Part 1.
COMPTROLLER OF PUBLIC ACCOUNTS
Chapter 3.
TAX ADMINISTRATION
Subchapter O. STATE SALES AND USE TAX
34 TAC §3.286
The Comptroller of Public Accounts proposes an amendment
to §3.286, concerning seller's and purchaser's responsibilities. The
amendment incorporates recent statutory changes. House Bill 1098, 77th Legislature,
2001, amended Tax Code, §151.052, effective September 1, 2001, to allow
a printer to accept a multistate exemption certificate from a purchaser if
the printed materials are produced by a web offset or rotogravure printing
process and the materials are delivered by the printer to a fulfillment house
or the United States Postal Service for distribution to third parties located
both in Texas and outside of Texas. The purchaser who gives the certificate
is then responsible for reporting and paying sales or use taxes to the comptroller
on those printed materials that are subject to tax. The proposed rule incorporates
this change in subsections (d)(7) and (f)(4). Senate Bill 1123, 77th Legislature,
2001, amended Tax Code, Chapters 111 and 151, effective September 1, 2001,
to provide certain penalties for various criminal offenses. The proposed rule
addresses criminal offenses and penalties in subsections (b)(4), (h)(3), (i)(5),
(j)(4), (n), and (o) and references a new rule concerning criminal offenses
and penalties. Senate Bill 640, 77th Legislature, 2001, added Tax Code, §111.0625
and §111.0626, which require taxpayers who remitted $100,000 or more
in sales or use tax during the preceding state fiscal year to file sales or
use tax returns and payments electronically. Subsection (e)(4) of the proposed
rule addresses these changes and references §3.9 of this title (relating
to Electronic Filing of Returns and Reports; Electronic Transfer of Certain
Payments by Certain Taxpayers). In addition to the legislative changes, subsections
(a)(3), (b)(3), and (d)(6) of the proposed amendment provide specific information
regarding the sales or use tax responsibilities of direct sales organizations
and their independent salespersons. This information reflects long-standing
comptroller policy. Finally, various subsections of the proposed rule are
amended for the purposes of clarity.
James LeBas, Chief Revenue Estimator, has determined that for the first
five-year period the rule will be in effect, there will be no significant
fiscal impact on the state or units of local government.
Mr. LeBas also has determined that for each year of the first five years
the rule is in effect, the public benefit anticipated as a result of enforcing
the rule will be in providing taxpayers with additional information regarding
their tax responsibilities. This rule is adopted under the Tax Code, Title
2, and does not require a statement of fiscal implications for small businesses.
There is no significant anticipated economic cost to individuals who are required
to comply with the proposed rule.
Comments on the proposal may be submitted to Bryant K. Lomax, Manager,
Tax Policy Division, P.O. Box 13528, Austin, Texas 78711.
This amendment is proposed under Tax Code, §111.002, which
provides the comptroller with the authority to prescribe, adopt, and enforce
rules relating to the administration and enforcement of the provisions of
Tax Code, Title 2.
The amendment implements Tax Code, §§111.024, 111.0625, 111.0626,
151.052, 151.7032, 151.708, 151.7102, and 151.714.
§3.286.Seller's and Purchaser's Responsibilities.
(a)
Definitions. The following words and terms, when used in
this section, shall have the following meanings, unless the context clearly
indicates otherwise.
(1)
Engaged in business--A retailer is engaged in business
in Texas if the retailer[
(A)
maintains, occupies, or uses,
[
(B)
has
[
(C)
promotes
[
(D)
uses
[
(E)
derives
[
(F)
allows
[
(G)
conducts
[
(2)
Place of business of the seller--For tax permit requirement
purposes
, the term
means an established outlet, office, or location
that
[
(3)
Seller--Every retailer, wholesaler, distributor, manufacturer,
or any other person who sells, leases, rents, or transfers ownership of taxable
items for a consideration. A promoter of a flea market, trade day, or other
event
that involves
[
[(4)
Special purpose district--A district
or other local taxing jurisdiction funded by a sales tax that is governed
by the County Sales and Use Tax Act, Chapter 323.]
(b)
Permits required.
(1)
Each
[
(2)
Each
[
(3)
Independent salespersons of direct sales organizations
are not
[
(4)
A person who engages in business in this
state as a seller of tangible personal property or taxable services without
a tax permit required by Tax Code, Chapter 151, commits a criminal offense.
Each day that a person operates a business without a permit is a separate
offense. See §3.305 of this title (relating to Criminal Offenses and
Penalties).
(c)
To obtain
[
(1)
A person must complete an
[
(2)
Each legal entity (corporation, partnership, sole proprietor,
etc.) must apply for its own permit. The permit cannot be transferred from
one owner to another.
The permit
[
(3)
The permit must be conspicuously displayed at the place
of business for which it is issued.
A permit holder that
[
(4)
All permits of the seller will have the same taxpayer number;
however, each business location will have a different outlet number. The outlet
numbers assigned may not necessarily correspond to the number of business
locations owned by a taxpayer.
(d)
Collection and remittance of the tax.
(1)
Each seller must collect the tax on each separate retail
sale in accordance with the statutory bracket system in the Tax Code, §151.053.
Copies of the bracket system should be displayed in each place of business
so both the seller and the customers may easily use them. The tax is a debt
of the purchaser to the seller until collected.
A seller who is a printer
should see paragraph (7) of this subsection for an exception to the collection
requirement.
(2)
The sales tax applies to each total sale, not to each item
of each sale. For example, if two items are purchased
at the same time
and each item is sold for
[
(3)
The amount of the sales tax must be separately stated on
the bill, contract, or invoice to the customer or there must be a written
statement to the customer that the stated price includes sales or use taxes.
Contracts, bills, or invoices
that
merely
state
[
(4)
A
[
(5)
The practice of rounding off the amount of tax
that
is
due on the sale of a taxable item is prohibited. Tax must be added
to the sales price according to the statutory bracket system.
(6)
Direct sales organizations must collect
and remit tax from independent salespersons as follows.
(A)
If an independent salesperson purchases a taxable item
from a direct sales organization after the customer's order has been taken,
then the direct sales organization must collect and remit sales tax on the
actual sales price of the taxable item.
(B)
If an independent salesperson purchases a taxable item
before the customer's order is taken, then the direct sales organization must
collect and remit the tax from the salesperson based on the suggested retail
sales price of the taxable item.
(C)
Taxable items that are sold to an independent salesperson
for the salesperson's use are taxed based on the actual price for which the
item was sold to the salesperson at the tax rate that was in effect for the
salesperson's location.
(7)
A printer is a seller of printed materials
and is required to collect tax on sales. However, a printer who is engaged
in business in Texas is not required to collect tax if:
(A)
the printed materials are produced by a web offset or rotogravure
printing process;
(B)
the printer delivers those materials to a fulfillment house
or to the United States Postal Service for distribution to third parties who
are located both in Texas and outside of Texas; and
(C)
the purchaser issues an exemption certificate that contains
the statement that the printed materials are for multistate use and the purchaser
agrees to pay to Texas all taxes that are or may become due to the state on
the taxable items that are purchased under the exemption certificate. See
subsection (f)(4) of this section for additional reporting requirements.
(e)
Payment of the tax.
(1)
Each seller
,
or purchaser
who owes
[
(2)
The returns must be signed by the person
who is
required to file the report or by the person's duly authorized agent, but
need not be verified by oath.
(3)
The returns
must
[
(4)
A seller, or a purchaser who owes tax
that was not collected by a seller, who remitted $100,000 or more in sales
and use tax to the comptroller during the preceding state fiscal year (September
1 through August 31) must file returns and transfer payments electronically
as provided by Tax Code, § 111.0625 and § 111.0626. For further
information about electronic filing of returns and payment of tax, see §3.9
of this title (relating to Electronic Filing of Returns and Reports; Electronic
Transfer of Certain Payments by Certain Taxpayers).
(f)
Reporting period.
(1)
Sellers, and purchasers
who owe
[
(2)
Sellers, and purchasers
who owe
[
(A)
Authorization to file returns on a yearly basis
is
[
(B)
Authorization to file returns on a yearly basis will be
denied if a taxpayer's liability exceeded $1,000 in the prior calendar year.
(C)
A taxpayer
who files
[
(D)
Authority to file on a yearly basis is automatically revoked
if a taxpayer's state sales and use tax liability is greater than $1,000 during
a calendar year. The taxpayer must file a return for that month or quarter,
depending on the amount, in which the
tax remittance or
liability
is greater than $1,000. On that report, the taxpayer must report all
taxes that are collected and all
accrued liability for the year
,
and must file monthly or quarterly, as appropriate,
so
[
(E)
Once each year
, the comptroller reviews
all
accounts [
(F)
Yearly filers must report on a calendar year basis. The
return and payment are due on or before January
20
[
(3)
Sellers, and purchasers
who owe
[
(4)
A printer who is not required to collect
tax on the sale of printed materials because the transaction meets the requirements
of subsection (d)(7) of this section must file a quarterly special use tax
report with the comptroller on or before the last day of the month following
the quarter. The special use tax report must contain the name and address
of each purchaser with the sales price and date of each sale. The printer
is still required to file sales and use tax returns to report and remit taxes
that the printer collected from purchasers on transactions that do not meet
the requirements of subsection (d)(7) of this section.
(5)
[
(6)
[
(g)
Filing the return; prepaying the tax; discounts; penalties.
(1)
The comptroller
makes
[
(2)
The return for each reporting period must reflect the total
sales, taxable sales, and taxable purchases for each outlet. The 0.5% discount
for timely filing and payment may be claimed on the return for each reporting
period and computed on the amount timely reported and paid with that return.
