Bill Summary – FastDemocracy

WEST VIRGINIA LEGISLATURE
REGULAR SESSION
              Introduced Senate Bill 478
       By Senators Grady and Plymale [Introduced January 26, 2023; referred to the Committee on Finance]
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  A BILL to amend and reenact §11-21-12m and §11-21-25 of the Code of West Virginia, 1931, as
         amended; to amend and reenact §11-24-10a of said code, to amend and reenact §18-30-3
         of said code; and to amend and reenact §18-30A-3, §18-30A-10, §18-30A-11, and §18-
         30A-13 of said code, all relating generally to the Jumpstart Savings Program; clarifying that
         the entire amount of an account distribution used for certain qualified expenses is subject
         to reducing personal income tax modification; clarifying that the amount of an account
         distribution is only subject to reducing personal income tax modification to the extent that
         the amount is not allowable as certain federal deductions; establishing an increasing
         personal income tax modification for account distributions used for nonqualified expenses
        and previously applied toward the reducing personal income tax modification for account
        contributions; defining terms; providing that an employer may not claim a tax credit for
        matching contributions to an account if the employer is the account owner or account
        beneficiary; providing that an employer may not claim both the reducing personal income
        tax modification and the matching credit for an amount contributed to an employee’s
        account; permitting employers to claim matching credit for certain amounts allowable as
        federal tax deductions; eliminating a definition related to an obsolete account; defining
        terms; expanding the occupations and professions in which an individual may incur
        qualified expenses; eliminating the minimum deposit required to open an account and for
        certain opening incentive deposits; authorizing the board to establish a minimum deposit to
        open an account or for certain opening incentive deposits; establishing retroactive internal
        effective date of January 1, 2023 for certain provisions; and making technical and clarifying
        corrections to reporting requirements.
     Be it enacted by the Legislature of West Virginia:
                                    CHAPTER 11. TAXATION.
     ARTICLE 21. PERSONAL INCOME TAX.
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     §11-21-12m. Additional modifications related to a Jumpstart Savings Account.
         (a) Modification for contributions.
         (1) For taxable years beginning on or after January 1, 2022, in addition to amounts
  authorized to be subtracted from federal adjusted gross income pursuant to §11-21-12 of this code
  a modification reducing federal adjusted gross income is hereby authorized in an amount equal to
  a West Virginia taxpayer’s contribution to a Jumpstart Savings Account for the taxable year in
  which the payment is made, in accordance with §18-30A-1 et seq. of this code, but only to the
  extent the amount is not allowable as a deduction when arriving at the taxpayer’s federal adjusted
  gross income for the taxable year.
         (2) The decreasing modification allowed pursuant to this subsection may not exceed
 $25,000 in a single taxable year: Provided, That the taxpayer may also elect to carry forward the
 modification over a period not to exceed five taxable years, beginning in the taxable year in which
 the contribution was made.
        (b) Decreasing modification for qualified distributions not deductible from federal adjusted
 gross income.
        (1) For taxable years beginning on or after January 1, 2022, in addition to amounts
 authorized to be subtracted from federal adjusted gross income pursuant to §11-21-12 of this
 code, a modification reducing federal adjusted gross income is hereby authorized in an amount
 equal to the portion entire amount of a distribution from a Jumpstart Savings Account received by
 a distributee that is used to pay for qualified expenses as defined in §18-30A-11 of this code
 described in §18-30A-3(a)(11)(D). Such decreasing modification is authorized for the taxable year
 the distribution is made to the distributee, but only to the extent the distribution amount is not
 allowable as a deduction when arriving at the distributee’s federal adjusted gross income for the
 taxable year when the distribution was made. Any decreasing modification applied by a distributee
 shall be subject to disallowance to the extent that the distributed moneys are not used to pay for
 qualified expenses, as defined in §18-30A-11 of this code in the taxable year of receipt of the
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 distribution or the next succeeding taxable year.
        (2) The decreasing modification allowed pursuant to this subsection may not exceed
 $25,000 for the taxable year.
        (3) For the purposes of this section, the term "distributee" means the beneficiary or the
 owner of a Jumpstart Savings Account who is authorized to receive distributions from the account,
 according to §18-30A-1 et seq. of this code and the legislative rules and procedures adopted by
 the Jumpstart Savings Board.
