By Stiles H.B. No. 9
75R5943 RJA-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the prepaid higher education tuition program.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Sections 54.619(d) and (e), Education Code, are
1-5 amended to read as follows:
1-6 (d) If the beneficiary of a plan described by Section
1-7 54.6251 enrolls in an institution of higher education, the board
1-8 shall pay:
1-9 (1) to the institution the tuition and required fees
1-10 of the institution; and
1-11 (2) to the purchaser [beneficiary] the amount by which
1-12 the estimated average private tuition and required fees exceeds the
1-13 tuition and required fees of the institution.
1-14 (e) If the beneficiary of a plan described by Section
1-15 54.6251 enrolls in a private or independent institution of higher
1-16 education, the board shall pay:
1-17 (1) to the institution the lesser of:
1-18 (A) the tuition and required fees of the
1-19 institution; or
1-20 (B) the estimated average private tuition and
1-21 required fees; and
1-22 (2) to the purchaser [beneficiary] the amount by which
1-23 the estimated average private tuition and required fees exceeds the
1-24 tuition and required fees of the institution.
2-1 SECTION 2. Section 54.621, Education Code, is amended to
2-2 read as follows:
2-3 Sec. 54.621. BENEFICIARY. (a) The beneficiary of a prepaid
2-4 tuition contract must be younger than 18 years of age or 18 years
2-5 of age or older and enrolled in high school at the time the
2-6 purchaser enters into the contract and must be:
2-7 (1) a resident of this state at the time the purchaser
2-8 enters into the contract; or
2-9 (2) a nonresident who is the child of a parent who is
2-10 a resident of this state at the time that parent enters into the
2-11 contract.
2-12 (b) The board may require a reasonable period of residence
2-13 in this state for a beneficiary or the parent of a beneficiary.
2-14 (c) Notwithstanding Section 54.052(d), the tuition and
2-15 required fees charged by an institution of higher education for
2-16 semester hours and fees that are paid for by a prepaid tuition
2-17 contract shall be determined as if the beneficiary of that contract
2-18 were a resident student [A beneficiary is considered a resident
2-19 for purposes of tuition regardless of the beneficiary's residence
2-20 on the date of enrollment].
2-21 SECTION 3. Section 54.627, Education Code, is amended to
2-22 read as follows:
2-23 Sec. 54.627. CHANGE OF BENEFICIARY. (a) The purchaser of a
2-24 prepaid tuition contract may designate a new beneficiary instead of
2-25 the original beneficiary if the new beneficiary meets the
2-26 requirements of a beneficiary on the date the designation is
2-27 changed. Except as provided by Subsection (b) [If the purchaser is
3-1 an individual], the new beneficiary must meet the requirements of
3-2 Section 529 of the Internal Revenue Code of 1986 so that the change
3-3 of beneficiary is not treated as a distribution under that law [be
3-4 a sibling, step-sibling, or half-sibling of the original
3-5 beneficiary].
3-6 (b) If the purchaser is this state, a local government of
3-7 this state, or an organization exempt from taxation under Section
3-8 501(a) of the Internal Revenue Code of 1986 because it is listed in
3-9 Section 501(c)(3) of that code that purchases an interest in a
3-10 prepaid tuition contract as part of a scholarship program operated
3-11 by the government or organization, the purchaser may designate a
3-12 new beneficiary without regard to the relationship of the new
3-13 beneficiary to the original beneficiary.
3-14 (c) [(b)] The board may adjust the terms of the contract so
3-15 that the purchaser is required to pay the amount the purchaser
3-16 would have been required to pay had the purchaser originally
3-17 designated the new beneficiary as the beneficiary, taking into
3-18 account any payments made before the date the designation is
3-19 changed.
3-20 (d) [(c)] The purchaser of a prepaid tuition contract may
3-21 not sell the contract.
3-22 SECTION 4. Section 54.632, Education Code, is amended by
3-23 adding Subsection (d) to read as follows:
3-24 (d) The board shall comply with Section 529 of the Internal
3-25 Revenue Code of 1986 in imposing penalties for refunds and excess
3-26 amounts payable under Sections 54.619(d) and (e).
