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LRB-0463/3
JK:emw&wlj
2021 - 2022 LEGISLATURE
February 16, 2022 - Introduced by Representatives Hesselbein, Sinicki, Hebl,
Hintz, Shelton, Vruwink, Spreitzer, Ohnstad, Considine, Brostoff, B.
Meyers
, Haywood, L. Myers, Emerson and Subeck, cosponsored by Senators
Johnson, Kooyenga, Roys, Larson and Erpenbach. Referred to Committee on
Ways and Means.
AB1018,1,7 1An Act to amend 71.05 (6) (a) 26. a., 71.05 (6) (a) 26. b., 71.05 (6) (a) 26. c., 71.05
2(6) (b) 32. a., 71.05 (6) (b) 32. ae., 71.05 (6) (b) 32. am., 71.07 (10) (a) 1., 71.07
3(10) (a) 3., 71.07 (10) (b), 71.07 (10) (c) 2., 71.28 (10) (c) 2., 71.47 (10) (c) 2. and
4224.50 (2) (a); and to create 71.05 (6) (b) 32. ap., 71.07 (10) (c) 3., 71.28 (10) (c)
53., 71.47 (10) (c) 3. and 71.98 (11) of the statutes; relating to: modifying the tax
6treatment of college savings accounts and the employee college savings account
7contribution credit.
Analysis by the Legislative Reference Bureau
This bill modifies the individual income tax treatment for contributions to and
withdrawals from college savings accounts and the employee college savings account
contribution credit.
Under current law, the College Savings Program Board, which is attached to
the Department of Financial Institutions, administers the state's college savings
programs. These programs, known as “Edvest” and “Tomorrow's Scholar,” are
qualified tuition programs authorized under federal law. Under the programs,
anyone may contribute to an account, commonly called a “529 account,” for the
benefit of a prospective student. For state income tax purposes, individuals may
deduct their contributions to accounts established under the Wisconsin qualified
tuition programs. Withdrawals from an account are tax-free if used for qualified

educational expenses but subject to negative federal and state tax consequences if
used for nonqualified expenses.
The bill makes the following changes to the state individual income tax
treatment for contributions to and withdrawals from 529 accounts:
1. Increases the maximum amount that may be deducted. Under current law,
the maximum amount that a contributor may deduct is annually indexed for
inflation and, in 2021, is $3,380, which is reduced to $1,690 for a married individual
filing a separate return or, in the case of divorced parents, each former spouse. The
bill increases these amounts to $5,000 and $2,500, which are indexed annually for
inflation, and repeals the limitation for divorced parents.
2. Requires the use of a first in, first out method of accounting for purposes of
provisions in current law requiring that account withdrawals be added to income for
state tax purposes and restricting carry-overs of contributions in excess of the
maximum deduction threshold if the carry-over amount was withdrawn from the
account within 365 days of being contributed.
3. Conforms the definition of “qualified higher education expense” to federal
law. In recent years, the federal definition of “qualified higher education expense”
has been expanded to include tuition expenses for elementary and secondary schools,
expenses for apprenticeship programs, and qualified education loan repayments.
The bill conforms state law to the federal definition.
Additionally, the bill modifies the tax credit that may be claimed by an employer
for contributions to an employee's 529 account. Under current law, the maximum
credit per employee is 25 percent of the amount the employer contributes to the 529
account, up to a maximum contribution that is 25 percent of the maximum amount
that an individual contributor may deduct under state law. For 2021, the maximum
credit is $211.25. Under the bill, the maximum credit per employee is 50 percent of
the amount the employer contributes to the 529 account, not exceeding a maximum
credit of $800, adjusted annually for inflation. The bill also specifies that sole
proprietors may claim the credit and that the credit may only be claimed for a
contribution to an employee's 529 account if the employee's compensation is
reported, or required to be reported, on a W-2 form issued by the employer.
Because this bill relates to an exemption from state or local taxes, it may be
referred to the Joint Survey Committee on Tax Exemptions for a report to be printed
as an appendix to the bill.
For further information see the state fiscal estimate, which will be printed as
an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB1018,1 1Section 1. 71.05 (6) (a) 26. a. of the statutes is amended to read:
AB1018,3,52 71.05 (6) (a) 26. a. To the extent that the receipt of such the amounts by the
3owner or beneficiary of the account results in a penalty as provided in 26 USC 529

