from ESAs and audit the ESAs to ensure that all
funds disbursed to eligible schools are used by and for the account beneficiary and in furtherance of the act.
(4) The power to accept any grants, gifts, appropriations, and other moneys from any unit of federal, state, or local government or any other person, firm, partnership, or corporation for deposit into the administrative account, the program account, or the ESA of any individual account beneficiary.
(5) The duty to return unclaimed funds to the state for the benefit of elementary and secondary education, postsecondary education, or vocational education, upon appropriation by the Legislature.
(6) The power to adopt regulations to implement this article.
(d) Moneys transferred by the Controller pursuant to subdivision (e) of Section 69995.2 shall be allocated by the ESA Trust Board to the program account and administrative account. All moneys allocated to the program account shall be promptly invested and accounted for separately for each individual ESA. All costs of administration, including investment management fees, of the ESA Trust shall be paid out of the administrative account, which shall not exceed, on an annual basis, 1 percent of the total amount of moneys in the program account.
69995.4.
(a) The Superintendent shall create an online application for a parent or legal guardian to request that an ESA be established for an eligible student and submit an executed participation agreement pursuant to this article. The Superintendent shall also accept applications and executed participation agreements submitted by mail.(b) The deadline for submitting an application and executed participation agreement for the next succeeding school year shall be April 1. The Superintendent shall establish at least one additional opportunity and deadline for a parent or legal guardian to submit an application and executed participation agreement during the school
year. The ESA deposit amount for an ESA established during a school year shall be less than the full ESA deposit amount established pursuant to subdivision (d) of Section 69995.2.
(c) The parent or legal guardian of an eligible student shall identify the eligible student as the account beneficiary of the ESA and execute the participation agreement.
(d) Once an application and participation agreement have been submitted, the Superintendent shall confirm that the child is enrolled in an eligible school and the participation agreement shall be transmitted to the eligible school.
(e) So long as the account beneficiary remains eligible to receive the ESA deposit amount and to direct the expenditure of funds pursuant to
this article, no additional application or participation agreement shall be required. However, an application and participation agreement shall be amended by the parent or legal guardian if the account beneficiary enrolls in a different eligible school.
(f) The Superintendent shall create an online process for a parent or legal guardian, public school district, eligible school, or any other person to report that a child is no longer eligible or no longer enrolled in an eligible school. Upon receipt of a report, the Superintendent shall inquire and confirm the eligibility status of the child by providing adequate notice to the parent or legal guardian of the child and the school and an opportunity for both to be heard. If the Superintendent determines that a child is no longer eligible, that determination may be appealed by the parent or
legal guardian on behalf of the child pursuant to the administrative adjudication procedures described in Chapter 4.5 (commencing with Section 11400) of Part 1 of Division 3 of Title 2 of the Government Code.
69995.5.
The Superintendent shall do all of the following:(a) Create an online application for a school to become eligible to receive funds from an ESA established pursuant to this article.
(b) Publish on its internet website, and periodically update, a list of eligible schools by name and address.
(c) Provide contact information for each eligible school on its internet website.
(d) Post the tuition and other eligible education expenses charged for each grade level at an eligible school on its internet website.
69995.6.
(a) The ESA Trust Board shall establish an ESA within the program account for each eligible student who has requested an account from the Superintendent, shall enter into participation agreements pursuant to this article, shall credit each ESA with the appropriate ESA deposit amount for that eligible student, and shall credit investment earnings of the program account to each ESA, as appropriate.(b) The ESA Trust Board shall provide parents and legal guardians of account beneficiaries with the ability to securely review online ESA activity, including ESA deposits or credits, ESA investment earnings, and ESA disbursements to an eligible school on behalf of the
account beneficiary. The ESA Trust Board shall protect the privacy of parents, legal guardians, and account beneficiaries.
(c) (1) Pursuant to the terms of an executed participation agreement, and except as provided in paragraph (2), the ESA Trust Board shall disburse funds on behalf of an account beneficiary to an eligible school on a monthly basis.
(2) Notwithstanding paragraph (1), the ESA Trust Board may enter into an agreement with an eligible school to provide for a different disbursement schedule.
(d) The ESA Trust Board shall randomly audit funds disbursed from ESAs to ensure student eligibility, student enrollment, student attendance, and school eligibility.
(e) The ESA Trust Board shall withhold any ineligible disbursement made to an eligible school from any future disbursements.
(f) The ESA Trust Board shall create a uniform participation agreement for use by the Superintendent, the ESA Trust Board, and the parents and legal guardians of eligible students. An eligible school identified in a participation agreement shall be a third-party beneficiary of an executed participation agreement.
69995.65.
The ESA Trust Board shall adopt regulations to implement this article.69995.7.
(a) The ESA Trust Board shall only disburse funds from an ESA to an eligible school.(b) The state shall not limit the number of eligible schools or the number of students enrolled in an eligible school. The state shall not impose conditions on the eligibility of a private school, college, or university to receive funds, other than conditions based on any of the following:
(1) Periodic certification that an eligible student is enrolled and attending the eligible school.
(2) Periodic certification that the amount disbursed from an ESA is only used
for tuition and eligible education expenses.
(3) Accreditation required to obtain status as an eligible school pursuant to paragraph (2) of subdivision (e) of Section 69995.1.
