SF 2440 (LSB 5329SZ (3) 90)

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 by expanding the plan trust to include career-related programs approved by the Iowa office of apprenticeship for purposes of withdrawals qualifying for an individual income tax deduction, and including retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 84D.2, Code 2024, is amended by adding the following new subsection:
   NEW SUBSECTION.  6A.  “Career-related programs” means the same as defined in section 422.7, subsection 22.
    Sec. 2.  Section 84D.4, Code 2024, is amended by adding the following new subsection:
   NEW SUBSECTION.  10.  The office shall approve career-related programs for purposes of the Iowa educational savings plan trust tax deduction.
    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 a career-related program if such a program is approved by the Iowa office of apprenticeship as a career-related program.
    Sec. 4.  Section 422.7, subsection 22, paragraph c, subparagraph (2), Code 2024, is amended by adding the following new subparagraph division:
   NEW SUBPARAGRAPH DIVISION.  (0b)  “Career-related program” means a class or a series of classes that do not qualify for college credit but match the needs and career goals of the beneficiary to develop the knowledge and skills necessary to pursue a new future career opportunity in the workplace. “Career-related program” does not include a class or a series of classes for improving or developing new knowledge for the current career of the beneficiary.
    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 plan trust to include career-related programs approved by the Iowa office of apprenticeship (office) for purposes of withdrawals qualifying for a state individual income tax deduction.
   The bill defines “career-related programs” to mean a class or a series of classes that do not qualify for college credit but match the needs and career goals of the beneficiary to develop the knowledge and skills necessary to pursue a new future career opportunity in the workplace, but does not include programs to develop knowledge for a current career.
   Prior to withdrawals from the 529 plan qualifying for a state individual income tax deduction under the bill, the office must first approve the career-related program to receive the state income tax deduction.
   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 state and federal individual income tax. However, a career-related program defined in the bill does not qualify as an “apprenticeship program” under federal law, and as a result, federal tax treatment may differ from state tax treatment.
   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.