SF 433 (LSB 2143XS (4) 89)

SENATE FILE 433

BY  WHITING

A BILL FOR

An Act relating to the Iowa educational savings plan trust by excluding from the computation of net income for the individual income tax withdrawals for the payment of qualified education expenses for private instruction, and including retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 12D.1, subsection 2, Code 2021, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  0j.  “Private instruction” means independent private instruction as defined in section 299A.1, subsection 2, paragraph “b”, competent private instruction under section 299A.2, or private instruction by a nonlicensed person under section 299A.3.
    Sec. 2.  Section 12D.1, subsection 2, paragraph k, Code 2021, is amended to read as follows:
   k.  “Qualified education expenses” means the same as “qualified higher education expenses” as defined in section 529(e)(3) of the Internal Revenue Code, as amended by Pub. L. No. 115-97, and shall include elementary and secondary school expenses for tuition described in section 529(c)(7) of the Internal Revenue Code, subject to the limitations imposed by section 529(e)(3)(A) of the Internal Revenue Code. “Qualified education expenses” includes expenses for the participation in an apprenticeship program registered and certified with the United States secretary of labor under section 1 of the National Apprenticeship Act, 29 U.S.C. §50, and amounts paid as principal or interest on any qualified education loan on behalf of a beneficiary or a sibling of the beneficiary, subject to the limitations imposed by section 529(c)(9)(B) and (C) of the Internal Revenue Code.  “Qualified education expenses” includes the payment to others of expenses described in section 529(e)(3)(A) of the Internal Revenue Code for private instruction.
    Sec. 3.  Section 422.7, subsection 32, paragraph c, subparagraph (1), Code 2021, is amended by adding the following new subparagraph division:
   NEW SUBPARAGRAPH DIVISION.  (g)  The payment of qualified education expenses described in section 529(e)(3)(A) of the Internal Revenue Code to others for private instruction at an elementary or secondary school defined in subparagraph (2), subparagraph division (b), subparagraph subdivision (ii), subparagraph part (B).
    Sec. 4.  Section 422.7, subsection 32, paragraph c, subparagraph (2), subparagraph division (b), subparagraph subdivision (ii), Code 2021, is amended to read as follows:
   (ii)  (A)  “Elementary or secondary school” includes an elementary or secondary school located out of state that educates a beneficiary who meets the definition of “children requiring special education” in section 256B.2, if the elementary or secondary school is accredited under the laws of the state in which it is located and adheres to the federal Civil Rights Act of 1964 and applicable state law analogous to chapter 216.
   (B)  For purposes of this paragraph “c”, subparagraph (1), subparagraph division (g), “elementary or secondary school” means a nonaccredited nonpublic school, a cooperative study program, a tutorial service, classes taken at an educational institution or through a private service provider, and a course taken online, all as part of a program or course of study for an elementary or secondary school student.
    Sec. 5.  Section 422.7, subsection 32, paragraph c, subparagraph (2), Code 2021, is amended by adding the following new subparagraph division:
   NEW SUBPARAGRAPH DIVISION.  (0c)  “Private instruction” means the same as defined in section 12D.1, subsection 2.
    Sec. 6.  RETROACTIVE APPLICABILITY.  This Act applies retroactively to January 1, 2021, for tax years beginning on or after that date.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill relates to the Iowa educational savings plan trust (529 plan) by excluding from the computation of net income for the individual income tax withdrawals for the payment of qualified education expenses for private instruction.
   The bill defines “private instruction” to mean independent private instruction as defined in Code section 299A.1(2)(b), competent private instruction under Code section 299A.2, or private instruction by a nonlicensed person under Code section 299A.3.
   Under the bill, “qualified education expenses” include expenses described in section 529(e)(3)(A) of the Internal Revenue Code for a nonaccredited nonpublic school, cooperative study program, tutorial service, classes taken at an educational institution or through a private service provider, and a course taken online, all as part of a program or course of study for an elementary or secondary school student.
   The federal tax treatment of the type of withdrawal described in the bill may differ from the state tax treatment under the bill.
   The bill applies retroactively to January 1, 2021, and applies to tax years beginning on or after that date.