SF 2259 (LSB 5329SV (1) 90)

SENATE FILE 2259

BY  COMMITTEE ON WORKFORCE

(SUCCESSOR TO SSB 3128)

A BILL FOR

An Act relating to the Iowa educational savings plan trust by expanding the definition of qualified educational expenses and apprenticeship programs for purposes of withdrawals qualifying for an individual income tax exclusion, 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 2024, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  0c.  “Apprenticeship program” means a program registered and certified with the United States secretary of labor under section 1 of the federal National Apprenticeship Act, 29 U.S.C. §50, or registered with the Iowa office of apprenticeship under chapter 84D.
    Sec. 2.  Section 12D.1, subsection 2, paragraph k, Code 2024, 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 expenses paid to an institution of higher education for career-related programs that do not qualify for college credit.
    Sec. 3.  Section 422.7, subsection 22, paragraph c, subparagraph (1), Code 2024, is amended by adding the following new subparagraph division:
   NEW SUBPARAGRAPH DIVISION.  (g)  The payment of expenses for career-related programs that do not qualify for college credit if such payments are qualified education expenses.
    Sec. 4.  Section 422.7, subsection 22, paragraph c, subparagraph (2), subparagraph division (a), Code 2024, is amended to read as follows:
   (a)  “Apprenticeship program” means a program registered and certified with the United States secretary of labor under section 1 of the National Apprenticeship Act, 29 U.S.C. §50 the same as defined in section 12D.1.
    Sec. 5.  RETROACTIVE APPLICABILITY.  This Act applies retroactively to January 1, 2024, 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 expanding the definition of qualified education expenses and apprenticeship programs for purposes of withdrawals from the 529 plan qualifying for an individual income tax exclusion.
   The bill specifies that “qualified education expenses” include expenses paid to an institution of higher education for career-related programs that do not qualify for college credit. As a result, the expenses paid to the institution of higher education for career-related programs that do not earn college credit are excluded from the computation of net income for the individual income tax. An institution of higher education is defined in Code section 12D.1.
   Under current law, withdrawals from a 529 plan for expenses related to an apprenticeship program registered and certified with the United States secretary of labor under the federal National Apprenticeship Act, are excluded from the computation of net income for the individual income tax. The bill expands the definition of “apprenticeship program” to include apprenticeships registered with the Iowa office of apprenticeship under Code chapter 84D, and as a result the withdrawals from a 529 plan for expenses related to an apprenticeship program registered with the Iowa office of apprenticeship are excluded from the computation of net income for the individual income tax.
   The federal tax treatment of the type of withdrawal described in the bill may differ from the state tax treatment under the bill. For federal tax purposes, if a withdrawal is considered a nonqualified withdrawal, the earnings portion of the nonqualified withdrawal is subject to federal taxation and a 10 percent withdrawal penalty.
   The bill applies retroactively to January 1, 2024, and applies to tax years beginning on or after that date.