S 348 Session 109 (1991-1992)
S 0348 General Bill, By H.U. Fielding
A Bill to amend the Code of Laws of South Carolina, 1976, by adding Chapter
110 in Title 59 so as to provide for the South Carolina Tuition Account
Program Act; to amend Section 12-7-435, as amended, relating to deductions
from South Carolina taxable income, so as to allow the deduction of payments
paid by the purchaser of an advance tuition payment contract, to require the
tuition account program agency established by this Act to obtain rulings from
the Internal Revenue Service and the Securities and Exchange Commission before
commencing operations and to provide for an unfavorable ruling.
12/10/90 Senate Prefiled
12/10/90 Senate Referred to Committee on Education
01/08/91 Senate Introduced and read first time SJ-118
01/08/91 Senate Referred to Committee on Education SJ-118
A BILL
TO AMEND THE CODE OF LAWS OF SOUTH
CAROLINA, 1976, BY ADDING CHAPTER 110 IN TITLE
59 SO AS TO PROVIDE FOR THE SOUTH CAROLINA
TUITION ACCOUNT PROGRAM ACT; TO AMEND
SECTION 12-7-435, AS AMENDED, RELATING TO
DEDUCTIONS FROM SOUTH CAROLINA TAXABLE
INCOME, SO AS TO ALLOW THE DEDUCTION OF
PAYMENTS PAID BY THE PURCHASER OF AN
ADVANCE TUITION PAYMENT CONTRACT, TO
REQUIRE THE TUITION ACCOUNT PROGRAM AGENCY
ESTABLISHED BY THIS ACT TO OBTAIN RULINGS
FROM THE INTERNAL REVENUE SERVICE AND THE
SECURITIES AND EXCHANGE COMMISSION BEFORE
COMMENCING OPERATIONS AND TO PROVIDE FOR
AN UNFAVORABLE RULING.
Whereas, tuition at institutions of higher education is greatly
increasing and is becoming difficult for individuals and families
to afford and plan for future educational expenses; and
Whereas, this is adversely affecting the ability of many to
provide and obtain a college education; and
Whereas, it is in the best interest of the people of South
Carolina to promote higher education in this State in order to
provide well-educated citizens; and
Whereas, it is the duty of the members of this body to help
foster and assure the higher education of the citizens of this
State; and
Whereas, thus, it is incumbent upon the General Assembly of
this State to provide a mechanism to assist individuals and
families in affording and planning future educational expenses.
Now, therefore,
Be it enacted by the General Assembly of the State of South
Carolina:
SECTION 1. Title 59 of the 1976 Code is amended by adding:
"CHAPTER 110
South Carolina Tuition Account Program
Act
Section 59-110-10. This chapter is known and may be cited
as the 'South Carolina Tuition Account Program Act'.
Section 59-110-20. As used in this chapter:
(1) 'Advance tuition account payment contract' means a
contract entered into by the South Carolina Tuition Account
Program Fund and Commission and a purchaser to provide for
the higher education of a qualified beneficiary.
(2) 'Advance tuition payment fund' includes all monies
received pursuant to purchases of advance tuition payment
contracts, any governmental appropriations into the fund and all
other monies deposited into the fund that are received from any
other source.
(3) 'Commission' means the South Carolina Tuition
Account Program Commission.
(4) 'Fund' means the advance tuition payment fund.
(5) 'Purchaser' means a person who makes or is obligated
to make advance tuition payments pursuant to an advance
tuition payment contract.
(6) 'Qualified beneficiary' means any resident of this State
who meets the eligibility criteria established by this act and by
the commission and on whose behalf a purchaser enters into a
tuition account payment contract.
(7) 'State institution of higher education' means a college
or university designated as such by the Commission on Higher
Education for purposes of this chapter.
(8) 'Tuition' means the quarter or semester charges
imposed to attend a state institution of higher education and all
mandatory fees required as a condition of enrollment as
determined by the commission.
(9) 'Weighted average tuition cost of state institutions of
higher education' means the tuition cost arrived at by adding the
products of the annual undergraduate tuition cost at each state
institution of higher education and its total number of full-time
equivalent undergraduate students, and then by dividing the
gross total of this cumulation by the total number of full-time
equivalent undergraduate students attending state institutions of
higher education.
