Michigan Laws 390.1477 – Education savings accounts; establishment; purpose; agreement; form of contribution; withdrawal; distributions; penalty; separate accounting for each beneficiary
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Terms Used In Michigan Laws 390.1477
- Account owner: means any of the following:
(i) The individual who enters into a Michigan education savings program agreement and establishes an education savings account. See Michigan Laws 390.1472Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name. Department: means the department of treasury. See Michigan Laws 390.1472 Designated beneficiary: means the individual designated as the individual whose higher education expenses are expected to be paid from the account. See Michigan Laws 390.1472 education savings account: means an account established under this act. See Michigan Laws 390.1472 Electronic funds transfer: The transfer of money between accounts by consumer electronic systems-such as automated teller machines (ATMs) and electronic payment of bills-rather than by check or cash. (Wire transfers, checks, drafts, and paper instruments do not fall into this category.) Source: OCC Eligible educational institution: means that term as defined in section 529 of the internal revenue code or a college, university, community college, or junior college described in section 4, 5, or 6 of article VIII of the state constitution of 1963 or established under section 7 of article VIII of the state constitution of 1963. See Michigan Laws 390.1472 Internal revenue code: means the United States internal revenue code of 1986 in effect on January 1, 2002 or at the option of the taxpayer, in effect for the current year. See Michigan Laws 390.1472 Michigan education savings program agreement: means the agreement between the program and an account owner that establishes an education savings account. See Michigan Laws 390.1472 person: may extend and be applied to bodies politic and corporate, as well as to individuals. See Michigan Laws 8.3l Program: means the Michigan education savings program established pursuant to this act. See Michigan Laws 390.1472 Program manager: means an entity selected by the treasurer to act as a manager of 1 or more of the savings plans offered under the program. See Michigan Laws 390.1472 Qualified higher education expenses: means qualified higher education expenses as defined in section 529 of the internal revenue code. See Michigan Laws 390.1472 Qualified withdrawal: means a distribution that is not subject to a penalty or an excise tax under section 529 of the internal revenue code, a penalty under this act, or taxation under the income tax act of 1967, 1967 PA 281, MCL 206. See Michigan Laws 390.1472 state: when applied to the different parts of the United States, shall be construed to extend to and include the District of Columbia and the several territories belonging to the United States; and the words "United States" shall be construed to include the district and territories. See Michigan Laws 8.3o Treasurer: means the state treasurer. See Michigan Laws 390.1472
(1) Beginning October 1, 2000, education savings accounts may be established under this act.
(2) Any individual or entity described in section 2(b)(ii) may open 1 or more education savings accounts to save money to pay the qualified higher education expenses of 1 or more designated beneficiaries. An account owner shall open only 1 account for any 1 designated beneficiary. Each account opened under this act shall have only 1 designated beneficiary.
(3) To open an education savings account, the individual or entity described in section 2(b)(ii) shall enter into a Michigan education savings program agreement with the program. The Michigan education savings program agreement shall be in the form prescribed by a program manager and approved by the treasurer and contain all of the following:
(a) The name, address, and social security number or employer identification number of the account owner.
(b) A designated beneficiary. A state or local government agency or instrumentality, a person exempt from taxation as an organization described in section 501(c)(3) of the internal revenue code, or a corporation, as part of a scholarship program, may defer naming a designated beneficiary consistent with the terms of the applicable Michigan education savings program agreement.
(c) The name, address, and social security number of the designated beneficiary.
(d) Any other information that the treasurer or program manager considers necessary.
(4) Any individual or entity described in section 2(b)(ii) may make contributions to an account.
(5) Contributions to accounts shall only be made in cash, by check, by credit card, or by any similar method as approved by the state treasurer but shall not be property.
(6) An account owner may withdraw all or part of the balance from an account on 60 days’ notice, or a shorter period as authorized in the Michigan education savings program agreement.
(7) Distributions from an account shall be requested on a form approved by the state treasurer. A program manager may retain from the distribution the amount necessary to comply with federal and state tax laws. Distributions may be made in the following manner:
(a) Directly to an eligible education institution.
(b) In the form of a check payable to both the designated beneficiary and the eligible educational institution.
(c) In the form of a check payable to the designated beneficiary or account holder.
(d) In the form of an electronic funds transfer to an account specified by the designated beneficiary or account holder.
(8) Except as otherwise provided in this subsection for tax years that begin before January 1, 2002, if the distribution is not a qualified withdrawal, a program manager shall withhold an amount equal to 10% of the distribution amount as a penalty and pay that amount to the department for deposit into the general fund. For a distribution made after December 31, 2001 that is not a qualified withdrawal, if an excise tax or penalty is imposed under section 529 of the internal revenue code pursuant to section 530(d)(4) of the internal revenue code, a penalty shall not be imposed under this subsection for that distribution. If a distribution that is not a qualified withdrawal is made after December 31, 2001 and an excise tax or penalty is not imposed under section 529 of the internal revenue code pursuant to section 530(d)(4) of the internal revenue code on that distribution, a program manager shall withhold an amount equal to 10% of the accumulated earnings attributable to that distribution amount as a penalty and pay that amount to the department for deposit into the general fund. The penalty under this subsection may be increased or decreased if the treasurer and the program manager determine that it is necessary to increase or decrease the penalty to comply with section 529 of the internal revenue code.
(9) Each savings plan under the program shall provide separate accounting for each designated beneficiary.