1(c) (6), any amount that was not used for qualified higher education expenses, as that
2term is
defined in 26 USC 529 (c) (7), (8), and (9) and (e) (3), and was contributed to
3the account after December 31, 2013, except that this subd. 26. a. applies only to
4amounts for which a subtraction was made under par. (b) 32. or 32m. For purposes
5of this subd. 26. a., a first in, first out method of accounting shall apply to the account.
AB1018,2 6Section 2 . 71.05 (6) (a) 26. b. of the statutes is amended to read:
AB1018,3,117 71.05 (6) (a) 26. b. Any amount rolled over by an owner into another state's
8qualified tuition program, as described in 26 USC 529 (c) (3) (C) (i), to the extent that
9the amount was previously claimed as a deduction under par. (b) 32. or 32m. For
10purposes of this subd. 26. b., a first in, first out method of accounting shall apply to
11the account.
AB1018,3 12Section 3. 71.05 (6) (a) 26. c. of the statutes is amended to read:
AB1018,3,1913 71.05 (6) (a) 26. c. To the extent that an amount is not otherwise added back
14under this subdivision, any amount withdrawn from a college savings the account,
15as described in s. 224.50,
for any purpose if the withdrawn amount was contributed
16to the account within 365 days of the day on which the amount was withdrawn from
17such an the account and if the withdrawn amount was previously subtracted under
18par. (b) 32. For purposes of this subd. 26. c., a first in, first out method of accounting
19shall apply to the account.
AB1018,4 20Section 4. 71.05 (6) (b) 32. a. of the statutes is amended to read:
AB1018,5,221 71.05 (6) (b) 32. a. Except as otherwise provided in this subdivision, an amount
22equal to not more than $3,000 $5,000 per beneficiary, by each contributor, or $1,500
23$2,500 by each contributor who is married and files separately, to an account for each
24year to which the claim relates, except that the total amount for which a deduction
25may be claimed under this subdivision and under subd. 33., per beneficiary by any

1claimant may not exceed $3,000 $5,000 each year, or $1,500 $2,500 each year by any
2claimant who is married and files separately. In the case of a married couple, the
3total deduction under this subdivision and under subd. 33., per beneficiary by the
4married couple may not exceed $3,000 $5,000 each year. In the case of divorced
5parents, the total deduction under this subdivision and under subd. 33., per
6beneficiary by the formerly married couple, may not exceed $3,000, and the
7maximum amount that may be deducted by each former spouse is $1,500, unless the
8divorce judgment specifies a different division of the $3,000 maximum that may be
9claimed by each former spouse.
For taxable years beginning after December 31, 2013
102021, the dollar amounts in this subd. 32. a., and the dollar amounts in subd. 33. a.,
11shall be increased each year by a percentage equal to the percentage change between
12the U.S. consumer price index for all urban consumers, U.S. city average, for the
13month of August of the previous year and the U.S. consumer price index for all urban
14consumers, U.S. city average, for the month of August 2012, as determined by the
15federal department of labor, except that the adjustment may occur only if the
16resulting amount is greater than the corresponding amount that was calculated for
17the previous year. Each amount that is revised under this subd. 32. a. and under
18subd. 33. a. shall be rounded to the nearest multiple of $10 if the revised amount is
19not a multiple of $10 or, if the revised amount is a multiple of $5, such an amount
20shall be increased to the next higher multiple of $10. The department of revenue
21shall annually adjust the changes in dollar amounts required under this subd. 32.
22a. and incorporate the changes into the income tax forms and instructions. Any
23amount that is paid into an account under this subdivision that exceeds the
24maximum amount that may be subtracted under this subdivision may be carried

