SB497: Bill Text

LRB-3933/1

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2021 - 2022 LEGISLATURE

2021 Senate BILL 497

August 5, 2021 - Introduced by Senators Agard, Roys, Johnson, Larson and Wirch, cosponsored by Representatives Pope, Vining, Hebl, Baldeh, Snodgrass, Moore Omokunde, Conley, Andraca, Neubauer, Shelton, Stubbs, Sinicki, Cabrera, Spreitzer, Subeck, Emerson, S. Rodriguez, Bowen and Shankland. Referred to Committee on Financial Institutions and Revenue.

SB497,1,5 An Act to amend 20.144 (1) (g), 25.17 (3) (a) and 69.14 (1) (a); and to create 20.144 (5) (title), 20.144 (5) (a), 20.144 (5) (c), 20.144 (5) (j), 20.144 (5) (q), 25.14 (1) (a) 20., 25.17 (1) (aL), 25.18 (1) (q), 25.32, 71.05 (6) (b) 57., 71.78 (4) (v) and 224.58 of the statutes; relating to: creating a baby bond program and baby bond fund, granting rule-making authority, and making an appropriation.

Analysis by the Legislative Reference Bureau

This bill requires the Department of Financial Institutions to establish and administer a baby bond program and creates a baby bond trust fund managed by the State of Wisconsin Investment Board.

Under the bill, the State Registrar of Vital Records must provide to DFI a copy of the record of birth for each child born in the state on or after the bill's effective date. In consultation with the Department of Health Services and the Department of Revenue, DFI must determine whether, on the day before the child was born, the child's mother met the income requirements for the Medical Assistance program, and if this criteria is satisfied, DFI must establish a baby bond account for the child, with the child designated as the account beneficiary. DFI must then deposit $3,000 into the baby bond trust fund and credit this amount to the child's baby bond account. The amount in the account consists of the initial $3,000, investment income generated through management of the baby bond trust fund by SWIB, and any allocated donations, gifts, grants, bequests, or other contributions received by the baby bond program. When the account beneficiary attains 18 years of age, if certain conditions are satisfied, the account beneficiary may receive distribution of the full account balance to pay expenses associated with postsecondary education of the account beneficiary; child care or education of a minor dependent of the account beneficiary; the purchase of a home by the account beneficiary; starting a business by the account beneficiary; or contributing to a retirement savings account by the account beneficiary. Upon application to DFI, an account beneficiary is eligible for distribution of the account balance if all of the following requirements are satisfied: 1) the account beneficiary is at least 18 years of age; 2) with an exception, the account beneficiary and at least one of the account beneficiary's parents is a Wisconsin resident; 3) the account beneficiary has successfully completed a financial literacy course developed by DFI; and 4) the account beneficiary certifies that the account beneficiary will use the money distributed only to pay expenses described above. If an account beneficiary or the account beneficiary's parents relocate from Wisconsin prior to the account beneficiary's 18th birthday, the account beneficiary is eligible for the distribution if the account beneficiary returns to Wisconsin and remains a Wisconsin resident for at least one year thereafter. A distribution from an account is not subject to state income tax. DFI may terminate an account beneficiary's account if the account beneficiary dies, the account balance is $0, or the account beneficiary is at least 30 years of age and has not requested a distribution or has failed to satisfy the conditions for distribution. The balance of an account that is terminated remains in the baby bond trust fund for further use for the baby bond program.

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:

SB497,1 Section 1 . 20.144 (1) (g) of the statutes is amended to read:

SB497,3,3 20.144 (1) (g) General program operations. The amounts in the schedule for the general program operations of the department of financial institutions. Except as provided in pars. (a), (h), (i), (j), and (u) and sub. subs. (3) and (5), all moneys received by the department, other than by the office of credit unions and the division of banking, and 88 percent of all moneys received by the office of credit unions and the department's division of banking shall be credited to this appropriation, but any balance at the close of a fiscal year under this appropriation shall lapse to the general fund. Annually, $150,000 of the amounts received under this appropriation account shall be transferred to the appropriation account under s. 20.575 (1) (g).

SB497,2 Section 2 . 20.144 (5) (title) of the statutes is created to read:

SB497,3,5 20.144 (5) (title) Baby bond program.

SB497,3 Section 3 . 20.144 (5) (a) of the statutes is created to read:

SB497,3,8 20.144 (5) (a) Administrative expenses. A sum sufficient for the administrative expenses of the baby bond program under s. 224.58.

SB497,4 Section 4 . 20.144 (5) (c) of the statutes is created to read:

SB497,3,11 20.144 (5) (c) Deposits into baby bond fund. A sum sufficient for deposits into the baby bond fund as provided in s. 224.58 (3) (b) 2.

SB497,5 Section 5 . 20.144 (5) (j) of the statutes is created to read:

SB497,3,16 20.144 (5) (j) Donations, gifts, and grants. All moneys received from donations, gifts, grants, bequests, or other contributions to the baby bond program under s. 224.58, to carry out the purpose for which received, including deposit into the baby bond fund.

SB497,6 Section 6 . 20.144 (5) (q) of the statutes is created to read:

SB497,3,20 20.144 (5) (q) Payment of distributions; crediting accounts. From the baby bond fund, a sum sufficient for the payment of distributions under s. 224.58 (4) and to credit accounts under s. 224.58 (3) (b) 2.

SB497,7 Section 7. 25.14 (1) (a) 20. of the statutes is created to read:

SB497,3,22 25.14 (1) (a) 20. The baby bond fund.