        (c) Increasing modification for distributions not used for qualified expenses. – For taxable
 years beginning on or after January 1, 2023, there shall be added to the federal adjusted gross
 income of a distributee, unless already included in federal adjusted gross income for the taxable
 year, any amount previously applied to a decreasing modification of federal adjusted gross income
 pursuant to subsection (a) of this article for any amount contributed to a Jumpstart Savings
 Account, that is subsequently withdrawn from said account and not used for qualified expenses in
 the taxable year of receipt of the distribution or the next succeeding taxable year.
        (c) (d) Modification for rollover of certain distributions. – In addition to amounts authorized
 to be subtracted from federal adjusted gross income pursuant to §11-21-12 of this code A
 modification reducing federal adjusted gross income is hereby authorized for the account owner,
 to the extent that the amount is not allowable as a deduction when arriving at the account owner’s
 federal adjusted gross income, in the amount as follows:
        (1) An amount equal to a distribution from a Jumpstart Savings Account received in the
 taxable year, if the account owner deposits such amount into a West Virginia ABLE Account within
 30 days of receiving the distribution, according to the requirements of §18-30A-1 et seq. of this
 code; and
        (2) An amount equal to the portion of a distribution received in the taxable year from a
 college savings account, established pursuant to §18-30-1 et seq. of this code, if the taxpayer
 deposits the amount into a Jumpstart Savings Account within 30 days of receiving the distribution
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 according to the requirements of §18-30A-1 et seq. of this code.
         (d) (e) Nothing in this section shall be construed to decrease or otherwise impact any
 person’s federal tax obligations or to authorize any act which violates federal law.
         (f) Definitions. – For the purposes of this section:
         (1) "Distributee" means the person who is authorized to receive distributions from a
 Jumpstart Savings Account, according to §18-30A-1 et seq. of this code and the legislative rules
 and procedures adopted by the Board of Trustees of the West Virginia College and Jumpstart
 Savings Programs.
         (2) "Qualified expense" has the meaning provided in §18-30A-3 of this code.
         (g) The modifications authorized in this section are authorized in addition to amounts
 authorized to be subtracted from federal adjusted gross income pursuant to §11-21-12 of this
 code.
         (h) The amendments to this section adopted during the 2023 Regular Session of the
 Legislature are effective January          1,            2023.
     §11-21-25. Nonrefundable credit for matching contribution to employee’s Jumpstart Savings Account.
          (a) A nonrefundable credit against the tax imposed by the provisions of this article is
  allowed against the tax liability imposed under this article of a qualified employer, for a matching
  contribution made to a Jumpstart Savings Account in the taxable year, if the beneficiary of the
  account owner is an employee of the taxpayer and a West Virginia resident, subject to the
  requirements of §18-30A-1 et seq. and the following:
          (1) The employer must directly contribute an amount to a Jumpstart Savings Account that
  is equal to a contribution made by the employee to such account in the same taxable year.
          (2) The credit allowed by this section may not exceed $5,000 per employee per taxable
  year.
         (3) The amount of the credit may not exceed the portion of the contribution that is
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 attributable to the employer and that would otherwise be derived by the employer as income from
 his or her business for the taxable year.
        (4) The employer may not claim the credit if the employer himself or herself is the account
 owner or beneficiary of the account to which the matching contribution was made.
        (5) An The employer may not claim a credit against more than one type of tax for a single
 contribution to a Jumpstart Savings Account.
        (6) The employer may not claim both the credit and a decreasing modification authorized
 by §11-21-12m of this code for an amount contributed to an employee’s account.
        (b) The credit provided by this section is only allowed to the extent the amount is not
 allowable as a deduction when arriving at the taxpayer’s federal adjusted gross income for the
 taxable year in which the contribution is made
        (c) (b) In order to qualify for the credit provided by this section, an employer must submit
 any forms or other information, as required by the West Virginia Jumpstart Savings Board or the
 State Treasurer, and the Tax Commissioner, upon making the contribution.
        (d) (c) Conduit Entities and Proprietorships Personal Income Taxes. —
        (1) If the employer directly contributing an amount to a Jumpstart Savings Account is an
 electing small business corporation (as defined in Section 1361 of the United States Internal
 Revenue Code of 1986, as amended), a partnership, a limited liability company that is treated as a
 partnership for federal income tax purposes, or a sole proprietorship, then the credit authorized
 pursuant to this section is allowed as a credit against the taxes imposed by this article on the flow
 through income of S corporation shareholders, partners, owners, and limited liability company
 members derived from such electing small business corporation, partnership, or limited liability
 company attributable to business or other activity.
        (2) If the employer directly contributing an amount to a Jumpstart Savings Account is a
 sole proprietor, then the credit authorized pursuant to this section is allowed as a credit against the
 taxes imposed by this article on the income of the sole proprietor attributable to the business.
