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Senate of Pennsylvania
Session of 2017 - 2018 Regular Session


Posted: February 9, 2018 03:43 PM
From: Senator Jake Corman
To: All Senate members
Subject: Addressing PA TAP 529 tax parity
In the near future, I plan to reintroduce legislation to strengthen the Pennsylvania 529 Tuition Account Program (TAP) by limiting the tax incentives solely to Pennsylvania’s plan.

The TAP savings program provides a valuable opportunity for families to invest towards their children’s and grandchildren’s higher education future. TAP is free of all federal, Pennsylvania state and local taxes, and the plans do not affect a student’s eligibility for state financial aid.

TAP plans encourage families to save for college by providing a tax incentive. Thirty-five states provide a tax incentive, but Pennsylvania is one of only five states which provides a tax deduction for contributions made to any 529 program, in-state or out-of-state. Pennsylvania is the largest state that allows for an in-state tax deduction for contributions made to an out-of-state program, and, among the five, Pennsylvania offers the most generous deduction.

Based on data from the Pennsylvania Department of Revenue, Treasury estimates that between 2013 and 2015, over $900 million in contributions have gone to out-of-state 529 programs. As a result, Pennsylvanians are, in effect, subsidizing other states’ programs and reducing the effectiveness of the Commonwealth’s own program.

In order to strengthen the fiscal soundness of the Pennsylvania’s 529 program, I am introducing legislation that will limit the applicability of Pennsylvania’s income tax deduction for contributions made to 529 plans to only contributions made to Pennsylvania’s 529 program.

Sponsored by the Commonwealth and administered by the state Treasury Department, Pennsylvania currently offers two 529 savings options: The Pennsylvania 529 GSP, which is tied to the rate of college tuition inflation; and, the Pennsylvania 529 Investment Plan (IP), which is tied to the market and allows an investor to choose from various investment options.

If you have any questions with regard to the legislation above, please contact my office.

Introduced as SB1161