(3)
Prepayments may be made by taxpayers who file monthly or
quarterly returns. The amount of the prepayment
must
[
(A)
A taxpayer who makes a
timely
prepayment based
upon
a reasonable
[
(B)
The monthly prepayment is due on or before the 15th day
of the month for which the prepayment is made
(C)
The quarterly prepayment is due on or before the 15th day
of the second month of the quarter for which the tax is due.
(D)
On or before the 20th day of the month
that follows
[
(4)
Remittances
that
[
(5)
If a taxpayer does not file a [
(6)
Permit holders are required to file sales and use tax returns[
(h)
Records required.
(1)
Records must be kept for four years, unless the comptroller
authorizes in writing a shorter retention period. Exemption and resale certificates
must be kept for four years following the completion of the last sale covered
by the certificate. See §3.281 of this title (relating to Records Required;
Information Required) and §3.282 of this title (relating to Auditing
Taxpayer Records).
(2)
The comptroller or an authorized representative has the
right to examine
, copy, and photograph
any records or equipment
of any person
who is
liable for the tax in order to verify the
accuracy of any return [
(3)
A person who intentionally or knowingly
conceals, destroys, makes a false entry in, or fails to make an entry in,
records that are required to be made or kept under Tax Code, Chapter 151,
commits a criminal offense. See § 3.305 of this title.
(i)
Resale and exemption certificates.
(1)
Any person
who sells
[
(2)
A seller may accept a resale certificate only from a purchaser
who is in the business of reselling the taxable items within the geographical
limits of the United States of America, its territories and possessions, or
in the United Mexican States. See §3.285 of this title (relating to Resale
Certificate; Sales for Resale). To be valid, the resale certificate must show
the 11-digit number from the purchaser's Texas tax permit or the out-of-state
registration number of the out- of-state purchaser.
A Mexican retailer
who claims a resale exemption must show the Federal Taxpayers Registry (RFC)
identification number for Mexico on the resale certificate and give a copy
of the Mexican Registration Form to the Texas seller.
(3)
A seller may accept an exemption certificate in lieu of
the tax on sales of items that will be used in an exempt manner or on sales
to exempt entities. See §3.287 of this title (relating to Exemption Certificates).
There is no exemption number. An exemption certificate does not require a
number to be valid.
(4)
A purchaser
who claims
[
(5)
A person who intentionally or knowingly makes, presents,
uses, or alters a resale or exemption certificate for the purpose of evading
sales or use tax is guilty of a criminal offense
. See §3.305 of
this title.
[
[(A)
if the tax evaded by the invalid certificate
is less than $20, the offense is a Class C misdemeanor;]
[(B)
if the tax evaded by the invalid certificate
is $20 or more but less than $200, the offense is a Class B misdemeanor;]
[(C)
if the tax evaded by the invalid certificate
is $200 or more but less than $750, the offense is a Class A misdemeanor;]
[(D)
if the tax evaded by the invalid certificate
is $750 or more but less than $20,000, the offense is a felony of the third
degree;]
[(E)
if the tax evaded by the invalid certificate
is $20,000 or more, the offense is a felony of the second degree.]
(6)
Direct payment permit holders are entitled to issue [
(7)
Maquiladora export permit holders are entitled to issue
[
(8)
The seller should obtain a properly executed resale or
exemption certificate at the time a transaction occurs. All certificates obtained
on or after the date the auditor actually begins work on the audit at the
seller's place of business or on the seller's records are subject to verification.
All incomplete certificates will be disallowed regardless of when they were
obtained. The seller has 60 days from the date
on which the seller receives
written notice [
(j)
Suspension of permit.
(1)
If a person fails to comply with any provision of the Tax
Code, Title 2, or with the rules issued by the comptroller under those statutes,
the comptroller may suspend the person's permit or permits.
(2)
Before a seller's permit is suspended, the seller is entitled
to a hearing before the comptroller to show cause why the permit or permits
should not be suspended. The comptroller shall give the seller at least 20
days notice, which shall be in accordance with the requirements of §1.14
of this title (relating to Notice of Setting).
(3)
After a permit has been suspended, a new permit will not
be issued to the same seller until the seller has posted sufficient security
and satisfied the comptroller that the seller will comply with both the provisions
of the law and the comptroller's rules and regulations.
(4)
A person who operates a business in this
state as a seller of tangible personal property or taxable services after
the permit has been suspended commits a criminal offense. Each day that a
person operates a business with a suspended permit is a separate offense.
See §3.305 of this title.
(k)
Refusal to issue permit. The comptroller is required by
the Tax Code, §111.0046, to refuse to issue any permit to a person who:
(1)
is not permitted or licensed as required by law for a different
tax or activity administered by the comptroller; or
(2)
is currently delinquent in the payment of any tax or fee
collected by the comptroller.
(l)
Cancellation of sales tax permits with no reported business
activity.
(1)
Permit cancellation due to abandonment. Any holder of a
sales tax permit who reported no business activity in the previous calendar
year is [
(2)
Re-application.
If a permit is cancelled, the person
may reapply and obtain
[
(m)
Direct payment. Yearly and quarterly filing requirements,
prepayment procedures and discounts for timely filing do not apply to holders
of direct payment permits. See §3.288 of this title (relating to Direct
Payment Procedures and Qualifications). Direct payment returns and remittances
are due monthly on or before the 20th day of the month following the end of
the calendar month for which payment is made.
(n)
Liability related to acquisition of a
business or assets of a business. Tax Code, §111.020 and §111.024,
provides that the comptroller may impose a tax liability on a person who acquires
a business or the assets of a business. See §3.7 of this title (relating
to Successor Liability: Liability Incurred by Purchase of a Business).
(o)
Criminal penalties. Tax Code, Chapter
151, imposes criminal penalties for certain prohibited activities or for failure
to comply with certain provisions under the law. See §3.305 of this title.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on April 19, 2002.
TRD-200202431
Martin Cherry
Deputy General Counsel for Taxation
Comptroller of Public Accounts
Earliest possible date of adoption: June 2, 2002
For further information, please call: (512) 463-3699
Subchapter A. GENERAL RULES
34 TAC §7.1
The Comptroller of Public Accounts proposes an amendment
to §7.1, concerning general statement of purpose. Section 7.1 is amended
to add the board's new responsibilities to develop, implement, and administer
the higher education savings plan, as reflected in the Education Code, Chapter
54, Subchapter G.
James LeBas, chief revenue estimator, has determined that for the first
five-year period the rule is in effect there will be no significant revenue
impact on state or local governments as a result of enforcing or administering
the rule.
Mr. LeBas also has determined that for each year of the first five years
the rule is in effect, the public benefit anticipated as a result of enforcing
the rules will include informing the public about the new Texas higher education
savings plan, conforming the rules to federal tax law changes, providing more
flexibility to individuals in the mechanisms available in Texas to help fund
a college education, and allowing individuals the opportunity to utilize a
Texas higher education savings plan to take advantage of the federal income
tax benefits provided by § 529, Internal Revenue Code of 1986, as amended.
There is no significant anticipated economic cost to individuals who are required
to comply with the proposed rule.
Mr. LeBas also has determined that the proposed rule will not have an adverse
economic effect on small or micro businesses.
Written comments on the proposal may be addressed to Andrew Ruth, Director,
Special Programs, P.O. Box 13407, Austin, Texas 78711-3407, phone: 1-800-531-5441
ext. 62094. If a person wants to ensure that the board considers a comment
made about this proposal, then the person must ensure that the board receives
the comment not later than the 30th day after the issue date of the Texas
Register in which this proposal appears. If the 30th day is a state or national
holiday, Saturday, or Sunday, then the first workday after the 30th day is
the deadline.
The amendment is proposed under Education Code, Chapter 54, Subchapter
F, §54.602 which authorizes the board to administer the higher education
savings plan, §54.618 which authorizes the board to adopt rules necessary
for the implementation of the Prepaid Higher Education Tuition Program, and §54.632
which requires the board to comply with §529 of the Internal Revenue
Code of 1986.
The amendment implements Education Code, Chapter 54, Subchapter F and Subchapter
G.
§7.1.General Statement of Purpose.
(a)
Pursuant to the Education Code, Chapter 54,
Subchapter F, the Prepaid Higher Education Tuition Board is responsible for
developing the Prepaid Higher Education Tuition Program to increase access
to higher education for Texas families. The program will provide a mechanism
through which the cost of tuition and required fees may be paid in advance
of enrollment in an institution of higher education or a private or independent
institution of higher education. Promulgation of these rules will inform the
public and provide an orderly procedure to accomplish the responsibilities
provided by law.
(b)
Higher Education Savings Plan.
(1)
The board develops, implements, and administers the higher
education savings plan under Education Code, §54.602(b) and Education
Code, Chapter 54, Subchapter G.
(2)
The higher education savings plan enables individuals to
contribute to an account that is established for the purpose of meeting the
qualified higher education expenses of a beneficiary.
(3)
This subchapter and subchapter K of this chapter inform
the public about the savings plan.
(c)
Board. This chapter provides an orderly
procedure to accomplish the board's responsibilities.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on April 19, 2002.
TRD-200202422
Martin Cherry
Deputy General Counsel for Taxation
Comptroller of Public Accounts
Earliest possible date of adoption: June 2, 2002
For further information, please call: (512) 475-0387
34 TAC §7.2
The Comptroller of Public Accounts proposes an amendment
to §7.2, concerning definitions. The amendment deletes the definition
of required penalty to reflect changes in federal law applicable to prepaid
higher education tuition programs.
