(a) An account may be established by any person who desires to save money for the payment of qualified higher education expenses of a designated beneficiary by entering into a college savings agreement. An account shall not be held jointly.
(b) An application for an account shall be in the form prescribed by the Chief Financial Officer and contain the following information:
(1) The name, address, and social security number or employer identification number of the account owner;
(2) The designation of a designated beneficiary;
(3) The name, address, and social security number of the designated beneficiary;
(4) The certification relating to no excess contributions; and
(5) Such other information as the Chief Financial Officer may require.
(c) The Chief Financial Officer may establish a nominal fee for the application.
(d) Contributions to accounts shall be made only in cash.
(e) An account owner may withdraw all or part of the balance from an account upon 60 days notice or such shorter period as may be authorized by the Chief Financial Officer. The Chief Financial Officer shall promulgate regulations to determine whether a withdrawal is a nonqualified withdrawal or qualified withdrawal.
(f) An account owner may change the designated beneficiary of an account in accordance with procedures established by the Chief Financial Officer. A change in the designated beneficiary of an account shall not be treated as a withdrawal, if the new beneficiary is a member of the family of the former beneficiary.
(g) An account owner may transfer all or a portion of the balance of an account to another account under the Program or into another qualified tuition program for the benefit of the designated beneficiary or a member of the family of the designated beneficiary in accordance with procedures established by the Chief Financial Officer. A transfer to another qualified tuition program to the credit of the same designated beneficiary shall be treated as a withdrawal, if the transfer occurs within 12 months from the date of a previous transfer.
(h) Repealed.
(i) Repealed.
(j) Repealed.
(k) Repealed.
(l) The Program shall provide a separate accounting for each designated beneficiary.
(m) No account owner or designated beneficiary shall be permitted to direct the investment of contributions to an account or the earnings on the account. This restriction shall be interpreted in accordance with applicable guidance issued by the Internal Revenue Service under section 529 of the Internal Revenue Code.
(n) An account owner or a designated beneficiary shall not use an interest in an account as security for a loan. A pledge of an interest in an account shall be void.
(o) The Chief Financial Officer shall promulgate regulations to prevent contributions on behalf of a designated beneficiary in excess of the amount determined by actuarial estimates necessary to pay qualified higher education expenses. The regulations shall include a requirement that an excess balance with respect to a designated beneficiary be promptly withdrawn in a nonqualified withdrawal or transfer to another account.
(p) If there is a distribution from an account to an individual or for the benefit of an individual during a calendar year, the distribution shall be reported to the Internal Revenue Service by the account owner, the designated beneficiary, or the distributee to the extent required by federal law or regulation. Statements shall be provided to each account owner at least once each year within 60 days after the end of the 12-month period to which they relate. The statement shall identify the contributions made during a preceding 12-month period, the total contributions made to the account through the end of the period, the value of the account at the end of the period, distributions made during the period, and any other information that the Chief Financial Officer shall require to be reported to the account owner. Statements and information relating to accounts shall be prepared and filed to the extent required by federal and state tax law.
(q) A nonprofit organization described in § 501(c)(3) of the Internal Revenue Code may establish and become the account owner of an account to fund scholarships for persons whose identity will be determined upon disbursement. In the case of an account established under this subsection, the requirement that a designated beneficiary be designated when an account is opened shall not apply and each individual who receives an interest in the account as a scholarship shall be treated as a designated beneficiary with respect to the interest.
(r) An annual fee may be imposed upon the account owner for the maintenance of the account.
(s) The following information shall be disclosed to each account owner:
(1) The terms and conditions for an account;
(2) Restrictions on the substitution of designated beneficiaries;
(3) The person or entity entitled to terminate the college savings agreement;
(4) The terms and conditions under which money may be wholly or partially withdrawn from the Program, including charges and fees that may be imposed for withdrawal;
(5) The probable tax consequences associated with contributions to, and distributions from, accounts; and
(6) Other terms, conditions, and provisions considered necessary or appropriate by the Chief Financial Officer.
CREDIT(S)
(Mar. 31, 2001, D.C. Law 13-212, § 2(b), 47 DCR 9457; June 5, 2003, D.C. Law 14-307, § 2402(d), 49 DCR 11664.)
HISTORICAL AND STATUTORY NOTES
Effect of Amendments
D.C. Law 14-307, in subsecs. (a), (f), and (m), a new sentence was added to the end of each subsection; subsec. (g) was rewritten; and subsecs. (h) through (k) were repealed. Prior to amendment, subsecs. (g), (h), (i), (j), and (k) had read as follows:
“(g) An account owner may transfer all or a portion of an account to another account whose designated beneficiary is a member of the family.
“(h) Changes in designated beneficiaries and transfers shall not be permitted to the extent that they would constitute excess contributions or unauthorized investment choices.
“(i) In the case of a nonqualified withdrawal from an account, an amount equal to 10% of the portion of the withdrawal constituting income under § 529 of the Internal Revenue Code shall be withheld as a penalty and paid to the Program fund established by the Chief Financial Officer.
“(j) The penalty described in subsection (i) of this section may be adjusted by the Chief Financial Officer so that the penalty is not de minimis under § 529 of the Internal Revenue Code; provided, that the Chief Financial Officer shall adjust the penalty to an amount that is not greater than is required under § 529 of the Internal Revenue Code; provided further, that the penalty, when combined with other revenue generated under this chapter, shall produce more revenue than is required to meet the costs of operating the Program and recover any prior costs not previously recovered.
“(k) If an account owner makes a nonqualified withdrawal and no penalty is withheld under subsection (i) of this section, or the amount withheld was less than the penalty required to be paid, the account owner shall pay the unpaid portion of the penalty to the Program upon the earlier of:
“(1) The filing of the account owner's District of Columbia income tax return for the taxable year of the withdrawal (determined with respect for any authorized extensions); or
“(2) If the account owner does not file a return, the due date for the return.”
Temporary Amendments of Section
For temporary (225 day) amendment of section, see 2(c) of College Savings Program Temporary Act of 2002 (D.C. Law 14-186, October 1, 2002, law notification 49 DCR 9244).
Emergency Act Amendments
For temporary (90 day) amendment of section, see § 2402(d) of Fiscal Year 2003 Budget Support Amendment Emergency Act of 2002 (D.C. Act 14-544, December 4, 2002, 49 DCR 11700).
For temporary (90 day) amendment of section, see § 2(c) of College Savings Program Emergency Act of 2002 (D.C. Act 14-374, May 20, 2002, 49 DCR 5114).
For temporary (90 day) amendment of section, see § 2402(d) of the Fiscal Year 2003 Budget Support Amendment Congressional Review Emergency Act of 2003 (D.C. Act 15-27, February 24, 2003, 50 DCR 2151).
For temporary (90 day) amendment of section, see § 2402(d) of Fiscal Year 2003 Budget Support Amendment Second Congressional Review Emergency Act of 2003 (D.C. Act 15-103, June 20, 2003, 50 DCR 5499).
Legislative History of Laws
For Law 13-212, see notes under § 47-4501.
For Law 14-307, see notes following § 47-903.
References in Text
Section 529 of the Internal Revenue Code, referred to in subsec. (m), is classified to 26 U.S.C.A. § 529.