Section 59-110-30. (A) There is created the South Carolina
Tuition Account Program Commission consisting of eleven
members as follows:
(1) the State Treasurer;
(2) the Commissioner on Higher Education;
(3) two members appointed by the Speaker of the
House of Representatives;
(4) two members appointed by the President of the
Senate;
(5) five members appointed by the Governor with the
advice and consent of the Senate as follows:
(a) one member nominated by the Advisory Council
of College Presidents for a term of four years;
(b) four members who shall serve for terms of four
years, one of whom must be designated chairman, except that
of those first appointed, two shall serve for terms of two years.
(B) Vacancies must be filled in the manner of original
appointment for the unexpired portion of the term. Members
shall receive the per diem, mileage, and subsistence authorized
by law for members of state boards, committees, and
commissions.
Section 59-110-40. In addition to the powers granted by
other provisions of this chapter, the commission has the powers
necessary to carry out and effectuate the purposes, objectives,
and provisions of this chapter, including, but not limited to, the
power to:
( 1) invest any money of the fund, at the commission's
discretion, in any instruments, obligations, securities, or
property determined proper by the commission and name and
use depositories for its money;
( 2) pay money to state institutions of higher education from
the fund;
( 3) impose reasonable residency requirements for qualified
beneficiaries;
( 4) impose reasonable limits on the number of participants
in the fund;
( 5) segregate contributions and payments to the fund into
various accounts and funds;
( 6) contract for goods and services and engage personnel
as necessary and engage the services of private consultants,
actuaries, managers, legal counsel, and auditors for rendering
professional, management, and technical assistance and advice,
payable out of any money of the fund;
( 7) solicit and accept gifts, grants, loans, and other aids
from any person or the federal, state, or a local government, or
to participate in any other way in any federal, state, or local
government program;
( 8) charge, impose, and collect administrative fees and
charges in connection with any transaction and provide for
reasonable penalties, including default, for delinquent payment
of fees or charges or for fraud;
( 9) procure insurance against any loss in connection with
the fund's property, assets, or activities;
(10) enter into contracts on behalf of the State;
(11) administer the advance tuition account program and the
fund;
(12) indemnify or procure insurance indemnifying any
member of the commission from personal loss or accountability
from liability resulting from a member's action or inaction as a
member of the board, including, but not limited to, liability
asserted by a person on any bonds or notes of the authority;
(13) impose reasonable time limits on use of the tuition
benefits provided by the fund, if the limits are made a part of
the contract;
(14) define the terms and conditions under which money
may be withdrawn from the fund, including, but not limited to,
reasonable charges and fees, if the terms and conditions are
made a part of the contract;
(15) provide for receiving contributions in lump or periodic
sums;
(16) establish policies, procedures, and eligibility criteria
and to promulgate regulations to implement this chapter;
(17) contract and make any arrangements necessary with
institutions of higher education to carry out the provisions of
this act;
(18) terminate tuition accounts and make refunds;
(19) sue and be sued, have perpetual succession, make and
execute and deliver contracts, conveyances, and other
instruments necessary or convenient to the exercise of its
powers;
(20) make and rules and regulations; and
(21) subject to legislative appropriations, employ an
executive director and an administrative staff, to carry out the
functions of the commission.
Section 59-110-50. (A) There is established, under the
supervision of the State Treasurer, an advance tuition payment
fund. The advance tuition payment fund must be invested and
administered by the State Treasurer pursuant to the provisions
of this chapter and the regulations established by the
commission.
(B) The advance tuition payment fund consists of:
(1) all payments made by purchasers pursuant to tuition
account payment contracts on behalf of qualified beneficiaries;
(2) all interest and earnings on money in the fund;
(3) any other money, public or private, made available
to the tuition account program or commission for the fund from
any source.
Section 59-110-60. The commission shall prepare or cause
to be prepared annually an accounting of the program's funds
and shall transmit a copy of the accounting to the Governor, the
President Pro Tempore of the Senate, the Speaker of the House
of Representatives, and the respective chairmen of the Senate
Finance Committee and House Ways and Means Committee.