James LeBas, chief revenue estimator, has determined that for the first
five-year period the rule is in effect there will be no significant revenue
impact on state or local governments as a result of enforcing or administering
the rule.
Mr. LeBas also has determined that for each year of the first five years
the rule is in effect, the public benefit anticipated as a result of enforcing
the rule will include informing the public about the new Texas higher education
savings plan, conforming the rules to federal tax law changes, providing more
flexibility to individuals in the mechanisms available in Texas to help fund
a college education, and allowing individuals the opportunity to utilize a
Texas higher education savings plan to take advantage of the federal income
tax benefits provided by §529, Internal Revenue Code of 1986, as amended.
There is no significant anticipated economic cost to individuals who are required
to comply with the proposed rule.
Mr. LeBas also has determined that the proposed rule will not have an adverse
economic effect on small or micro businesses.
Written comments on the proposal may be addressed to Andrew Ruth, Director,
Special Programs, P.O. Box 13407, Austin, Texas 78711-3407, phone: 1-800-531-5441
ext. 62094. If a person wants to ensure that the board considers a comment
made about this proposal, then the person must ensure that the board receives
the comment not later than the 30th day after the issue date of the
The amendment is proposed under Education Code, Chapter 54, Subchapter
F, §54.602 which authorizes the board to administer the higher education
savings plan, §54.618 which authorizes the board to adopt rules necessary
for the implementation of the Prepaid Higher Education Tuition Program, and §54.632
which requires the board to comply with §529 of the Internal Revenue
Code of 1986.
The amendment implements Education Code, Chapter 54, Subchapter F and Subchapter
G.
§7.2.Definitions.
The following words, terms, and phrases, when used in this chapter,
shall have the following meanings. Terms used in this chapter and defined
in the Education Code, §54.601, shall have the meaning ascribed therein.
(1)
Average amount of tuition and required fees--The average
amount of tuition and required fees among all institutions within the plan
selected by the purchaser.
(2)
Comptroller--The Comptroller of Public Accounts for the
state of Texas.
(3)
Enrollment period--The designated period in each calendar
year during which the board will accept applications for enrollment in the
program.
(4)
Person--Includes an individual or corporation, organization,
government or governmental subdivision or agency, business trust, estate,
trust, partnership, association, and any other legal entity.
(5)
Required fees--Those fees imposed on all students as a
condition of enrollment at a particular institution of higher education or
private or independent institution of higher education. Required fees do not
include fees such as laboratory fees or equipment usage fees required for
particular courses, charges for room and board, book costs, or any optional
fees.
[
(6)
[
(7)
[
This agency hereby certifies that the proposal has been
reviewed by legal counsel and found to be within the agency's legal authority
to adopt.
Filed with the Office of
the Secretary of State on April 19, 2002.
TRD-200202423
Martin Cherry
Deputy General Counsel for Taxation
Comptroller of Public Accounts
Earliest possible date of adoption: June 2, 2002
For further information, please call: (512) 475-0387
34 TAC §7.3
The Comptroller of Public Accounts proposes an amendment
to §7.3, concerning tax exempt status requirements. The amendment deletes
references to a required penalty for refunds made under a prepaid tuition
contract to reflect changes in federal law.
James LeBas, chief revenue estimator, has determined that for the first
five-year period the rule is in effect there will be no significant revenue
impact on state or local governments as a result of enforcing or administering
the rule.
Mr. LeBas also has determined that for each year of the first five years
the rule is in effect the public benefit anticipated as a result of enforcing
the rule will include informing the public about the new Texas higher education
savings plan, conforming the rules to federal tax law changes, providing more
flexibility to individuals in the mechanisms available in Texas to help fund
a college education, and allowing individuals the opportunity to utilize a
Texas higher education savings plan to take advantage of the federal income
tax benefits provided by §529, Internal Revenue Code of 1986, as amended.
There is no significant anticipated economic cost to individuals who are required
to comply with the proposed rule.
Mr. LeBas also has determined that the proposed rule will not have an adverse
economic effect on small or micro businesses.
Written comments on the proposal may be addressed to Andrew Ruth, Director,
Special Programs, P.O. Box 13407, Austin, Texas 78711-3407, phone: 1-800-531-5441
ext. 62094. If a person wants to ensure that the board considers a comment
made about this proposal, then the person must ensure that the board receives
the comment not later than the 30th day after the issue date of the
The amendment is proposed under Education Code, Chapter 54, Subchapter
F, §54.602 which authorizes the board to administer the higher education
savings plan, §54.618 which authorizes the board to adopt rules necessary
for the implementation of the Prepaid Higher Education Tuition Program, and §54.632
which requires the board to comply with §529 of the Internal Revenue
Code of 1986.
The amendment implements Education Code, Chapter 54, Subchapter F and Subchapter
G.
§7.3.Tax Exempt Status Requirements.
(a)
The provisions of this section are intended to meet the
requirements of the Internal Revenue Code, §529.
(b)
All payments of amounts due to the fund for a prepaid tuition
contract must be made in cash. No person may make payments to the fund in
excess of the amounts required to be paid under the prepaid tuition contract
selected by the purchaser.
(c)
A separate accounting shall be maintained for each beneficiary.
(d)
The purchaser of a prepaid tuition contract and the beneficiary
of the contract shall have no ability to directly or indirectly control or
direct the investment of the payments made under the contract or any earnings
of the fund.
(e)
The purchaser of a prepaid tuition contract and the beneficiary
of the contract cannot use any interest in the contract as security for a
loan or other obligation.
(f)
The board shall make such reports as the Secretary of the
Treasury shall require.
[
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on April 19, 2002.
TRD-200202424
Martin Cherry
Deputy General Counsel for Taxation
Comptroller of Public Accounts
Earliest possible date of adoption: June 2, 2002
For further information, please call: (512) 475-0387
34 TAC §7.63
The Comptroller of Public Accounts proposes an amendment
to §7.63, concerning change of beneficiary. The amendment deletes references
to a required penalty for refunds made under a prepaid tuition contract to
reflect changes in federal law.
James LeBas, chief revenue estimator, has determined that for the first
five-year period the rule is in effect there will be no significant revenue
impact on state or local governments as a result of enforcing or administering
the rule.
Mr. LeBas also has determined that for each year of the first five years
the rule is in effect the public benefit anticipated as a result of enforcing
the rule will include informing the public about the new Texas higher education
savings plan, conforming the rules to federal tax law changes, providing more
flexibility to individuals in the mechanisms available in Texas to help fund
a college education, and allowing individuals the opportunity to utilize a
Texas higher education savings plan to take advantage of the federal income
tax benefits provided by §529, Internal Revenue Code of 1986, as amended.
There is no significant anticipated economic cost to individuals who are required
to comply with the proposed rule.
Mr. LeBas also has determined that the proposed rule will not have an adverse
economic effect on small or micro businesses.
Written comments on the proposal may be addressed to Andrew Ruth, Director,
Special Programs, P.O. Box 13407, Austin, Texas 78711-3407, phone: 1-800-531-5441
ext. 62094. If a person wants to ensure that the board considers a comment
made about this proposal, then the person must ensure that the board receives
the comment not later than the 30th day after the issue date of the
The amendment is proposed under Education Code, Chapter 54, Subchapter
F, §54.618, which authorizes the board to adopt rules necessary for the
implementation of the Prepaid Higher Education Tuition Program, and §54.632,
which requires the board to comply with §529 of the Internal Revenue
Code of 1986 in imposing penalties for refunds.
This amendment implements Education Code, Chapter 54, Subchapter F.
§7.63.Change of Beneficiary.
(a)
The purchaser of a prepaid tuition contract may substitute
one beneficiary for another subject to the following conditions:
(1)
the new beneficiary must meet the requirements of a qualified
beneficiary on the date the designation is changed, including residency requirements;
(2)
the new beneficiary is a member of the family of the original
beneficiary who meets the requirements of the Internal Revenue Code of 1986, §529
so that the change of beneficiary is not treated as a distribution under that
law;
(3)
documentation must be submitted evidencing the relationship
of the beneficiaries;
(4)
the purchaser must pay any amounts that would have been
paid under the contract originally had the new beneficiary been designated
at the time the original beneficiary was designated, plus any required fees
specified in the board's fee schedule; and
(5)
the original beneficiary has not used any contract benefits.
(b)
Amounts paid before the beneficiary is changed shall be
credited against amounts due at the time of the change. If the amount due
at the time of the change is less than the amount paid prior to the change,
such amount shall be credited against other amounts due through the term of
the contract. If the amount paid prior to change exceeds the amounts due through
the term of the contract, the amount in excess of the amounts due shall be
refunded to the purchaser [
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on April 19, 2002.
TRD-200202425
Martin Cherry
Deputy General Counsel for Taxation
Comptroller of Public Accounts
Earliest possible date of adoption: June 2, 2002
For further information, please call: (512) 475-0387
34 TAC §7.71
The Comptroller of Public Accounts proposes an amendment
to §7.71, concerning conversions. The amendment deletes references to
a required penalty for refunds made under a prepaid tuition contract to reflect
changes in federal law.
James LeBas, chief revenue estimator, has determined that for the first
five-year period the rule is in effect there will be no significant revenue
impact on state or local governments as a result of enforcing or administering
the rule.
Mr. LeBas also has determined that for each year of the first five years
the rule is in effect the public benefit anticipated as a result of enforcing
the rules will include informing the public about the new Texas higher education
savings plan, conforming the rules to federal tax law changes, providing more
flexibility to individuals in the mechanisms available in Texas to help fund
a college education, and allowing individuals the opportunity to utilize a
Texas higher education savings plan to take advantage of the federal income
tax benefits provided by §529, Internal Revenue Code of 1986, as amended.