3-27 SECTION 5. Section 54.633, Education Code, is amended to
4-1 read as follows:
4-2 Sec. 54.633. PREPAID HIGHER EDUCATION TUITION SCHOLARSHIPS
4-3 FOR [NEEDY] STUDENTS. (a) To the extent money is available, the
4-4 board or the board of a direct-support organization established by
4-5 the board under Subsection (e) may award a prepaid higher
4-6 education tuition scholarship to a student who meets:
4-7 (1) economic or [and] academic requirements adopted by
4-8 the board by rule; or
4-9 (2) economic or academic requirements established by
4-10 the board of a direct-support organization that are consistent
4-11 with board rules.
4-12 (b) A scholarship awarded under this section terminates if
4-13 the student to whom the scholarship is awarded is:
4-14 (1) convicted of, or adjudicated as having engaged in
4-15 delinquent conduct constituting, an offense under Chapter 481,
4-16 Health and Safety Code; or
4-17 (2) convicted of, or adjudicated as having engaged in
4-18 delinquent conduct constituting, a felony or Class A misdemeanor.
4-19 (c) The board shall ensure that each region of the state is
4-20 equitably represented in the awarding of scholarships under this
4-21 section.
4-22 (d) Scholarships under this section may be [are] funded by
4-23 the private sector, the state, or a local government of the state.
4-24 (e) The board may establish a direct-support organization
4-25 under the Texas Non-Profit Corporation Act (Article 1396-1.01 et
4-26 seq., Vernon's Texas Civil Statutes) to:
4-27 (1) receive, hold, invest, and administer money,
5-1 gifts, grants, loans, or other property for or on behalf of the
5-2 program; [and]
5-3 (2) purchase and award scholarships under this
5-4 section; and
5-5 (3) establish economic and academic eligibility
5-6 requirements consistent with board rules.
5-7 (f) The board of directors of the direct-support
5-8 organization consists of:
5-9 (1) the comptroller;
5-10 (2) a member appointed by the governor with the advice
5-11 and consent of the senate; and
5-12 (3) three members appointed jointly by the comptroller
5-13 and the member appointed by the governor.
5-14 (g) The comptroller serves as executive director of the
5-15 board of the direct-support organization. The comptroller shall:
5-16 (1) select and assign employees of the comptroller to
5-17 serve as the staff to the board of the direct-support organization;
5-18 (2) select and supervise the staff of the board of the
5-19 direct-support organization and perform other duties delegated to
5-20 the comptroller by the board of the direct-support organization;
5-21 and
5-22 (3) provide to the board of the direct-support
5-23 organization and to that board's staff, as necessary, information
5-24 regarding that board's qualifications for office or employment
5-25 under this subchapter and responsibilities under applicable laws
5-26 relating to standards of conduct for state officers or employees.
5-27 (h) The board of the direct-support organization shall
6-1 develop and implement policies that clearly separate the
6-2 policy-making responsibilities of the board of the direct-support
6-3 organization and the management responsibilities of the comptroller
6-4 and the staff of the board of the direct-support organization.
6-5 (i) [(g)] The board must certify that the direct-support
6-6 organization operates in a manner consistent with the goals of this
6-7 state and in the best interests of this state.
6-8 (j) [(h)] The board may contract with an independent
6-9 certified public accountant to annually audit the direct-support
6-10 organization under rules adopted by the board. The board shall
6-11 submit the audit to the comptroller, governor, lieutenant governor,
6-12 speaker of the house of representatives, Legislative Budget Board,
6-13 Legislative Audit Committee, state auditor, and Texas Higher
6-14 Education Coordinating Board. The comptroller or state auditor may
6-15 require the direct-support organization or independent certified
6-16 public accountant to provide additional information relating to the
6-17 operation of the organization.
6-18 (k) [(i)] The identity of a donor under this section who
6-19 desires to remain anonymous and the records of the direct-support
6-20 organization, other than the records disclosed under Subsection (j)
6-21 [(h)], are confidential.
6-22 (l) A prepaid tuition contract may be purchased for
6-23 scholarship purposes under this section without identifying a
6-24 specific beneficiary.
6-25 SECTION 6. Section 54.636(e), Education Code, is amended to
6-26 read as follows:
6-27 (e) In making investments of the assets of the fund, the
7-1 board shall exercise the judgment and care, under the circumstances
7-2 at the time of the investment, that a person of ordinary prudence,
7-3 discretion, and intelligence would exercise in the management of
7-4 the person's own affairs, not for speculation but for making a
7-5 permanent disposition of funds, considering the probable income
7-6 from the disposition and the probable safety of capital [The board
7-7 shall invest the assets of the fund in accordance with the Public
7-8 Funds Investment Act (Subchapter A, Chapter 2256, Government
7-9 Code)].
