THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY CORMAN, BRUBAKER, GORDNER, COSTA, ALLOWAY, BLAKE, BOSCOLA, BREWSTER, ERICKSON, FONTANA, GREENLEAF, LEACH, RAFFERTY, EARLL, MENSCH, SOLOBAY, TARTAGLIONE, TOMLINSON, VOGEL, M. WHITE, WOZNIAK, YAW AND YUDICHAK, JUNE 14, 2011

REFERRED TO FINANCE, JUNE 14, 2011  

AN ACT

Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An

act relating to tax reform and State taxation by codifying

and enumerating certain subjects of taxation and imposing

taxes thereon; providing procedures for the payment,

collection, administration and enforcement thereof; providing

for tax credits in certain cases; conferring powers and

imposing duties upon the Department of Revenue, certain

employers, fiduciaries, individuals, persons, corporations

and other entities; prescribing crimes, offenses and

penalties," in personal income tax, further providing for

classes of income.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 303(a.7) of the act of March 4, 1971

(P.L.6, No.2), known as the Tax Reform Code of 1971, added July

6, 2006 (P.L.319, No.67), is amended to read:

Section 303.  Classes of Income.--* * *

(a.7)  The following shall apply:

(1)  An amount paid as a contribution into a qualified

tuition program under Chapter 3 of the act of April 3, 1992

(P.L.28, No.11), known as the "Tuition Account Programs and

College Savings Bond Act," shall be deductible from taxable

income on the annual personal income tax return. The amount paid

as a contribution to a qualified tuition program allowable as a

deduction under this subsection shall be subject to an annual

limitation not to exceed the threshold for exclusion from gifts

as provided in section 2503(b) of the Internal Revenue Code of

1986, as amended, per designated beneficiary. The deduction

shall not result in taxable income being less than zero.

(2)  (i)  The following shall not be subject to tax under

this article:

(A)  Any amount distributed from a qualified tuition program

that is excludable from tax under section 529(c)(3)(B) of the

Internal Revenue Code of 1986, as amended.

(B)  Any rollover that is excludable from tax under section

529(c)(3)(C) of the Internal Revenue Code of 1986, as amended.

The exception under this clause does not apply to a rollover

from a qualified tuition program under Chapter 3 of the "Tuition

Account Programs and College Savings Bond Act."

(C)  Undistributed earnings on a qualified tuition program.

(ii)  A change in designated beneficiaries under section

529(c)(3)(C) of the Internal Revenue Code of 1986, as amended,

shall not constitute a taxable event under this article.

(3)  Any amount distributed from a qualified tuition program  

that is not described under paragraph (2) shall be taxable under

this article.

(4)  For purposes of this subsection:

(i)  The term "designated beneficiary" shall have the same

meaning as provided in section 529(e)(1) of the Internal Revenue

Code of 1986, as amended.

(ii)  The term "qualified tuition program" shall have the

same meaning as provided in section 529(b)(1) of the Internal

Revenue Code of 1986, as amended.

* * *

Section 2.  The amendment of section 303(a.7) of the act

shall not apply to contributions or rollovers made prior to the

effective date of this section.

Section 3.  This act shall take effect as follows:

(1)  Section 2 of this act shall take effect September 1,

2011, or immediately, whichever is later.

(2)  The remainder of this act shall take effect

immediately.