There is no significant anticipated economic cost to individuals who are required
to comply with the proposed rule.
Mr. LeBas also has determined that the proposed rule will not have an adverse
economic effect on small or micro businesses.
Written comments on the proposal may be addressed to Andrew Ruth, Director,
Special Programs, P.O. Box 13407, Austin, Texas 78711-3407, phone: 1-800-531-5441
ext. 62094. If a person wants to ensure that the board considers a comment
made about this proposal, then the person must ensure that the board receives
the comment not later than the 30th day after the issue date of the
The amendment to §7.71 is proposed under Education Code,
Chapter 54, Subchapter F, §54.618, which authorizes the board to adopt
rules necessary for the implementation of the Prepaid Higher Education Tuition
Program, and §54.632, which requires the board to comply with Section
529 of the Internal Revenue Code of 1986 in imposing penalties for refunds.
The amendment implements Education Code, Chapter 54, Subchapter F.
§7.71.Conversion.
(a)
Plans are designed to be flexible and to allow beneficiaries
to attend their choice of institutions of higher education or private or independent
institutions of higher education.
(b)
A purchaser may convert a prepaid tuition contract from
one plan to another plan during the annual enrollment period specified by
the board and upon payment of any additional amounts due under the plan to
which the contract is converted plus any required fees specified in the board's
fee schedule. The value at the time of conversion of the contract under the
original plan shall be credited against amounts due upon conversion. Such
value shall be the present lump sum actuarial value of the average amount
of tuition and required fees for junior college plans, junior/senior college
plans, and senior college plans and the estimated amount of private tuition
and required fees for the private college plan. For contracts that are paid
in full, the payment of additional amounts for conversion is determined by
applying the value at the time of the conversion of the contract purchased
under the original plan to the cost of the new plan. For contracts that are
not paid in full, the payment of additional amounts for conversion is determined
by applying the pro rata amount of the value at the time of conversion of
the contract purchased under the original plan to the cost of the new plan,
such pro rata amount determined by the number of payments paid under the contract
under the original plan by the purchaser to the number of payments required
to pay the contract under the original plan in full. If the amount due under
the plan to which the contract is converted is less than the value at the
time of conversion of the contract under the original plan, such excess amounts
shall be credited against other amounts due through the term of the contract.
If the amount to be credited under the preceding sentence exceeds the amount
due through the term of the contract, such excess shall be refunded to the
purchaser less any applicable fees [
(c)
A purchaser may transfer ownership of a prepaid tuition
contract to another eligible purchaser, provided the transfer is accomplished
without consideration and, if the beneficiary is a nonresident of Texas, the
substitute purchaser meets the applicable residency requirements.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on April 19, 2002.
TRD-200202426
Martin Cherry
Deputy General Counsel for Taxation
Comptroller of Public Accounts
Earliest possible date of adoption: June 2, 2002
For further information, please call: (512) 475-0387
34 TAC §7.72
(Editor's note: The text of the following section proposed for
repeal will not be published. The section may be examined in the offices of
the Comptroller of Public Accounts or in the Texas Register office, Room 245,
James Earl Rudder Building, 1019 Brazos Street, Austin.)
The Comptroller of Public Accounts proposes the
repeal of §7.72, concerning required penalties on certain payments. The
rule is repealed to reflect changes in federal law which no longer requires
the penalties.
James LeBas, chief revenue estimator, has determined that the repeal of
the rule will not result in any fiscal implications to the state or to units
of local governments.
Mr. LeBas also has determined that the repeal will not have an adverse
economic effect on small or micro businesses.
Written comments on the repeal may be addressed to Andrew Ruth, Director,
Special Programs, P.O. Box 13407, Austin, Texas 78711-3407, phone: 1-800-531-5441
ext. 62094.
This repeal is proposed under Education Code, Chapter 54, Subchapter
F, §54.618, which authorizes the board to adopt rules necessary for the
implementation of the Prepaid Higher Education Tuition Program, and §54.632,
which requires the board to comply with §529 of the Internal Revenue
Code of 1986 in imposing penalties for refunds.
This repeal implements Education Code, Chapter 54, Subchapter F.
§7.72.Required Penalties on Certain Payments.
This agency hereby certifies that the proposal has been
reviewed by legal counsel and found to be within the agency's legal authority
to adopt.
Filed with the Office of
the Secretary of State on April 19, 2002.
TRD-200202427
Martin Cherry
Deputy General Counsel for Taxation
Comptroller of Public Accounts
Earliest possible date of adoption: June 2, 2002
For further information, please call: (512) 475-0387
34 TAC §7.81
The Comptroller of Public Accounts proposes an amendment
to §7.81, concerning refunds. The amendment deletes references to a required
penalty for refunds made under a prepaid tuition contract to reflect changes
in federal law.
James LeBas, chief revenue estimator, has determined that for the first
five-year period the rule is in effect there will be no significant revenue
impact on state or local governments as a result of enforcing or administering
the rule.
Mr. LeBas also has determined that for each year of the first five years
the rule is in effect the public benefit anticipated as a result of enforcing
the rules will include informing the public about the new Texas higher education
savings plan, conforming the rule to federal tax law changes, providing more
flexibility to individuals in the mechanisms available in Texas to help fund
a college education, and allowing individuals the opportunity to utilize a
Texas higher education savings plan to take advantage of the federal income
tax benefits provided by §529, Internal Revenue Code of 1986, as amended.
There is no significant anticipated economic cost to individuals who are required
to comply with the proposed rule.
Mr. LeBas also has determined that the proposed rule will not have an adverse
economic effect on small or micro businesses.
Written comments on the proposal may be addressed to Andrew Ruth, Director,
Special Programs, P.O. Box 13407, Austin, Texas 78711-3407, phone: 1-800-531-5441
ext. 62094. If a person wants to ensure that the board considers a comment
made about this proposal, then the person must ensure that the board receives
the comment not later than the 30th day after the issue date of the
The amendment to §7.81 is proposed under Education Code,
Chapter 54, Subchapter F, §54.618, which authorizes the board to adopt
rules necessary for the implementation of the Prepaid Higher Education Tuition
Program, and §54.632, which requires the board to comply with §529
of the Internal Revenue Code of 1986 in imposing penalties for refunds.
This amendment implements Education Code, Chapter 54, Subchapter F.
§7.81.Refunds.
(a)
Refunds shall be made in accordance with provisions of
these rules and the prepaid tuition contract, in a manner that will not adversely
affect the tax status of the program under applicable provisions of the Internal
Revenue Code, as amended from time to time. Refunds shall be governed by these
rules as amended and as in effect on the date the request for refund is submitted
to the board. In general, it is the board's intent that the amount of any
refund shall be the sum of all payments made under the contract for tuition
and required fees, less fees due and payable to the program under the board's
fee schedule and less any amounts paid by the program pursuant to the prepaid
tuition contract prior to the refund.
(b)
Refunds shall be made to the purchaser of the prepaid tuition
contract unless otherwise designated by the purchaser in writing to the board
in the event of the purchaser's death.
(c)
Should a beneficiary terminate his/her student status on
or after the date on which the institution denies refunds to students withdrawing
for a particular semester, no refund shall be paid under the prepaid tuition
contract for amounts relating to such semester.
(d)
Examples of circumstances under these rules in which refunds
may be made include, but are not limited to, the following.
(1)
Under any plan if the beneficiary receives a full scholarship
for tuition and required fees, the amount of tuition and required fees that
would have been paid under the plan selected may be refunded. Under a junior
college plan, junior/senior college plan, or a senior college plan, the amount
of such refund shall not exceed the tuition scholarship amount. Refund payments
may be issued each academic term as long as the scholarship is effective.
The purchaser of the prepaid tuition contract shall be entitled to such refund.
Proof of scholarship must be submitted in a form acceptable to the board.
(2)
Under the junior college plan, junior/senior college plan
or senior college plan, if a beneficiary receives a partial scholarship for
tuition and required fees, the tuition scholarship amount may be refunded.
Under the private college plan, if a beneficiary receives a partial scholarship,
a refund may be made in an amount equal to the excess of the estimated average
private tuition and required fee amounts, over the actual tuition and required
fee amounts less the scholarship amount. [
(3)
If the beneficiary dies or becomes disabled (within the
meaning of the Internal Revenue Code, §529(b)(3)) while attending an
institution of higher education or a private or independent institution of
higher education, the amount of benefits remaining available under the prepaid
tuition contract, less any applicable fees, may be refunded. A lump sum refund
may be made within 60 days of the date the program is notified of the death
or disability to the purchaser of the prepaid tuition contract, provided proof
of death or disability is submitted in a form acceptable to the board.
(4)
If the beneficiary dies or becomes disabled (within the
meaning of the Internal Revenue Code, §529(b)(3)) after having graduated
from high school but prior to attending an institution of higher education
or a private or independent institution of higher education, a refund may
be issued or the benefits under such contract may be transferred to another
qualified beneficiary. If a change of beneficiary is not requested, a lump
sum refund may be made within 60 days of the date the program is notified
of the death or disability to the purchaser of the prepaid tuition contract,
provided proof of death or disability is submitted in a form acceptable to
the board. Under the junior college plan, junior/senior college plan, or senior
college plan, the refund will equal the average amount of tuition and required
fees in effect at the time the refund is requested. Under the private college
plan, the refund will equal the estimated average of private tuition and required
fees as determined annually by the board.