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         (3) Electing small business corporations, limited liability companies, partnerships, and
 other unincorporated organizations shall allocate the credit allowed by this article among its
 partners, owners, shareholders, or members in the same manner as profits and losses are
 allocated for the taxable year.
         (4)   No credit is allowed under this section against any employer withholding taxes
 imposed by this article.
         (5) The credit allowed under this section must be used in the tax year in which the
 contribution is made. The credit may not be carried back to a prior tax year nor carried forward to a
 subsequent tax year. Any unused amount of unused the credit is forfeited.
         (d) The amendments to this section adopted during the 2023 Regular Session of the
 Legislature are effective January             1,             2023.
     ARTICLE             24.           CORPORATION                NET           INCOME              TAX.
     §11-24-10a. Nonrefundable credit for matching contribution to employee’s Jumpstart Savings Account.
          (a) A nonrefundable credit against the tax imposed by the provisions of this article is
  allowed for a matching contribution to a Jumpstart Savings Account made in the taxable year if the
  beneficiary of the account owner is an employee of the taxpayer and a West Virginia resident,
  subject to the requirements of §18-30A-1 et seq. and the following:
          (1) The employer must directly contribute an amount to a Jumpstart Savings Account that
  is equal to a contribution made by the employee to such account in the same taxable year.
          (2) The credit allowed by this section may not exceed $5,000 per employee per taxable
  year.
          (3) An The employer may not claim the credit against more than one type of tax for a single
 contribution to a Jumpstart Savings Account.
         (4) The employer may not claim both the credit and a decreasing modification authorized
 by §11-21-12m of this code for an amount contributed to an employee’s account.
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         (b) The credit provided by this section is only allowed to the extent the amount is not
 allowable as a deduction when arriving at the taxpayer’s federal adjusted gross income for the
 taxable year in which the contribution is made
         (c) (b) In order to qualify for the credit provided by this section, an employer must submit
 any forms or other information, as required by the West Virginia Jumpstart Savings Board or the
 State Treasurer, or the Tax Commissioner, upon making the contribution.
         (d) (c) Conduit Entities Corporation Net Income Tax. —
         (1) If the employer directly contributing an amount to a Jumpstart Savings Account is an
 electing small business corporation (as defined in Section 1361 of the United States Internal
 Revenue Code of 1986, as amended), a partnership, or a limited liability company that is treated
 as a partnership for federal income tax purposes, then the credit authorized pursuant to this
 section is allowed as a credit against the taxes imposed by this article on the flow through income
 of S corporation shareholders, partners, owners, and limited liability company members derived
 from such electing small business corporation, partnership, or limited liability company attributable
 to business or other activity.
         (2) Electing small business corporations, limited liability companies, partnerships, and
 other unincorporated organizations shall allocate the credit allowed by this article among its
 corporate partners, owners, shareholders, or members in the same manner as profits and losses
 are allocated for the taxable year.
         (3) No credit is allowed under this section against any employer withholding taxes imposed
 by this article.
         (4) The credit allowed under this section must be used in the tax year in which the
 contribution is made. The credit may not be carried back to a prior tax year nor carried forward to a
 subsequent tax year. Any unused amount of unused the credit is forfeited.
         (d) The amendments to this section adopted during the 2023 Regular Session of the
 Legislature are effective January             1,             2023.
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                                    CHAPTER 18. EDUCATION.
     ARTICLE 30. WEST VIRGINIA COLLEGE PREPAID TUITION AND SAVINGS
             PROGRAM                                                                               ACT.
     §18-30-3. Definitions.
          For the purposes of this article, the following terms have the meanings ascribed to them,
  unless the context clearly indicates otherwise or as otherwise provided in 26 U.S.C. § 529:
          "Account" means a savings plan account established in accordance with this article.
          "Account owner" means the individual, corporation, association, partnership, trust, or other
  legal entity who enters into a savings plan contract and invests money in a savings plan account.
          "Beneficiary" means the individual designated as a beneficiary at the time an account is
  established, the individual designated as the beneficiary when beneficiaries are changed, the
  individual entitled to receive distributions from an account, and any individual designated by the
  account owner, his or her agent, or his or her estate in the event the beneficiary is unable or
 unwilling to receive distributions under the terms of the contract.
         "Board" means the Board of Trustees of the West Virginia College and Jumpstart Savings
 Programs as provided in §18-30-4 of this code.
         "Distribution" means any disbursement fr