1forward to the next taxable year, and thereafter, subject to the limitations in this
2subdivision.
AB1018,5 3Section 5. 71.05 (6) (b) 32. ae. of the statutes is amended to read:
AB1018,5,94 71.05 (6) (b) 32. ae. No carryover carry-over that would otherwise be
5authorized under this subdivision may be allowed if the carryover carry-over
6amount was withdrawn from an account for any purpose and the withdrawal
7occurred within 365 days of the day on which the amount was contributed to the
8account. For purposes of this subd. 32. ae., a first in, first out method of accounting
9shall apply to the account.
AB1018,6 10Section 6. 71.05 (6) (b) 32. am. of the statutes is amended to read:
AB1018,5,1611 71.05 (6) (b) 32. am. Any carryover carry-over amount that is otherwise eligible
12for a subtraction under this subdivision shall be reduced by an amount equal to the
13amount of a withdrawal from an account that was not used for qualified higher
14education expenses, as that term is defined in 26 USC 529 (c) (7), (8), and (9) and (e)
15(3), to the extent that the withdrawn amount exceeds the amount that is added to
16income under par. (a) 26.
AB1018,7 17Section 7. 71.05 (6) (b) 32. ap. of the statutes is created to read:
AB1018,5,2018 71.05 (6) (b) 32. ap. No subtraction may be allowed under this subdivision for
19any amount contributed to an account for which a credit is claimed under s. 71.07
20(10), 71.28 (10), or 71.47 (10).
AB1018,8 21Section 8. 71.07 (10) (a) 1. of the statutes is amended to read:
AB1018,6,222 71.07 (10) (a) 1. “Claimant" means an individual who files a claim under this
23subsection and who is a sole proprietor and an employer and contributes to an
24employee's college savings account under par. (b). or who is a
partner of a
25partnership, member of a limited liability company, or shareholder of a tax-option

1corporation that is an employer and that contributes to an employee's college savings
2account under par. (b).
AB1018,9 3Section 9. 71.07 (10) (a) 3. of the statutes is amended to read:
AB1018,6,84 71.07 (10) (a) 3. “Employer” means an employer that is a partnership, as
5defined in s. 71.195, or a tax-option corporation, as defined in s. 71.34 (2)
a person
6for whom an individual performs or performed any service as an employee of that
7person and who is required to furnish a W-2 form to the employee for federal income
8tax purposes
.
AB1018,10 9Section 10. 71.07 (10) (b) of the statutes is amended to read:
AB1018,6,1510 71.07 (10) (b) Filing claims. Subject to the limitations provided in this
11subsection, a claimant may claim as a credit against the tax imposed under s. 71.02,
12up to the amount of those taxes, for each employee of an employer, the claimant's
13proportionate share, as computed under par. (c) 1., of
an amount equal to the amount
14the employer paid into a college savings account owned by the employee in the
15taxable year in which the contribution is made.
AB1018,11 16Section 11. 71.07 (10) (c) 2. of the statutes is amended to read:
AB1018,7,1017 71.07 (10) (c) 2. The maximum amount of the credit per employee that a
18claimant may claim under this subsection is the claimant's proportionate share of an
19amount equal to 25 50 percent of the amount the employee's employer contributed
20to the employee's college savings account up to a maximum contribution equal to 25
21percent of the maximum amount that an individual contributor may deduct under
22s. 71.05 (6) (b) 32. a. per beneficiary
, not to exceed a maximum credit of $800. For
23taxable years beginning after December 31, 2021, the dollar amount in this
24subdivision shall be increased each year by a percentage equal to the percentage
25change between the U.S. consumer price index for all urban consumers, U.S. city

1average, for the month of August of the previous year and the U.S. consumer price
2index for all urban consumers, U.S. city average, for the month of August 2020, as
3determined by the federal department of labor, except that the adjustment may occur
4only if the resulting amount is greater than the corresponding amount that was
5calculated for the previous year. The amount that is revised under this subdivision
6shall be rounded to the nearest multiple of $10 if the revised amount is not a multiple
7of $10 or, if the revised amount is a multiple of $5, such an amount shall be increased
8to the next higher multiple of $10. The department of revenue shall annually adjust
9the change in the dollar amount required under this subdivision and incorporate the
10change into the income tax forms and instructions
.
AB1018,12 11Section 12. 71.07 (10) (c) 3. of the statutes is created to read:
AB1018,7,1412 71.07 (10) (c) 3. A credit may be claimed under par. (b) only if, for federal income
13tax purposes, the compensation of the employee described in par. (b) is reported, or
14required to be reported, on a W-2 form issued by the claimant.
AB1018,13 15Section 13. 71.28 (10) (c) 2. of the statutes is amended to read:
AB1018,8,916 71.28 (10) (c) 2. The maximum amount of the credit per employee that a
17claimant may claim under this subsection is an amount equal to 25 50 percent of the
18amount the claimant contributed to the employee's college savings account up to a
19maximum contribution equal to 25 percent of the maximum amount that an
20individual contributor may deduct under s. 71.05 (6) (b) 32. a. per beneficiary
, not to
21exceed a maximum credit of $800. For taxable years beginning after December 31,
222021, the dollar amount in this subdivision shall be increased each year by a
23percentage equal to the percentage change between the U.S. consumer price index
24for all urban consumers, U.S. city average, for the month of August of the previous
25year and the U.S. consumer price index for all urban consumers, U.S. city average,