(5)
If the beneficiary dies or becomes disabled before the
contract is paid in full, a refund may be issued or the benefits under such
contract may be transferred to another qualified beneficiary. If a change
of beneficiary is not requested, a lump sum refund may be made within 60 days
of the date the program is notified of the death or disability to the purchaser
of the prepaid tuition contract, provided proof of death or disability is
submitted in a form acceptable to the board. For junior college plans, junior/senior
college plans, or senior college plans, the refund amount will be equal to
a pro rata amount of the average amount of tuition and required fees in effect
at the time the refund is requested, such pro rata amount determined by the
number of payments made under the contract by the purchaser to the number
of payments required to pay the contract in full. For private college plans,
the refund amount will be equal to a pro rata amount of the estimated amount
of private tuition and required fees set forth in the prepaid tuition contract,
such pro rata amount determined by the number of payments made under the contract
by the purchaser to the number of payments required to pay the contract in
full.
(6)
If a prepaid tuition contract is terminated under §7.82(c)
of this title (relating to Termination of Prepaid Tuition Contract), such
contract may be refunded in an amount equal to the present lump sum actuarial
value, as of the date of termination, of the average amount of tuition or
the estimated amount of private tuition and required fees of junior college
plans, junior/senior college plans or the estimated amount of private tuition
and required fees for the private college plan, less [
(7)
If the purchaser who selected the junior college plan,
junior/senior college plan, or senior college plan dies or becomes disabled
and payments cease before the contract is paid in full, and unless otherwise
directed by the purchaser in writing, a refund may be made. The refund amount
will be equal to a percentage of the average amount of tuition and required
fees in effect at the time the refund is requested, determined by reference
to the percentage of payments made under the contract by the purchaser[
(8)
Refunds may be made for other reasons as approved by the
board[
This agency hereby certifies that the proposal has been
reviewed by legal counsel and found to be within the agency's legal authority
to adopt.
Filed with the Office of
the Secretary of State on April 19, 2002.
TRD-200202428
Martin Cherry
Deputy General Counsel for Taxation
Comptroller of Public Accounts
Earliest possible date of adoption: June 2, 2002
For further information, please call: (512) 475-0387
34 TAC §§7.101 - 7.111
The Comptroller of Public Accounts proposes new §§7.101-7.111,
concerning the Higher Education Savings Plan. These rules establish administrative
and procedural guidelines for a new Higher Education Savings Plan which will
allow individuals to make contributions to a higher education savings account,
while taking advantage of federal income tax benefits under Internal Revenue
Code of 1986, §529, as amended. The new rules will reside under Texas
Administrative Code, Title 34, Part 1, Chapter 7, new Subchapter K: Higher
Education Savings Plan.
James LeBas, chief revenue estimator, has determined that for the first
five-year period the rule is in effect there will be no significant revenue
impact on state or local governments as a result of enforcing or administering
the rule.
Mr. LeBas also has determined that for each year of the first five years
the rules are in effect, the public benefit anticipated as a result of enforcing
the rules will include informing the public about the new Texas Higher Education
Savings Plan, conforming the rules to federal tax law changes, providing more
flexibility to individuals in the mechanisms available in Texas to help fund
a college education, and allowing individuals the opportunity to utilize a
Texas Higher Education Savings Plan to take advantage of the federal income
tax benefits provided by Internal Revenue Code of 1986, §529, as amended.
There is no significant anticipated economic cost to individuals who are required
to comply with the proposed rule.
Mr. LeBas also has determined that the proposed rule will not have an
adverse economic effect on small or micro businesses.
Written comments on the proposal may be addressed to Andrew Ruth, Director,
Special Programs, P.O. Box 13407, Austin, Texas 78711-3407, phone: 1-800-531-5441
ext. 62094. If a person wants to ensure that the board considers a comment
made about this proposal, then the person must ensure that the board receives
the comment not later than the 30th day after the issue date of the
The new rules are proposed under Education Code, Chapter 54,
Subchapter F, §54.618, which authorizes the board to adopt rules to implement
Subchapter F, and Education Code, Chapter 54, Subchapter G, §§54.702,
54.708, and 54.710, which authorize the board to adopt rules governing the
Higher Education Savings Plan.
The new rules implement Education Code, Chapter 54, Subchapter G.
§7.101.Definitions.
The following words, terms, and phrases, when used in this subchapter,
shall have the following meanings.
(1)
Beneficiary--The designated individual whose qualified
higher education expenses are expected to be paid from a savings trust account.
(2)
Financial institution--A bank, trust company, savings and
loan association, credit union, broker-dealer, mutual fund, insurance company,
or other similar financial institution that is authorized to transact business
in this state.
(3)
Nonqualified withdrawal--A withdrawal from a savings trust
account other than:
(A)
a qualified withdrawal;
(B)
a withdrawal that is made as the result of the death or
disability of the beneficiary of the account; or
(C)
a withdrawal that is made as a result of the receipt of
a scholarship or an allowance or payment that is described in Internal Revenue
Code of 1986, §135(d)(1)(B) or (C), as amended, and that the beneficiary
has received, to the extent that the amount of the withdrawal does not exceed
the amount of the scholarship, allowance, or payment, in accordance with federal
law.
(4)
Owner--The individual, trust, estate, Uniform Gift to Minors
Act (UGMA) custodian or Uniform Transfer to Minors Act (UTMA) custodian, guardian,
corporation, non-profit entity, or other legal entity, or any combination
thereof that results from transfers by operation of law, that owns a savings
trust account under a savings trust agreement between the board and that individual,
trust, estate, UGMA or UTMA custodian, guardian, corporation, non-profit entity,
or other legal entity, or any combination thereof.
(5)
Plan manager--A financial institution that is under contract
with the board to serve as a plan administrator.
(6)
Qualified higher education expenses--Tuition, fees, books,
supplies, and equipment that are required for the enrollment or attendance
of a beneficiary at an eligible educational institution as defined by Internal
Revenue Code of 1986, §529, as amended, and including in certain instances
the following:
(A)
In the case of a special needs beneficiary, "qualified
higher education expenses" include expenses for special needs services that
are incurred in connection with enrollment or attendance of the beneficiary
at an eligible educational institution; and
(B)
To the extent permitted by Internal Revenue Code of 1986, §529,
as amended, beneficiaries who live off-campus and not at home may include
in "qualified higher education expenses" a reasonable room and board allowance
as determined by the eligible educational institution, and beneficiaries who
live on campus may include in "qualified higher education expenses" the actual
invoice amount that is charged for room and board, if that amount is greater
than the allowance.
(7)
Qualified withdrawal--A withdrawal from a savings trust
account to pay the qualified higher education expenses of the beneficiary
of the account.
(8)
Savings trust account--An account that an owner establishes
through the savings plan under this subchapter and Education Code, Chapter
54, Subchapter G, on behalf of a beneficiary for the purpose of applying distributions
from the account toward qualified higher education expenses at eligible educational
institutions.
(9)
Savings trust agreement--The agreement between the owner
that establishes a savings trust account and the board, which may be amended
over time.
(10)
Special needs beneficiary--A beneficiary who, because
of a physical, mental, or emotional condition, including a learning disability,
requires additional time to complete education courses or degree requirements.
This definition shall be automatically amended from time to time to conform
with the definition of special needs beneficiary in any proposed, temporary,
or final Treasury Department regulations. The board may adopt policies and
procedures by which a beneficiary's status as a special needs beneficiary
will be determined.
§7.102.General Provisions.
(a)
Applicability of this subchapter. This subchapter applies
to each savings trust agreement.
(b)
Rights of owners and beneficiaries. The rights of an owner
or a beneficiary under a savings trust agreement are subject to:
(1)
Education Code, Chapter 54, Subchapter G;
(2)
this subchapter; and
(3)
the terms and conditions of that agreement.
(c)
Composition and content of savings trust agreements.
(1)
The savings trust agreement between the board and an owner
consists of:
(A)
the application for enrollment that the owner submitted
to the plan manager that has custody of the owner's savings trust account;
and
(B)
the master agreement for the savings plan, except when
the agreement irreconcilably conflicts with Education Code, Chapter 54, Subchapter
G; Internal Revenue Code of 1986, §529, as amended; regulations thereunder;
or this subchapter.
(2)
The savings trust agreement between the board and an owner
is governed by:
(A)
the terms of the agreement;
(B)
this subchapter;
(C)
Education Code, Chapter 54, Subchapter G, and any other
applicable law of this state; and
(D)
Internal Revenue Code of 1986, §529, as amended, regulations
thereunder, and any other applicable federal law.
(3)
The savings trust agreement between the board and an owner
must contain the information that is required by Education Code, §54.707(c)
and §54.709(d).
(d)
Conflicts between Education Code, Chapter 54, Subchapter
G, and the Internal Revenue Code of 1986, §529, as amended, or this subchapter
and the master agreement. To the extent of irreconcilable conflict, the provisions
of Internal Revenue Code of 1986, §529, as amended, and regulations thereunder;
Education Code, Chapter 54, Subchapter G; and this subchapter prevail over
the master agreement for the savings plan. The agreement is at all times subject
to this subchapter. Any amendment to Internal Revenue Code of 1986, §529;
Education Code, Chapter 54, Subchapter G; or this subchapter that would apply
to the savings plan, a savings trust agreement, or a savings trust account
will automatically constitute an amendment to the savings trust agreement.
(e)
Disclosures and promotion of the plan.
(1)
Every savings trust agreement, deposit slip, or similar
document that is used in connection with a contribution to a savings trust
account must clearly indicate that:
(A)
the account is not insured by this state; and
(B)
neither the principal that is deposited nor the investment
return is guaranteed by this state.
