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Committee passes tax deduction bill

The Colleges and Universities Committee of the State Assembly passed a bill expanding state tax deductions for college savings programs last week.

AB31, sponsored by State Rep. Steve Nass, R-Whitewater, would allow Wisconsin families’ who choose to invest in any national Section 529 college savings program to receive the tax deduction, which was previously reserved for only those who select Wisconsin’s version of the program.

Under current legislation, families must invest in the EdVest Program, Wisconsin’s form of a Section 529 plan, in order to receive the state income tax deduction. Choosing to participate in another state’s program causes families to be ineligible for the deduction, which can be up to $3,000 per child.

More options are available for Wisconsin families with AB31, Nass’s spokesperson Mike Mikalsen said.

According to Mikalsen, it is imperative to change the current legislation to create equity between families of Wisconsin and those of the rest of the nation. Currently, an estimated 52,000 Wisconsin families are investing about $109 million in Section 529 college savings plans offered by other states, but are not receiving tax deductions.

The Wisconsin Department of Revenue states that if AB31 were enacted, state families would save approximately $6.1 million per year in state income taxes.

“That amount of money is a very large penalty simply because families choose to invest in another state,” Mikalsen said.

University of Wisconsin director of financial aid Steve Van Ess said in addition to broadening the number of investing options available to families, the change might also lead to improved investor benefits for EdVest program participants because “EdVest’s environment becomes more competitive.”

While Wisconsin families are only eligible for $3,000 per child in deductions, there are other programs in the state that have better returns and may allow tax deductions for unlimited investments, according to Mikalsen.

“We want to address these issues at a later date but right now we’re simply trying to level the playing field,” Mikalsen said. “The state has the responsibility to not penalize families for choosing other options.”

For example, on another level, Mikalsen said, the state does not require people to take home mortgages out in Wisconsin.

The bill now awaits the approval of the State Assembly and Senate before making its way to Gov. Jim Doyle. According to Doyle spokesperson Ethnie Groves, the governor will review the bill when it comes to his desk.

“Doyle is very supportive of the UW System, providing a considerable amount of funding in his budget,” Groves said. “The amount the governor has provided in his first two budgets has more than doubled.”

However, it is still uncertain whether or not Doyle would sign the bill, as Wisconsin would be the first state in the nation to offer such a tax deduction.

“Anything that helps families save for higher education or helps them increase the amount of their savings for higher education is a good thing,” Van Ess said.