Senate File 2440 - Introduced SENATE FILE 2440 BY COMMITTEE ON WAYS AND MEANS (SUCCESSOR TO SF 2259) (SUCCESSOR TO SSB 3128) A BILL FOR An Act relating to the Iowa educational savings plan trust 1 by expanding the plan trust to include career-related 2 programs approved by the Iowa office of apprenticeship for 3 purposes of withdrawals qualifying for an individual income 4 tax deduction, and including retroactive applicability 5 provisions. 6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 7 TLSB 5329SZ (3) 90 jm/jh
S.F. 2440 Section 1. Section 84D.2, Code 2024, is amended by adding 1 the following new subsection: 2 NEW SUBSECTION . 6A. “Career-related programs” means the 3 same as defined in section 422.7, subsection 22. 4 Sec. 2. Section 84D.4, Code 2024, is amended by adding the 5 following new subsection: 6 NEW SUBSECTION . 10. The office shall approve 7 career-related programs for purposes of the Iowa educational 8 savings plan trust tax deduction. 9 Sec. 3. Section 422.7, subsection 22, paragraph c, 10 subparagraph (1), Code 2024, is amended by adding the following 11 new subparagraph division: 12 NEW SUBPARAGRAPH DIVISION . (g) The payment of expenses for 13 a career-related program if such a program is approved by the 14 Iowa office of apprenticeship as a career-related program. 15 Sec. 4. Section 422.7, subsection 22, paragraph c, 16 subparagraph (2), Code 2024, is amended by adding the following 17 new subparagraph division: 18 NEW SUBPARAGRAPH DIVISION . (0b) “Career-related program” 19 means a class or a series of classes that do not qualify for 20 college credit but match the needs and career goals of the 21 beneficiary to develop the knowledge and skills necessary 22 to pursue a new future career opportunity in the workplace. 23 “Career-related program” does not include a class or a series 24 of classes for improving or developing new knowledge for the 25 current career of the beneficiary. 26 Sec. 5. RETROACTIVE APPLICABILITY. This Act applies 27 retroactively to January 1, 2024, for tax years beginning on 28 or after that date. 29 EXPLANATION 30 The inclusion of this explanation does not constitute agreement with 31 the explanation’s substance by the members of the general assembly. 32 This bill relates to the Iowa educational savings plan 33 trust (529 plan) by expanding the plan trust to include 34 career-related programs approved by the Iowa office of 35 -1- LSB 5329SZ (3) 90 jm/jh 1/ 2
S.F. 2440 apprenticeship (office) for purposes of withdrawals qualifying 1 for a state individual income tax deduction. 2 The bill defines “career-related programs” to mean a class 3 or a series of classes that do not qualify for college credit 4 but match the needs and career goals of the beneficiary to 5 develop the knowledge and skills necessary to pursue a new 6 future career opportunity in the workplace, but does not 7 include programs to develop knowledge for a current career. 8 Prior to withdrawals from the 529 plan qualifying for a state 9 individual income tax deduction under the bill, the office must 10 first approve the career-related program to receive the state 11 income tax deduction. 12 Under current law, withdrawals from a 529 plan for expenses 13 related to an apprenticeship program registered and certified 14 with the United States secretary of labor under the federal 15 National Apprenticeship Act are excluded from the computation 16 of net income for state and federal individual income tax. 17 However, a career-related program defined in the bill does not 18 qualify as an “apprenticeship program” under federal law, and 19 as a result, federal tax treatment may differ from state tax 20 treatment. 21 For federal tax purposes, if a withdrawal is considered 22 a nonqualified withdrawal, the earnings portion of the 23 nonqualified withdrawal is subject to federal taxation and a 24 10 percent withdrawal penalty. 25 The bill applies retroactively to January 1, 2024, and 26 applies to tax years beginning on or after that date. 27 -2- LSB 5329SZ (3) 90 jm/jh 2/ 2