(2)
The promotional material or other savings plan information
that is distributed to an owner or beneficiary shall disclose that:
(A)
no money that is invested in the savings plan is insured
by this state; and
(B)
neither the principal that is deposited nor the investment
return is guaranteed by this state.
(3)
The promotional material or other savings plan information
that is provided to the public, an owner, or a beneficiary must disclose the
administrative fees and service charges that are imposed under Education Code,
Chapter 54, Subchapter G.
(4)
The promotion of or other form of disclosure of information
about the savings plan to an owner or a beneficiary must be done in a manner
that is consistent with:
(A)
Education Code, Chapter 54, Subchapter G; and
(B)
Internal Revenue Code of 1986, §529, as amended.
(5)
No plan manager, financial institution, or person who acts
on behalf of either shall make any representation that is inconsistent with
the requirements and limitations of this subchapter, or that is otherwise
misleading with respect to any attribute of the savings plan, a savings trust
agreement, or a savings trust account.
§7.103.Tax Benefits and Securities Laws Exemptions.
(a)
Intent to satisfy tax exempt requirements. This subchapter,
the savings plan, each savings trust agreement, and each savings trust account
hereunder are intended to satisfy all requirements of:
(1)
Internal Revenue Code of 1986, §529, as amended, and
regulations thereunder; and
(2)
federal securities laws.
(b)
Media for making payments to savings trust accounts. Any
payment of an amount due to a savings trust account under a savings trust
agreement must be made in cash or by electronic funds transfer.
(c)
Excess contributions prohibited.
(1)
The owner of a savings trust account may not contribute
to the account any sum that would cause the balance of the account to exceed
the amount that is required to pay the qualified higher education expenses
of the beneficiary of the account. Contributions to a savings trust account
may not be made if, as a result thereof, the balance of the savings trust
account would exceed the sum of four times the cost of one year of undergraduate
tuition, fees, books, supplies, and room and board at the most expensive educational
institution that is eligible for the savings plan, and three times the cost
of one year of graduate school tuition, fees, books, supplies, and room and
board at the most expensive graduate school that is eligible for the savings
plan, which amount will be determined and published annually by the board.
Contributions to a savings trust account during a calendar year shall be limited
to the amount, if any, by which the foregoing sum exceeds the balance of that
savings trust account (together with the balance of all other savings trust
accounts that are maintained under the savings plan for the beneficiary of
that savings trust account) as of the end of the immediately preceding year.
Any contribution that exceeds that limit will be promptly refunded, without
interest or earnings, to the account's owner.
(2)
A plan manager shall monitor contributions to each savings
trust account that is in the manager's custody, to ensure compliance with
any applicable limits on contributions.
(3)
In application of these rules, the plan manager must determine
whether the beneficiary of a savings trust account is the beneficiary of any
other qualified tuition program under Internal Revenue Code of 1986, §529,
as amended, that is maintained by the state, and must enforce the foregoing
limitation on contributions by incorporating all other such accounts into
calculations of allowed contributions.
(d)
Separate accountings. A plan manager shall maintain a separate
accounting for each savings trust account in the manager's custody.
(e)
Investment and earnings control prohibited. Except as provided
in §7.106(f) of this title (relating to investment alternatives), neither
the owner of a savings trust account nor the beneficiary of that account may
control or direct the investment of:
(1)
the principal of the account; or
(2)
any earnings of the account.
(f)
Pledge of interest as security prohibited. Neither the
owner of a savings trust account nor the beneficiary of that account may:
(1)
assign any interest in the account for the benefit of a
creditor;
(2)
use any interest in the account as security or collateral
for a loan or other obligation; or
(3)
otherwise alienate, sell, transfer, assign, pledge, encumber,
or charge any interest in the account.
(g)
Reports. A plan manager shall make reports that are required
by:
(1)
Internal Revenue Code of 1986, §529, as amended; and
(2)
any other applicable tax law.
(h)
Policies and procedures. Except where in conflict with
Education Code, Chapter 54, Subchapter G, or this subchapter, the board may
adopt any policy or procedure, and such policy or procedure automatically
amends each outstanding savings trust agreement as necessary for:
(1)
the savings plan to obtain or maintain qualification as
a qualified tuition program under Internal Revenue Code of 1986, §529,
as amended;
(2)
owners and beneficiaries to obtain or maintain the federal
income tax benefits or favorable treatment that is provided by Internal Revenue
Code of 1986, §529, as amended; or
(3)
the savings plan to obtain or maintain exemption from registration
under federal securities laws.
§7.104.Enrollment.
(a)
Enrollment period. The savings plan will have an open,
continuous enrollment period.
(b)
Date on which applications for enrollment are considered
to have been received. For purposes of this section:
(1)
if an application for enrollment has an official postmark
date that is affixed by the United States Postal Service, a plan manager is
considered to have received the application on the earlier of:
(A)
the official postmark date; or
(B)
the date that is reflected on the date stamp to the application
or equivalent documentation that evidences actual receipt of the application
by the plan manager; or
(2)
if an application for enrollment does not have an official
postmark date that is affixed by the United States Postal Service, a plan
manager is considered to have received the application on the date that is
reflected on the date stamp to the application or equivalent documentation
that evidences actual receipt of the application by the plan manager.
(c)
Limitations on enrollment. The board may limit enrollment
in the savings plan as the board considers necessary.
(d)
Opening of savings trust account. A prospective owner may
open a savings trust account if:
(1)
the prospective owner enters into a savings trust agreement
with the board;
(2)
the prospective owner makes the minimum contribution that
the plan manager that has custody of the account requires; and
(3)
the maintenance and funding of the account would not cause
excess contributions in violation of §7.103(c) of this title (relating
to Excess Contributions Prohibited).
§7.105.Administrative Fees and Service Charges.
To be determined in consultation with the selected plan manager(s).
§7.106.Plan Managers.
(a)
Access to books and records. A plan manager shall provide
the comptroller with access to the books and records of the manager as the
comptroller determines necessary to assess the manager's compliance with Education
Code, Chapter 54, Subchapter G, this subchapter, the savings trust agreement,
or the contract between the board and the manager.
(b)
Savings trust accounts. A plan manager shall hold each
savings trust account in trust. Notwithstanding the foregoing, the Texas Trust
Code shall not apply to a savings trust agreement or a savings trust account.
(c)
Investments. A plan manager shall ensure that each investment
by the manager is made with the judgment and care that a person of prudence,
discretion, and intelligence would exercise in the management of the property
of another, not in regard to speculation but in regard to the permanent disposition
of funds, with consideration of the probable income as well as the probable
safety of capital.
(d)
Marketing of savings plan.
(1)
A plan manager shall develop a strategy to market the savings
plan and present the strategy to the board for review. If the board approves
the strategy, the manager shall fully implement that strategy.
(2)
A plan manager may contract with a financial institution
to market the savings plan on behalf of the manager.
(e)
Account services. A plan manager may contract with a financial
institution to provide account services to the owner of a savings trust account
that the manager administers. The institution may charge a fee or commission
for those services.
(f)
Investment alternatives. The plan manager may formulate
a variety of alternative investment strategies for savings trust accounts,
so long as such strategies are consistent with the requirements and limitations
of Internal Revenue Code of 1986, §529, as amended, and the regulations
thereunder. An owner is entitled to select a strategy from among such alternatives,
as permitted by Internal Revenue Code of 1986, §529, as amended.
(g)
Board review. From time to time, and in accordance with
procedures that the board establishes, the board shall review, monitor, and
audit the actions of the plan manager and financial institutions, as described
in subsections (c), (d), (e), and (f) above, and without impairment to any
other right that the board may have to terminate a contract with a plan manager,
may terminate the contract with a plan manager or withdraw its approval to
any of the above matters, if in its judgment the board finds that continuation
of that contract or the continued approval is not in the best interests of
the owners and beneficiaries, so long as such action is consistent with rights
and obligations of the board under the savings trust agreement.
§7.107.Beneficiaries.
Any individual may be the beneficiary of a savings trust account, including
the owner of that account.
§7.108.Roll-Overs.
In the case of a roll-over contribution from another qualified tuition
plan into a savings trust account, the board shall require that the owner
provide additional information and certifications to confirm that the contribution
is a qualified roll-over under Internal Revenue Code §529, as amended,
and to properly specify that portion of the contribution that is attributable
to the investment in the account that was maintained under the previous qualified
tuition program and that portion of the contribution that is attributable
to earnings that were accumulated in that account.
§7.109.Owners.
A savings trust account may only be established with one owner at the
time it is opened, and thereafter shall have only one owner except when owned
by more than one individual, trust, estate, or UGMA/UTMA custodian, guardian,
corporation, non-profit entity, or other legal entity (or any combination
thereof) as a result of a transfer by operation of law.
§7.110.Replacement of Beneficiary.
(a)
Criteria for being a qualified replacement beneficiary.
An individual may be the qualified replacement beneficiary of a savings trust
agreement if:
(1)
the individual is a member of the family of the former
beneficiary who satisfies the requirements of Internal Revenue Code of 1986, §529(e)(2),
as amended, so that the change of beneficiary is not treated as a distribution
under that law; and
(2)
documentation that evidences the relationship between the
individual and the former beneficiary is submitted to the plan manager that
has custody of the savings trust account.
(b)
Conditions for replacement of beneficiary. The owner of
a savings trust agreement may replace the beneficiary of that agreement with
another individual only if:
(1)
the individual is a qualified replacement beneficiary as
described in subsection (a) of this section; and
(2)
the owner pays to the plan manager that has custody of
the savings trust account any fees that are required under the board's administrative
fee and service charge schedule.