7-10 SECTION 7. Section 54.639, Education Code, is amended to
7-11 read as follows:
7-12 Sec. 54.639. EXEMPTION FROM CREDITORS' CLAIMS. (a) Money
7-13 in the fund is exempt from claims of creditors, including claims of
7-14 creditors of a purchaser, a [or] beneficiary, or a successor in
7-15 interest of a purchaser or beneficiary.
7-16 (b) The rights of a purchaser, beneficiary, or successor in
7-17 interest of a purchaser or beneficiary in and under a prepaid
7-18 tuition contract and the payment of tuition and required fees for a
7-19 beneficiary under a prepaid tuition contract to an institution of
7-20 higher education or a private or independent institution of higher
7-21 education under this chapter are exempt from attachment, levy,
7-22 garnishment, execution, and seizure for the satisfaction of any
7-23 debt, judgment, or claim against a purchaser, beneficiary, or
7-24 successor in interest of a purchaser or beneficiary.
7-25 (c) A claim or judgment against a purchaser, beneficiary, or
7-26 a successor in interest of a purchaser or beneficiary does not
7-27 impair or entitle the claim or judgment holder to assert or enforce
8-1 a lien against:
8-2 (1) the rights of a purchaser, beneficiary, or
8-3 successor in interest of a purchaser or beneficiary in and under a
8-4 prepaid tuition contract; or
8-5 (2) the right of a beneficiary to the payment of
8-6 tuition and required fees to an institution of higher education or
8-7 a private or independent institution of higher education under a
8-8 prepaid tuition contract.
8-9 SECTION 8. Section 54.641(a), Education Code, is amended to
8-10 read as follows:
8-11 (a) Not later than January [December] 1 of each year, the
8-12 board shall furnish without charge to each purchaser a statement
8-13 of:
8-14 (1) the amount paid by the purchaser under the prepaid
8-15 tuition contract;
8-16 (2) the number of credit hours originally covered by
8-17 the contract;
8-18 (3) the number of credit hours remaining under the
8-19 contract; and
8-20 (4) any other information the board determines by rule
8-21 is necessary or appropriate.
8-22 SECTION 9. Section 54.643, Education Code, is amended by
8-23 adding Subsection (c) to read as follows:
8-24 (c) Notwithstanding any other provision of this subchapter,
8-25 the board may release information to the Internal Revenue Service
8-26 and to any state tax agencies as required by applicable tax law.
8-27 SECTION 10. Subchapter F, Chapter 54, Education Code, is
9-1 amended by adding Section 54.644 to read as follows:
9-2 Sec. 54.644. TAX EXEMPT STATUS REQUIREMENTS. (a) The
9-3 provisions of this section are intended to meet the requirements of
9-4 Section 529 of the Internal Revenue Code of 1986.
9-5 (b) A payment of an amount due to the fund for a prepaid
9-6 tuition contract must be made in cash. A person may not make a
9-7 payment to the fund in excess of the amounts required to be paid
9-8 under a prepaid tuition contract.
9-9 (c) The board shall maintain a separate accounting for each
9-10 beneficiary.
9-11 (d) The purchaser of a prepaid tuition contract and the
9-12 beneficiary of the contract may not control or direct the
9-13 investment of payments under the contract or any earnings of the
9-14 fund.
9-15 (e) The purchaser of a prepaid tuition contract and the
9-16 beneficiary of the contract may not use any interest in the
9-17 contract as security for a loan or other obligation.
9-18 (f) The board shall make reports required by the secretary
9-19 of the United States Treasury.
9-20 SECTION 11. Section 54.638, Education Code, is repealed.
9-21 SECTION 12. The importance of this legislation and the
9-22 crowded condition of the calendars in both houses create an
9-23 emergency and an imperative public necessity that the
9-24 constitutional rule requiring bills to be read on three several
9-25 days in each house be suspended, and this rule is hereby suspended,
9-26 and that this Act take effect and be in force from and after its
9-27 passage, and it is so enacted.