The commission shall make available the accounting of the
fund to purchasers. The accounts of the fund are subject to
annual audits by the State Auditor.
Section 59-110-70. (A) The assets of the fund must be
preserved, invested, and expended solely pursuant to and for
the purposes set forth in this chapter and must not be
commingled or managed together with any other accounts or
funds established for other purposes.
(B) Assets of the fund are not considered state funds for any
purpose.
(C) Unless otherwise provided by resolution of the
commission, assets of the fund must be expended in the
following order of priority to:
(1) make payments to state institutions of higher
education on behalf of qualified beneficiaries;
(2) make refunds upon termination of an advance tuition
payment contract;
(3) pay the costs of administration and organization of
the fund and the program.
(D) Assets of the fund may be invested in any instrument,
obligation, security, or property considered appropriate by the
commission and may be pooled for investment purposes with
investments of the State, including, but not limited to, state
pension funds on terms and conditions agreeable to the
commission.
Section 59-110-80. The investment policies of the tuition
account program must be directed to obtaining sufficient
income to meet the program's obligations under this chapter,
maintaining such reserves as are considered necessary, and
covering its operating expenses. The commission may not
engage in an investment practice or activity which entails
greater risk than necessary to meet these objectives.
Section 59-110-90. (A) The fund must be administered in
a manner reasonably designed to be actuarially sound so that
the assets of the fund are sufficient to defray the obligations of
the program.
(B) In the accounting of the fund made pursuant to Section
59-110-60, the commission shall evaluate or cause to be
evaluated annually by a nationally recognized actuary the
actuarial soundness of the fund and determine the additional
assets needed, if any, to defray the obligations of the program.
If there are not funds sufficient to ensure the actuarial
soundness of the fund, the commission shall adjust payments of
subsequent purchasers to ensure its actuarial soundness. If
there are insufficient numbers of new purchasers to ensure the
actuarial soundness of a plan of the fund, the available assets of
the program attributable to the plan must be prorated
immediately among existing contracts, and these shares must be
applied, at the option of the person to whom the refund is
payable or would be payable under the contract upon
termination of the contract, either toward the purposes of the
contract for a qualified beneficiary or disbursed to the person
to whom the refund is payable or would be payable under the
contract upon termination of the contract.
Section 59-110-100. (A) The commission may contract
with a purchaser for the advance payment of tuition by the
purchaser for a qualified beneficiary to attend any of the state
institutions of higher education to which the qualified
beneficiary is admitted, without further tuition cost to the
qualified beneficiary. In addition, an advance tuition payment
contract must set forth in a clear manner all of the following:
( 1) the amount of the payment required from the
purchaser on behalf of the qualified beneficiary;
( 2) the terms and conditions for making the payment;
( 3) provisions for late payment charges and for default;
( 4) the name and age of the qualified beneficiary under
the contract. The purchaser, with the approval of and on
conditions determined by the commission, subsequently may
substitute another person for the qualified beneficiary originally
named;
( 5) the number of credit hours covered by the contract;
( 6) the name of the person entitled to terminate the
contract, which, as provided by the contract, may be the
purchaser, the qualified beneficiary, or a person to act on behalf
of the purchaser or qualified beneficiary, or any combination of
these persons;
( 7) the terms and conditions under which the contract
may be terminated and the amount of the refund, if any, to
which the person terminating the contract, or specifically the
purchaser or designated qualified beneficiary if the contract so
provides, is entitled upon termination;
( 8) the contractual obligations to the qualified
beneficiary on behalf of the tuition account program and the
State. The advance tuition payment contract shall provide for
the credit hours of higher education that a qualified beneficiary
may receive under the contract if the qualified beneficiary is
not entitled to in-state tuition rates;
( 9) the period of time from the beginning to the end of
which the qualified beneficiary may receive the benefits under
the contract;
(10) all other rights and obligations of the purchaser and
the tuition account program;
(11) other terms, conditions, and provisions as the
commission considers in its sole discretion to be necessary or
appropriate.
(B) The form of any advance tuition payment contract to be
entered into by the tuition account program must be approved
first by the State Budget and Control Board.