§7.111.Withdrawals.
(a)
General provisions. The owner of a savings trust account
may withdraw any amount from that account if:
(1)
the withdrawal is made in accordance with Education Code,
Chapter 54, Subchapter G; this subchapter; and the applicable savings trust
agreement;
(2)
the owner certifies to the appropriate plan manager the
portion, if any, of the withdrawal that constitutes a nonqualified withdrawal;
and
(3)
the withdrawal would not adversely affect the tax status
of the savings plan under applicable provisions of Internal Revenue Code of
1986, as amended. Notwithstanding the owner's certifications that are described
in clause (2) above, the board may independently determine the extent to which
any withdrawal constitutes a nonqualified withdrawal.
(b)
Responsibility of plan managers. A plan manager shall monitor
withdrawals from each savings trust account in the manager's custody to ensure
compliance with any applicable limitations on withdrawals.
(c)
Examples of particular types of withdrawals. The circumstances
under which a withdrawal is authorized include the following.
(1)
If the beneficiary of a savings trust agreement receives
a full or partial scholarship for tuition and required fees, the owner of
the agreement may withdraw the amount of the scholarship from the savings
trust account. A withdrawal under this paragraph may occur:
(A)
only as each academic term occurs; and
(B)
only if proof of the scholarship is submitted to the plan
manager that has custody of the account, in a form that is acceptable to the
plan manager.
(2)
If the beneficiary of a savings trust agreement dies or
becomes disabled within the meaning of Internal Revenue Code of 1986, §529(b)(3)(B),
as amended:
(A)
The owner of the agreement may withdraw the entire balance
of the savings trust account or replace the deceased or disabled beneficiary
with a qualified replacement beneficiary as provided in §7.110 of this
title (relating to Replacement of Beneficiary).
(B)
If the owner of the agreement requests a withdrawal, the
appropriate plan manager shall pay the withdrawal to the owner not later than
the 60th day after the date on which the plan manager receives proof of the
death or disability in a form that is acceptable to the plan manager.
This agency hereby certifies that the proposal
has been reviewed by legal counsel and found to be within the agency's legal
authority to adopt.
Filed with the Office of
the Secretary of State on April 19, 2002.
TRD-200202429
Martin Cherry
Deputy General Counsel for Taxation
Comptroller of Public Accounts
Earliest possible date of adoption: June 2, 2002
For further information, please call: (512) 475-0387
Subchapter A. PRACTICE AND PROCEDURE
is
]:
maintaining,
occupying, or using,
] permanently or temporarily, directly or indirectly,
or through an agent, by whatever name called, an office, place of distribution,
sales or sample room, warehouse or storage place, or other place of business;
having
] any representative, agent,
salesperson, canvasser, or solicitor
who operates
[
operating
] in this state under the authority of the seller
to sell, deliver,
or take
[
for the purpose of selling, delivering, or taking
]
orders for any taxable items;
promoting
] a flea market,
trade day, or other event
that involves
[
involving the
]
sales of taxable items;
utilizing
] independent salespersons
in direct sales of taxable items;
deriving
] receipts from a
rental or
lease of tangible personal property
that is
located
in this state;
allowing
] a franchisee or
licensee to operate under its trade name if the franchisee or licensee is
required to collect Texas sales or use tax; or
conducting
] business in
this state through employees, agents, or independent contractors.
operated by
] the seller, his agent, or employee
operates
for the purpose of
receipt of
[
receiving
]
orders for taxable items. A warehouse, storage yard, or manufacturing plant
is not
[
may not be considered
] a "place of business of the
seller" for tax permit requirement purposes unless
the seller receives
three or more orders [
are received by the seller
] in a calendar
year at the warehouse, storage yard, or manufacturing plant.
involving
] the sales of taxable
items is a seller and is responsible for the collection and remittance of
the sales tax
that
[
collected by
] dealers, salespersons,
or individuals
collect
at such events
,
unless the participants
hold active sales tax permits
that
[
issued by
] the comptroller
has issued
. A direct sales organization
that is
engaged
in business as defined in paragraph (1)(D) of this subsection is a seller
and is responsible for the collection and remittance of the sales tax
on all sales of taxable items
[
collected
] by the independent
salespersons
who sell
[
selling
] the organization's product.
Pawnbrokers, storagemen, mechanics, artisans, or others
who sell
[
selling
] property to enforce a lien are also sellers. An auctioneer
who does not receive payment for the item sold, does not issue a bill of sale
or invoice to the purchaser of the item, and who does not issue a check or
other remittance to the owner of the item sold by the auctioneer is not considered
a seller responsible for the collection of the tax. In this instance, it is
the owner's responsibility to collect and remit the tax. Auctioneers should
refer to §3.311 of this title (relating to Auctioneers, Brokers, and
Factors).
Every
] seller must apply to
the comptroller
and obtain
[
for
] a tax permit for each
place of business.
Every
] out-of-state seller
who is
engaged in business in this state must apply to the comptroller
and obtain
[
for
] a tax permit. An out-of-state seller
who
[
that
] has been engaged in business in Texas continues
to be responsible for
collection of
[
collecting
] Texas
use tax on sales made into Texas for 12 months after the seller ceases to
be engaged in business in Texas.
will not be
] required to hold sales tax permits
to sell taxable items for direct sales organizations
.
Direct
[
It is the responsibility of the direct
] sales organizations [
to
] hold
responsibility to maintain
Texas permits and [
to
] collect Texas tax
on all sales of taxable items by their independent
salespersons. See subsection (d)(6) of this section for collection and remittance
of tax by direct sales organizations
.
Obtaining
] a permit.
An
] application
that
[
will be furnished by
] the comptroller
furnishes
[
and must be filled out completely. After the application is filled
out and returned
]
and must return that application
to the
comptroller, together with [
whatever
] bond or other security
that may be
[
is
] required by §3.327 of this title (relating
to Taxpayer's Bond or Other Security)
. A
[
, a
] separate
permit under the same account
is
[
will be
] issued to
the applicant for each place of business. The permit is issued without charge.
It
] is valid only for
the person to whom it was issued and for the transaction of business only
at the address
that is
shown on the permit. If a person operates
two or more types of business
at the same location
[
under
the same roof
],
then
only one permit is
required
[
needed
].
However, a person who
] has traveling salesmen
who operate
[
operating
] from one central office needs only one permit, which
must be displayed at the central office.
, each costing
] $.07,
then
the seller must collect the tax on the total
sum
[
selling price
] of $.14. Tax must be reported and remitted to the comptroller
as provided by the Tax Code, §151.410. When tax is collected properly
under the bracket system,
the seller is not required to remit any amount
that is collected in excess of the tax due.
[
any over-collection
need not be remitted by the seller.
] Conversely, when the tax collected
under the bracket system is less than the tax due on the
seller's
total receipts, the seller is
required to remit tax on the
[
responsible for remitting tax on
] total receipts even though
the
seller did not collect tax
[
not collected
] from customers.
stating
] that "all taxes" are included are not specific enough to relieve
either party to the transaction of its sales and use tax responsibilities.
The total amount
that is
shown on such documents
is
[
will be
] presumed to be the taxable item's sales price, without
tax included. The seller or customer may overcome the presumption by using
the seller's records to show that tax was included in the sales price. Out-of-state
sellers must identify the tax as Texas sales or use tax.
It is unlawful for any
] seller
who advertises or holds
[
to advertise or hold
] out to the
public that the seller will assume, absorb, or refund any portion of the tax,
or that the seller will not add the tax to the
sales
[
selling
] price of [
the
] taxable items
commits a criminal offense.
See §3.305 of this title
[
being sold
].
owing
] tax
that was
not collected by a seller
,
must remit tax on all receipts from the sales or purchases of taxable items
less any applicable deductions. On or before the 20th day of the month following
each reporting period, each person
who is
subject to the tax shall
file a consolidated return together with the tax payment for all businesses
that operate
[
operating
] under the same taxpayer number. Reports
and payments
that are
due [
to be submitted on due dates occurring
] on Saturdays, Sundays, or legal holidays may be submitted
on
the next business day.
will
] be filed
on forms
that
[
prescribed by
] the comptroller
prescribes
. The fact that the seller or purchaser does not receive the [
form or does not receive the
] correct forms from the comptroller [
for the filing of the return
] does not relieve the seller or purchaser
of the responsibility
to file
[
of filing
] a return and
to pay
[
paying
] the required tax.
owing
] tax
that was
not collected by sellers, who have less than
$1,500 in state tax per quarter to report may file returns quarterly. The
quarterly reporting periods end on March
31
[
31st
],
June
30
[
30th
], September
30
[
30th
],
and December
31
[
31st
]. The returns
must
[
are to
] be filed on or before the 20th day of the month following
the period ending date.
owing
] tax
that was
not collected by sellers,
who have
[
having
] less than $1,000 state tax to report during a calendar
year [
and with authorization from the comptroller's office
] may
file yearly returns
upon authorization from the comptroller
.
will be
] conditioned
upon
[
on
] the
correct
and timely
filing of prior returns.
filing
] on a
yearly basis without authorization
is
[
will be
] liable
for applicable penalty and interest on any previously unreported quarter.
as
] long as the yearly tax liability is greater than $1,000.
will be reviewed
] to confirm yearly filing status and
to authorize permit holders who meet the filing requirements to
file
[
begin filing
] yearly returns.
20th
]
of the next calendar year.
owing
] tax
that was
not collected by sellers, who have $1,500
or more in state tax per quarter to report must file monthly returns except
for sellers who prepay the tax.