SB497,8 Section 8. 25.17 (1) (aL) of the statutes is created to read:

SB497,3,24 25.17 (1) (aL) Baby bond fund (s. 25.32);

SB497,9 Section 9. 25.17 (3) (a) of the statutes is amended to read:

SB497,4,8 25.17 (3) (a) Invest the core retirement investment trust, baby bond fund, state life fund, local government property insurance fund, veterans trust fund, and injured patients and families compensation fund in loans, securities, and any other investments authorized by s. 620.22, and in bonds or other evidences of indebtedness or preferred stock of companies engaged in the finance business whether as direct lenders or as holding companies owning subsidiaries engaged in the finance business. Investments permitted by sub. (4) are permitted investments under this subsection.

SB497,10 Section 10. 25.18 (1) (q) of the statutes is created to read:

SB497,4,12 25.18 (1) (q) Invest any of the assets of the baby bond fund in any investment that is an authorized investment for assets in the variable retirement investment trust under s. 25.17 (5).

SB497,11 Section 11. 25.32 of the statutes is created to read:

SB497,4,15 25.32 Baby bond fund. (1) There is established a separate nonlapsible trust fund designated as the baby bond fund. The fund shall consist of all of the following:

SB497,4,16 (a) Money deposited into the fund under s. 224.58 (3) (b) 2.

SB497,4,18 (b) All donations, gifts, grants, bequests, or other contributions deposited into the fund under s. 224.58 (6).

SB497,4,19 (c) All earnings and other investment income of the fund.

SB497,4,22 (2) Except as provided in s. 25.187, moneys in the baby bond fund may be expended only for the purpose of making distributions under s. 224.58 (4) and deposits under s. 224.58 (3) (b) 2.

SB497,12 Section 12 . 69.14 (1) (a) of the statutes is amended to read:

SB497,5,2 69.14 (1) (a) Filing deadline. A record of birth for every birth that occurs in this state shall be filed within 5 days after the birth with the state registrar, who shall register the birth under this subchapter. The state registrar shall submit a copy of the record of birth to the department of financial institutions.

SB497,13 Section 13. 71.05 (6) (b) 57. of the statutes is created to read:

SB497,5,5 71.05 (6) (b) 57. The amount of a distribution made to an account beneficiary, as defined in s. 224.58 (1) (b), under s. 224.58 (4).

SB497,14 Section 14. 71.78 (4) (v) of the statutes is created to read:

SB497,5,8 71.78 (4) (v) The department of financial institutions and the department of health services for the purpose of determining eligibility under s. 224.58 (3) (a) 1.

SB497,15 Section 15 . 224.58 of the statutes is created to read:

SB497,5,10 224.58 Baby bond program. (1) Definitions. In this section:

SB497,5,12 (a) “Account” means a baby bond account established by the department under sub. (3).

SB497,5,14 (b) “Account beneficiary” means an individual for whom the department establishes an account.

SB497,5,15 (c) “Domestic business entity” has the meaning given in s. 180.1100 (2).

SB497,5,16 (d) “Eligible expense" means an expense associated with any of the following:

SB497,5,17 1. Postsecondary education of an account beneficiary.

SB497,5,18 2. Child care or education of a minor dependent of the account beneficiary.

SB497,5,19 3. The purchase of a home by an account beneficiary.

SB497,5,22 4. Starting a business by an account beneficiary if the business is a domestic business entity or is a foreign business entity registered or authorized to do business in this state under ch. 178, 179, 180, 181, or 183.

SB497,5,25 5. Contributing to a traditional individual retirement account, a Roth IRA, an account associated with a 401 (k), 403 (b), 457, or Keogh plan, or a similar retirement savings account by an account beneficiary.

SB497,6,1 (e) “Foreign business entity” has the meaning given in s. 180.1100 (3).

SB497,6,4 (f) “Last-known address” means the most recent contact information provided to the department according to the department's records, which may be either a physical address or an electronic mail address.

SB497,6,6 (2) Baby bond program. The department shall establish and administer a baby bond program as described in this section.

SB497,6,8 (3) Establishing accounts. (a) For each record of birth submitted to the department under s. 69.14 (1) (a), the department shall do all of the following:

SB497,6,11 1. In consultation with the department of health services and the department of revenue, determine whether, on the day before the child was born, the mother meets the income level described under s. 49.471 (4) (a) 1. or 2.

SB497,6,13 2. If the criteria in subd. 1. is satisfied, establish a baby bond account for the child, with the child designated as the account beneficiary.

SB497,6,15 (b) Upon establishing an account for a child under par. (a) 2., the department shall promptly do all of the following:

SB497,6,17 1. Provide written notice of the account to the last-known address of the child's parents.

SB497,6,21 2. From the appropriation account under s. 20.144 (5) (c) or (j), deposit $3,000 into the baby bond fund and credit this amount to the child's account or, from the appropriation amount under s. 20.144 (5) (q), credit $3,000 to the child's account if such funds are available for this purpose as provided in s. 224.58 (5) (b).

SB497,6,25 (c) An account established under this subsection shall include the amount specified in par. (b) 2., the account beneficiary's pro rata share of total net investment earnings of the baby bond fund, and any amount allocated to the account under sub. (5) (b) or (6) (b).

SB497,7,4 (4) Distributions. (a) Not later than 30 days before an account beneficiary's 18th birthday, the department shall provide notice to the last-known address of the account beneficiary and the account beneficiary's parents that the account beneficiary may be eligible for distribution of the account balance.

SB497,7,7 (b) Upon application to the department by an account beneficiary, the department shall distribute to the account beneficiary the full balance of the account if all of the following requirements are satisfied:

SB497,7,8 1. The account beneficiary is at least 18 years of age.