(C) The commission shall make any arrangements that are
necessary or appropriate with state institutions of higher
education in order to fulfill its obligations under advance tuition
payment contracts, which arrangements may include, but are
not limited to, the payment by the tuition account program of
the then actual in-state tuition cost on behalf of a qualified
beneficiary to the state institution of higher education.
(D) An advance tuition account program must provide for
the qualified beneficiary to attend a technical college in this
State under the jurisdiction of the State Board for Technical and
Comprehensive Education before entering a state institution of
higher education if the beneficiary so chooses, and that the
contract may be terminated pursuant to Section
59-110-160(A)(4) after completing the requirements for a
degree at the technical college in this State or before entering
the state institution of higher education.
(E) An advance tuition payment contract may provide that,
if after a number of years specified in the contract the contract
has not been terminated or the qualified beneficiary's rights
under the contract have not been exercised, the commission,
after making a reasonable effort to locate the purchaser and
qualified beneficiary or the agent of either, shall retain the
amounts otherwise payable, and the rights of the qualified
beneficiary, the purchaser, or the agent of either are considered
terminated.
Section 59-110-110. At a minimum, the program must
offer advance tuition payment contracts pursuant to the
following levels of tuition:
(1) weighted average tuition cost of state institutions of
higher education, which includes the tuition cost arrived at by
adding the products of the annual undergraduate tuition cost at
each state institution of higher education and its total number
of full-time equivalent undergraduate students, and then by
dividing the gross total of this cumulation by the total number
of full-time equivalent undergraduate students attending state
institutions of higher education; or
(2) the tuition at a specific institution of higher learning as
designated by the purchaser.
Section 59-110-120. A designation made by a purchaser,
for an advance tuition payment contract, pursuant to Section
59-110-90(2), must be made with the intention that the
beneficiary will attend that specific institution as designated.
If the beneficiary enters another institution of higher learning
which is a participant in the tuition account program, the
amount of the tuition payment contract must then be converted
to that institution's tuition rate at the time the contract was
procured.
Section 59-110-130. All advance tuition payment contracts
entered into pursuant to the tuition account program must be
executed pursuant to the following provisions:
(1) A payment or series of payments is required from the
purchaser on behalf of a qualified beneficiary.
(2) If an advance tuition payment contract is terminated
before a qualified beneficiary earns a high school diploma or
reaches age eighteen or pursuant to Section 59-110-50(A), the
commission shall refund the face amount of the payment in
accordance with the terms of the contract, less any
administrative fee specified in the contract, but may not refund
any investment income attributable to the payments.
(3) Except as provided in item (4), the fund shall provide
for the qualified beneficiary to attend a state institution of
higher education at which the qualified beneficiary attends for
the number of credit hours required by the institution for the
awarding of a baccalaureate degree, without further tuition cost
to the qualified beneficiary, except as provided in Section
59-110-100(A)(8) for a qualified beneficiary who is not entitled
to in-state tuition rates.
(4) As an alternative to item (3), the fund must provide for
the qualified beneficiary to attend a state institution of higher
education at which the qualified beneficiary attends for a fixed
number of credit hours, as permitted by the fund, less than the
total number of credit hours required by the institution for the
awarding of a baccalaureate degree, without further tuition cost
to the qualified beneficiary for that fixed number of credit
hours, except as provided in Section 59-110-100(A)(8) for a
qualified beneficiary who is not entitled to in-state tuition rates.
Section 59-110-140. Contracts required to be offered by
this section may require that payment from a purchaser, on
behalf of a qualified beneficiary who may attend a state
institution of higher education in less than four years after the
date the contract is entered into by the purchaser, be based upon
attendance at a certain state institution of higher education or at
that state institution of higher education with the highest
prevailing tuition cost for the number of credit hours covered
by the contract.
Section 59-110-150. If a beneficiary of an advance tuition
payment contract attends a technical college under the
jurisdiction of the State Board for Technical and
Comprehensive Education, that beneficiary then may attend any
state institution of higher education at no additional tuition cost
and receive the number of credit hours necessary for the
awarding of a baccalaureate degree. The number of credit
hours the beneficiary may receive must be reduced to reflect
credit hours previously paid for under the contract.