(4)
]
Each
[
Every
] taxpayer
who is
required to file
a
city, county,
special purpose district (SPD), or metropolitan transit authority/city transit
department
[
and Metropolitan Transit Authority/City Transit Department
] (MTA/CTD) sales and use tax
return
[
returns
]
must file
the return
[
them
] at the same time
that
the state sales and use tax
return is
[
returns are
] filed.
(5)
] State agencies. State agencies
that deposit taxes directly with the comptroller's office according to Accounting
Policy Statement Number
8
[
12
] are not required to file
a separate tax return. A fully completed deposit request voucher is deemed
to be the return filed by these agencies.
Paragraphs (1)-(3) of this
subsection
[
Subsection (f)(1)-(3) of this section
] do not
apply to these state agencies. Taxes must be deposited with the comptroller's
office within the time period otherwise specified by law for deposit of state
funds.
will make
]
forms available to all persons
who are
required to file returns.
The failure of the taxpayer to obtain the forms
does
[
will
] not relieve that taxpayer from the requirement to file and remit the
tax timely. Each taxpayer may claim a discount for timely filing and payment
as reimbursement for the expense of
collection of
[
collecting
] the tax. The discount is equal to 0.5% of the amount of tax due.
Certain sellers and purchasers are required to file returns and pay tax electronically,
as provided in subsection (e)(4) of this section.
should
] be a reasonable estimate of the state and local tax liability for
the entire reporting period. "Reasonable estimate" means at least 90% of the
total amount due or an amount equal to the actual net tax liability due and
paid for the same reporting period of the immediately preceding year.
an
] estimate of tax liability may
retain an additional discount of 1.25% of the amount due.
following
] the quarter or month for which a prepayment
was made, the taxpayer must file a return showing the actual liability and
remit any amount due in excess of the prepayment. If there is an additional
amount due, the taxpayer may retain the 0.5% reimbursement provided that both
the return and the additional amount due are timely filed. If the prepayment
exceeded the actual liability, the taxpayer will be mailed an overpayment
notice or refund warrant.
which
] are less
than a reasonable estimate as required by paragraph (3) of this subsection
are not
[
will not be
] regarded as
prepayments
[
a prepayment
]. The 1.25% discount will not be allowed. If the taxpayer
owes more than $1,500 in a calendar quarter, the taxpayer
is
[
will be
] regarded as a monthly filer. All monthly reports
that
are
not filed because of the invalid prepayment
are
[
will be
] subject to late filing penalty and interest.
quarterly or monthly
] return together with payment on or before the due date, the taxpayer
forfeits all discounts and incurs a mandatory 5.0% penalty. After the first
30 days delinquency, an additional mandatory penalty of 5.0% is assessed against
the taxpayer, and after the first 60 days delinquency, interest begins to
accrue at the
prime rate, as published in the
Wall Street Journal
on the first business day of each calendar year,
plus 1.0%. For taxes that are due on or before December 31, 1999, interest
is assessed at the rate of
[
rate of
]12%
annually
.
monthly, quarterly, or yearly as set out in subsection (f) of this section
].
A permit holder must file a
[
The
] sales and
use tax
return
[
returns must be filed
] even if
the permit holder has no sales or
[
there is no
] tax to report
for the reporting period. A person who has failed to file timely reports on
two or more previous occasions must pay an additional penalty of $50 for each
subsequent report that is not filed timely. The penalty is due regardless
of whether the person subsequently files the report or whether no taxes are
due for the reporting period.
made
] or to determine the tax liability
in the event
that
no return is filed.
selling
] taxable
items in this state must collect
sales and use
[
a
] tax
on [
the
] taxable items
that are
[
so
] sold
unless a valid and properly completed resale
certificate
, exemption
certificate
, direct payment exemption certificate, or maquiladora exemption
certificate is received from the purchaser. Simply having permit numbers on
file without properly completed certificates does not relieve the seller from
the responsibility for collecting tax.
claiming
]
an exemption from the tax must issue to the seller a properly completed resale
or exemption certificate. The seller must act in good faith when accepting
the resale or exemption certificate. If a seller has actual knowledge that
the exemption claimed is invalid, the seller must collect the tax.
:
]
an
] exemption
certificates
[
certificate
] when purchasing
all taxable items, other than those purchased for resale. The direct payment
exemption certificate must show the purchaser's direct payment permit number.
See §3.288 of this title (relating to Direct Payment Procedures and Qualifications).
a
] maquiladora exemption
certificates when they purchase
[
certificate when purchasing
] tangible personal property,
other than that purchased for resale. Maquiladora export permit holders should
refer to §3.358 of this title (relating to Maquiladoras).
is received by the seller
] from the comptroller
of the seller's duty
[
in which
] to deliver certificates to
the comptroller. For the purposes of this section, written notice given by
mail is presumed to have been received by the seller within three business
days from the date of deposit in the custody of the United States Postal Service.
The seller may overcome the presumption
of three business days for mail
delivery
by submitting proof from the United States Postal Service or
by
providing
other competent evidence
that shows
[
showing
] a later delivery date. Any certificates
that are
delivered to the comptroller during the 60-day period
are
[
will be
] subject to verification by the comptroller before any deductions
are
[
will be
] allowed. Certificates
that are
delivered
to the comptroller after the 60-day period will not be accepted and the deduction
will not be granted. See §3.285 of this title (relating to Resale Certificate;
Sales for Resale), §3.287 of this title (relating to Exemption Certificates), §3.288
of this title (relating to Direct Payment Procedures and Qualifications) and §3.282
of this title (relating to Auditing Taxpayer Records).
hereby
] deemed to have abandoned the permit, and the [
permit is hereby canceled by the
] comptroller
may cancel the permit
. "No Business Activity" means zero total sales, zero taxable sales,
and zero taxable purchases.
Nothing herein shall prohibit any applicant
from receiving
] a new sales tax permit upon request provided the issuance
is not prohibited by subsection (k)(1) or (2) of this section, or by [
the
] Tax Code, §111.0046.
Chapter 7.
PREPAID HIGHER EDUCATION TUITION PROGRAM
(6)
Required penalty--An amount
to be retained by the fund, as provided in this chapter or in a prepaid tuition
contract, out of a refund or other amount payable under a prepaid tuition
contract. The amount of a required penalty shall be equal to 10% of the portion
of such refund or payment that represents undistributed earnings on the contract.]
(7)
] Staff--Employees of the comptroller
selected by the comptroller to serve as staff of the board and assist in the
performance of duties delegated to the comptroller by the board.
(8)
] Tuition--The charges imposed
by an institution of higher education or private or independent institution
of higher education on undergraduates as a condition of enrollment, as identified
by such institution. Where applicable, a reference to tuition shall be deemed
a reference to resident tuition rates unless otherwise specified.
(g)
Required penalties shall be
imposed on refunds and other payments under a prepaid tuition contract as
provided in this chapter or in the prepaid tuition contract. The amount of
any refund or other payment to which a person is otherwise entitled under
a prepaid tuition contract shall be reduced by the amount of any required
penalty thereon.]
Subchapter G. BENEFICIARIES
subject to a required penalty under §7.3(g)
of this title (relating to Tax Exempt Status Requirements)
].
Subchapter H. CONVERSION
and less a required penalty under §7.3(g)
of this title (relating to Tax Exempt Status Requirements)
].
Subchapter I. REFUNDS, TERMINATION
Such amount will be subject
to a required penalty under §7.3(g) of this title (relating to Tax Exempt
Status Requirements).
] Refund payments up to the amount determined in
accordance with this paragraph may be issued each academic term as long as
the scholarship is effective. The purchaser of the prepaid tuition contract
shall be entitled to such refund. Proof of scholarship must be submitted in
a form acceptable to the board.
the required penalty
under §7.3(g) of this title (relating to Tax Exempt Status Requirements);
]a cancellation fee; and any other applicable fee. In no case shall
a refund be made in an amount less than the total amount paid by the purchaser
under the contract less any applicable administrative fees or amounts previously
distributed.
, and such amount will be subject to a required penalty under §7.3(g)
of this title (relating to Tax Exempt Status Requirements)
]. If the
purchaser who selected the private college plan dies or becomes disabled and
payments cease before the contract is paid in full, a refund may be made.
The refund amount will be equal to a percentage of the estimated amount of
private tuition and required fees set forth in the prepaid tuition contract,
determined by reference to the percentage of payments made under the contract
by the purchaser[
, and such amount will be subject to a required penalty
under §7.3(g) of this title
]. A lump sum refund may be made within
60 days to the purchaser of the prepaid tuition contract unless otherwise
specified in writing by the purchaser as described in this paragraph. In the
alternative, contract benefits may be converted to a plan with reduced benefits.
Proof of death or disability shall be in a form acceptable to the board. Notwithstanding
any other provision of this paragraph, the purchaser, in a writing to the
board, and providing such other information as the board may request, may
designate a person who shall have a right of survivorship with respect to
purchaser's rights and obligations pursuant to a prepaid tuition contract;
provided that such designation shall in no way affect the purchaser's ability
to modify or terminate the contract and receive a refund without the consent
or authorization of the designee.
subject to required penalties as determined by the board under §7.3(g)
of this title (relating to Tax Exempt Status Requirements)
]. By way
of example, such refunds may be made in an amount equal to the lowest amount
of tuition and required fees of all institutions under the plan selected,
less a cancellation fee[
and less a required penalty under §7.3(g)
of this title
]. Refund payments may be made in semiannual installments
to the purchaser of the prepaid tuition contract.
Subchapter K. HIGHER EDUCATION SAVINGS PLAN
Chapter 9.
PROPERTY TAX ADMINISTRATION