(4) Public disclosure of the receipt and expenditure of ESA funds as required by the ESA Trust Board.
(5) The general health and safety standards applicable to the facilities of all private schools operating in the state.
(c) Once an eligible student graduates from high school or obtains a high school equivalency certificate pursuant to Section 51425, the maximum balance in an ESA and available for an eligible student’s use for tuition, undergraduate or graduate eligible education expenses, or
expenses associated with vocational education, shall be sixty thousand dollars ($60,000). Any amount in an ESA that exceeds this limit shall be treated as unclaimed funds pursuant to paragraph (5) of subdivision (c) of Section 69995.3. The Department of Finance shall adjust this limit annually for inflation using the California Consumer Price Index.
69995.8.
(a) The California Community Colleges, the California State University, and the University of California, and each campus, branch, and function thereof, shall accept funds from an ESA to pay for the tuition and eligible educational expenses of an account beneficiary who is admitted to the college or university.(b) A full-time private school, including a private college or university, may become an eligible school by filing an application with the Superintendent. A full-time private school, including a private college or university, that becomes an eligible school may accept funds from an ESA for the tuition and eligible educational expenses of an
account beneficiary who is admitted to the eligible school.
(c) A vocational education or training school may become an eligible school by filing an application with the Superintendent. A vocational education or training school may accept funds from an ESA for the tuition and eligible educational expenses of an account beneficiary who is admitted to the eligible school.
(a)Notwithstanding Section 69995.2, and except as provided in subdivision (b), the child of a parent or legal guardian who chooses to educate their child at home pursuant to an affidavit filed pursuant to Section 33190 and in lieu of enrolling in an eligible school shall not be entitled to establish an ESA pursuant to this article. This article does not prohibit the state from offering financial aid for education-related expenses to the parents or legal guardians of homeschooled children ineligible for an ESA.
(b)Notwithstanding subdivision (a), the parent or legal guardian of a child enrolled in an eligible school to facilitate homeschooling may establish an ESA pursuant to this article.
69995.10.
(a) An eligible school shall not share, refund, or rebate any funds received from an ESA with or to the parent, legal guardian, or eligible student in any manner.(b) The ESA Trust Board may terminate and suspend an ESA and participation agreement if the parent, legal guardian, or eligible student fails to comply with the terms of the participation agreement with the intent to defraud or misuse the funds distributed on behalf of an account beneficiary upon notice to the parent or legal guardian and an opportunity to be heard. If the ESA Trust Board terminates or suspends an ESA, that determination may be appealed by the parent, legal guardian, or eligible student
pursuant to the administrative adjudication procedures described in Chapter
4.5 (commencing with Section 11400) of Part 1 of Division 3 of Title 2 of the Government Code.
69995.11.
The Legislature shall provide for the allocation of costs associated with this article as follows:(a) For the cost of providing an ESA deposit amount for an eligible student not enrolled in a public elementary or secondary school before the operative date of this article, the Legislature shall rebase, as necessary, the minimum funding guarantee for school districts, as provided in Section 8 of Article XVI of the California Constitution, to include such eligible students in the definition of “average daily attendance” as defined in Section 8.1 of Article XVI of the California Constitution.
(b) For the costs of providing
an ESA deposit amount for an eligible student, the cost for that ESA deposit amount shall be apportioned between the General Fund and the public school district in which the eligible student resides, in the same ratio of General Fund and local property tax revenue that would have been used to educate that eligible student in the student’s public school district. The Legislature shall provide for the transfer of funds from a school district to the state as necessary to carry out this provision.
69995.12.
This article shall become operative on January 1, 2025, only if Senate Constitutional AmendmentSEC. 3.
Section 17132.2 is added to the Revenue and Taxation Code, to read:17132.2.
(a) For taxable years beginning on or after January 1, 2025, gross income shall not include distributions from an Education Savings Account pursuant to a participation agreement.(b) For purposes of this section, the following definitions shall apply:
(1) “Education Savings Account” means an education savings account established under the Education Savings Account Act of 2024 (Article 19.1 (commencing with Section 69995) of Chapter 2 of Part 42 of Division 5 of Title 3 of the Education Code).
(2) “Participation agreement” has the same meaning as
that term is defined in subdivision (k) of Section 69995.1 of the
Education Code.
(c) (1) For purposes of complying with Section 41, as it pertains to the exclusions from income provided by this section, the Legislature finds and declares the following:
(A) The goal, purpose, and objective of the exclusion from income is to encourage parents and legal guardians to participate in the Education Savings Account and to maximize the value of the Education Savings Account.
(B) The performance indicators used to determine whether the exclusion from income is achieving its stated purpose shall be the number of taxpayers receiving distributions from an Education Savings Account that, but for this section, would have been included in income, and the
average dollar value of income so excluded.
(2) (A) No later than July 1, 2026, and annually thereafter, the Franchise Tax Board shall submit a report to the Legislature, in compliance with Section 9795 of the Government Code, that details the number of taxpayers that received distributions from an Education Savings Account that, but for this section, would have been included in income, and the average dollar value of income so excluded.
(B) The disclosure provisions of this paragraph shall be treated as an exception to Section 19542.
(d) This section shall become operative on January 1, 2025, only if Senate Constitutional Amendment ____
5 of the 2023–24 Regular Session is approved by the voters at the statewide general election on November 5, 2024.
