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Senate of Pennsylvania
Session of 2013 - 2014 Regular Session


Posted: May 13, 2014 03:37 PM
From: Senator Mike Folmer
To: All Senate members
Subject: College Savings Plans
In the near future, I will be introducing two pieces of legislation to enhance and protect college savings plans of Pennsylvania families.

In 2006, Pennsylvania passed legislation to allow for a tax deduction for contributions to a college savings plan. This law provides for a deduction regardless which college savings plan the individual chose to contribute to.

I propose to build on this law by amending two other current statutes.

Hundreds of thousands of Pennsylvania families utilize college savings plans to prepare for the financial investment of higher education – be it for themselves, their children, their grandchildren or other family members. College costs have risen significantly in recent years across the nation at public and private colleges where many of Pennsylvania families send their children to college. Other states offer these incentives and protections to their taxpayers. It’s time Pennsylvania make these updates and enhancements available.

Document #1

Introduced as SB1403

Description: Amendments to the Tuition Account Programs and College Savings Bond Act:
My legislation amends the Tuition Account Programs and College Savings Bond Act to build on the benefits of college savings plans allowed under current law by:
  • Extending the protections of current Pennsylvania law, which shields Pennsylvania sponsored college savings plans from creditors.  My legislation extends these protections to any college savings plan a Pennsylvania family has chosen, regardless of the sponsoring entity
  • Providing that assets in any college savings plan will be excluded from student loan and aid eligibility determinations for any programs administered by an agency of the Commonwealth of Pennsylvania.  Currently, only the Pennsylvania sponsored college savings plans are excluded from state funded student loan and aid eligibility determinations

Document #2

Introduced as SB1404

Description: Amendments to the Tax Reform Code of 1971:
In 2006, Pennsylvania established a tax deduction for individuals contributing to a college savings plan – regardless of which college savings plan they chose for their contribution.  My legislation amends the Tax Reform Code to build on this incentive by:
  • Allowing the carry-forward for up to 4-year of excess college savings plan contributions for purposes of making a deduction.  The current maximum annual deduction is $14,000.  Under my legislation, if an individual contributes $15,000 to a college savings plan over the course of a year, they could take a $14,000 deduction for that year and then deduct the excess amount (in this case $1,000) in the following tax year. This will mirror existing law in various other states and is intended to encourage individuals to not wait to contribute more to their college savings account just to qualify for the existing deduction.
  • Mirroring Ohio and a number of other states as well as federal tax law as it relates to certain retirement savings options by allowing college savings plan contributions to be made up to April 15th and still be deductible for the prior tax year.  Current Pennsylvania law requires any college savings plan contribution to be made prior to December 31 in order to be eligible for a deduction.
  • Exempting all college savings plan assets from Pennsylvania’s inheritance tax.  Current Pennsylvania law exempts only the Pennsylvania college savings plans from the inheritance tax.  Meanwhile, thousands of Pennsylvania families have chosen other college savings plans and therefore those accounts are potentially at risk of being diminished when the grandparent (or even parent owner) passes away and  the inheritance tax is applied to such college savings accounts.