Juneau -- The Alaska House Wednesday passed Senate Bill 186, sponsored by Senator Tim Kelly (R-Anchorage). SB 186 would authorize a new way to save for a higher education in Alaska by creating the Alaska Higher Education Savings Trust.

"Under Internal Revenue Service Code Section 529, states are allowed to create 'qualified State tuition programs'," said Kelly. "These programs allow a person to make contributions into a tax-deferred higher education savings account for a beneficiary, or to purchase tuition credits on behalf of a beneficiary. SB 186 is the state legislation needed to take advantage of this federal provision."

The University of Alaska would administer the Trust, and individuals would be able to contribute up to $50,000 for a beneficiary, in one lump sum or over a five-year period. The Savings Trust would grow, tax-deferred, until withdrawn by the beneficiary, and would then be taxed at the student's rate at the time of withdrawal.

"This program provides unprecedented flexibility and savings power," said Kelly. "Recent activity in Washington, D.C. indicates that at some point in the future Congress may allow funds to be withdrawn from this type of education account tax-free as long as they are used for education."

SB 186 also updates the Advanced College Tuition program to conform with new IRS codes and changes the name to the Advanced College Savings Fund. Both the Fund and the Trust fall under the same administrative roof to keep overhead, record keeping and marketing costs to a minimum.

SB 186 goes to the Governor for signature.