Section 59-110-160. (A) An advance tuition payment
contract must authorize a termination of the contract when any
one of the following occurs:
(1) the qualified beneficiary dies;
(2) the qualified beneficiary is not admitted to a state
institution of higher education after making proper application;
(3) the qualified beneficiary certifies to the commission
that he has decided to attend and has been accepted by a South
Carolina independent, degree-granting institution of
postsecondary education recognized by the Commission on
Higher Education or, after he has a high school diploma or has
reached age eighteen, has decided not to attend a state
institution of higher education and requests, in writing, before
July fifteenth of the year in which the qualified beneficiary
desires to terminate the contract, that the advance tuition
payment contract be terminated;
(4) other circumstances, determined by the commission
and set forth in the advance tuition payment contract, occur.
Section 59-110-170. (A) An advance tuition payment
contract must provide for a refund pursuant to this section to a
person to whom the refund is payable under the contract upon
termination of the contract. If the qualified beneficiary has a
high school diploma or has reached age eighteen, and does not
attend an institution of higher education, the amount of a refund
is the face amount of the payment on the date of termination of
the contract and any accrued investment income attributable to
the payment. The amount of a refund must be reduced by an
appropriate percentage pursuant to any amount transferred to a
technical college on behalf of a qualified beneficiary when the
contract is terminated or by the amount transferred to a state
institution of higher education on behalf of a qualified
beneficiary, if the beneficiary entered an institution of higher
education. Termination of a contract and the right to receive a
refund must not be authorized under the contract if the qualified
beneficiary has completed more than one-half of the credit
hours required by the state institution of higher education for
the awarding of a baccalaureate degree. This provision does
not affect the termination and refund rights of a graduate of a
technical college. Pursuant to this subsection and except as
provided by subsection (B), the commission shall make refund
payments in equal installments over four years and not later
than August fifteenth of the year due.
(B) An advance tuition payment contract must authorize a
person, who is entitled under the advance tuition payment
contract to terminate the contract, to direct payment of the
refund to an independent degree-granting college or university
located in this State or to an independent junior college located
in this State. If directed to make payments pursuant to this
subsection, the commission shall transfer to the designated
institution an amount equal to the tuition due for the qualified
beneficiary, but the fund may not transfer a cumulative amount
greater than the refund to which the person is entitled.
Section 59-110-180. State institutions of higher education,
purchasers, and qualified beneficiaries may enforce this chapter
and any contract entered into pursuant to this chapter in the
court of common pleas of Richland County.
Section 59-110-190. Nothing in this chapter or in an
advance tuition payment contract entered into pursuant to this
chapter is a promise or guarantee by the commission or the
State that a person will be admitted to a state institution of
higher education or to a particular state institution of higher
education, will be allowed to continue to attend a state
institution of higher education after having been admitted, or
will be graduated from a state institution of higher education.
Section 59-110-200. An advance tuition payment contract
is exempt from the Uniform Securities Act. An advance tuition
payment contract must not be sold or otherwise transferred by
the purchaser or qualified beneficiary without the prior
approval of the commission."
SECTION 2. Section 12-7-435 of the 1976 Code, as last
amended by subsection A, Section 39, Part II, Act 189 of 1989,
is further amended by adding an appropriately lettered item to
read:
"( ) Amounts paid to the South Carolina Tuition
Program Fund pursuant to an advance tuition payment
contract."
SECTION 3. (A) No advance tuition contract may be entered
into by the commission established by this act unless the
Internal Revenue Service issues a favorable ruling or opinion
that the purchaser of an advance tuition payment contract will
not be in actual or constructive receipt of income as a result. If
the ruling is not favorable, the commission shall prepare and
submit to the General Assembly a report outlining its
recommendations for the modification and continuation of the
program.
(B) No advance tuition payment contract may be entered
into unless the commission obtains appropriate rulings from the
Securities and Exchange Commission regarding the application
of federal security laws to the fund.
SECTION 4. If no advance tuition payment contract has
been entered into pursuant to this act before July 1, 1992,
Chapter 110 of Title 59 of the 1976 Code, as added by this act,
is repealed.
SECTION 5. This act takes effect upon approval by the
Governor.
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