1for the month of August 2020, as determined by the federal department of labor,
2except that the adjustment may occur only if the resulting amount is greater than
3the corresponding amount that was calculated for the previous year. The amount
4that is revised under this subdivision shall be rounded to the nearest multiple of $10
5if the revised amount is not a multiple of $10 or, if the revised amount is a multiple
6of $5, such an amount shall be increased to the next higher multiple of $10. The
7department of revenue shall annually adjust the change in the dollar amount
8required under this subdivision and incorporate the change into the income tax
9forms and instructions
.
AB1018,14 10Section 14. 71.28 (10) (c) 3. of the statutes is created to read:
AB1018,8,1311 71.28 (10) (c) 3. A credit may be claimed under par. (b) only if, for federal income
12tax purposes, the compensation of the employee described in par. (b) is reported, or
13required to be reported, on a W-2 form issued by the claimant.
AB1018,15 14Section 15. 71.47 (10) (c) 2. of the statutes is amended to read:
AB1018,9,815 71.47 (10) (c) 2. The maximum amount of the credit per employee that a
16claimant may claim under this subsection is an amount equal to 25 50 percent of the
17amount the claimant contributed to the employee's college savings account up to a
18maximum contribution equal to 25 percent of the maximum amount that an
19individual contributor may deduct under s. 71.05 (6) (b) 32. a. per beneficiary
, not to
20exceed a maximum credit of $800. For taxable years beginning after December 31,
212021, the dollar amount in this subdivision shall be increased each year by a
22percentage equal to the percentage change between the U.S. consumer price index
23for all urban consumers, U.S. city average, for the month of August of the previous
24year and the U.S. consumer price index for all urban consumers, U.S. city average,
25for the month of August 2020, as determined by the federal department of labor,

1except that the adjustment may occur only if the resulting amount is greater than
2the corresponding amount that was calculated for the previous year. The amount
3that is revised under this subdivision shall be rounded to the nearest multiple of $10
4if the revised amount is not a multiple of $10 or, if the revised amount is a multiple
5of $5, such an amount shall be increased to the next higher multiple of $10. The
6department of revenue shall annually adjust the change in the dollar amount
7required under this subdivision and incorporate the change into the income tax
8forms and instructions
.
AB1018,16 9Section 16. 71.47 (10) (c) 3. of the statutes is created to read:
AB1018,9,1210 71.47 (10) (c) 3. A credit may be claimed under par. (b) only if, for federal income
11tax purposes, the compensation of the employee described in par. (b) is reported, or
12required to be reported, on a W-2 form issued by the claimant.
AB1018,17 13Section 17. 71.98 (11) of the statutes is created to read:
AB1018,9,1614 71.98 (11) Qualified tuition programs. For taxable years beginning after
15December 31, 2020, sections 221 (e) (1) and 529 of the Internal Revenue Code as in
16effect for federal purposes, relating to qualified tuition programs.
AB1018,18 17Section 18. 224.50 (2) (a) of the statutes is amended to read:
AB1018,9,2518 224.50 (2) (a) Except as provided in s. 224.51, establish and administer a
19college savings program that allows an individual, trust, legal guardian, or entity
20described under 26 USC 529 (e) (1) (C) to establish a college savings account to cover
21tuition, fees, and the costs of room and board, books, supplies, and equipment
22required for the enrollment or attendance of a beneficiary at an eligible educational
23institution, as defined under 26 USC 529, and to cover tuition expenses in connection
24with enrollment or attendance at an elementary or secondary public, private, or
25religious school, as described in section 11032 of P.L. 115-97, related to qualified

1tuition programs under 26 USC 529, to cover the expenses for fees, books, supplies,
2and equipment required for the participation of a beneficiary in an apprenticeship
3program described in 26 USC 529 (c) (8), and to cover the amounts paid as principal
4or interest on a qualified education loan, as defined in 26 USC 221 (d) (1), of the
5beneficiary or a sibling of the beneficiary
.
AB1018,19 6Section 19. Initial applicability.
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