Brief (1)
SB 231, as amended, would enact the Family Development Account Program, a program under the Department of Commerce and Housing which would enable eligible families and individuals to establish tax-advantaged accounts for the purpose of funding specific purchases.
Families or individuals with household income less than or equal to 200 percent of the federal poverty level would be eligible to open family development accounts (FDAs) earmarked for higher educational expenses; job training costs; purchase of primary residence; major repairs or improvements to a primary residence; or start-up capitalization costs for small businesses.
The Secretary of Commerce and Housing would be required to adopt rules and regulations and prepare a request for proposals from nonprofit or charitable community-based organizations seeking to administer the Family Development Account Reserve Fund (FDARF). The FDARF would be created to fund administrative costs of the program incurred by financial institutions, community-based organizations, and also to provide matching funds for moneys in FDAs. No more than 20 percent of all funds in the FDARF could be used for administrative costs during the first two years of the program, and the limitation would be set at 15 percent in subsequent years.
The following tax provisions would be effective for tax years 2001-2003. Moneys deposited into FDAs by account holders would be exempt from Kansas income tax unless withdrawn for an unapproved use. Interest earned on FDAs also would be exempt from income taxes. Financial institutions also would receive a privilege tax exemption for earnings attributable to FDAs. A program contributor, defined to include "a person or entity who makes a contribution" to an FDARF, would be allowed income tax credits up to $25,000 per contributor or 25 percent of the contribution amount, whichever is less. The total amount of all such tax credits authorized could not exceed $0.5 million in any fiscal year.
Account holders making nonqualified withdrawals from FDAs would be required to forfeit all matching moneys in the accounts, which would then be returned to the FDARFs of the contributing community-based organizations.
FDA funds, including accrued interest, would be disregarded when determining eligibility for public assistance or benefits.
Background
Proponents included Senator Haley, Heart of America Family Services, and the Washington University's Center for Social Development.
The latest fiscal information available based on ongoing discussions with the Department of Revenue suggested that the bill would be expected to reduce receipts by about $519,000 and would necessitate expenditure of an additional $59,889 in administrative costs.
The Senate Committee of the Whole amended the bill to eliminate a requirement that the Department of Commerce and Housing award up to $100,000 annually for an independent evaluation of the program; to reduce the amount of the income tax credits for program contributors from the lesser of $50,000 per contributor or 50 percent of the contribution amount to the lesser of $25,000 per contributor or 25 percent of the contribution amount; and to sunset the tax provisions after tax year 2003.
1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/fulltext.cgi