Senate Study Bill 3128 - Introduced SENATE FILE _____ BY (PROPOSED COMMITTEE ON WORKFORCE BILL BY CHAIRPERSON DICKEY) A BILL FOR An Act relating to the Iowa educational savings plan trust by 1 expanding the definition of qualified educational expenses 2 and apprenticeship programs for purposes of withdrawals 3 qualifying for an individual income tax exclusion, and 4 including retroactive applicability provisions. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 5329SC (5) 90 jm/jh

S.F. _____ Section 1. Section 12D.1, subsection 2, Code 2024, is 1 amended by adding the following new paragraph: 2 NEW PARAGRAPH . 0c. “Apprenticeship program” means a program 3 registered and certified with the United States secretary of 4 labor under section 1 of the federal National Apprenticeship 5 Act, 29 U.S.C. §50, or registered with the Iowa office of 6 apprenticeship under chapter 84D. 7 Sec. 2. Section 12D.1, subsection 2, paragraph k, Code 2024, 8 is amended to read as follows: 9 k. “Qualified education expenses” means the same as 10 “qualified higher education expenses” as defined in section 11 529(e)(3) of the Internal Revenue Code, as amended by Pub. L. 12 No. 115-97, and shall include elementary and secondary school 13 expenses for tuition described in section 529(c)(7) of the 14 Internal Revenue Code, subject to the limitations imposed by 15 section 529(e)(3)(A) of the Internal Revenue Code. “Qualified 16 education expenses” includes expenses for the participation 17 in an apprenticeship program registered and certified with 18 the United States secretary of labor under section 1 of the 19 National Apprenticeship Act , 29 U.S.C. §50 , and amounts paid as 20 principal or interest on any qualified education loan on behalf 21 of a beneficiary or a sibling of the beneficiary, subject to 22 the limitations imposed by section 529(c)(9)(B) and (C) of the 23 Internal Revenue Code. “Qualified education expenses” includes 24 expenses paid to an institution of higher education for 25 career-related programs that do not qualify for college credit. 26 Sec. 3. Section 422.7, subsection 22, paragraph c, 27 subparagraph (1), Code 2024, is amended by adding the following 28 new subparagraph division: 29 NEW SUBPARAGRAPH DIVISION . (g) The payment of expenses for 30 career-related programs that do not qualify for college credit 31 if such payments are qualified education expenses. 32 Sec. 4. Section 422.7, subsection 22, paragraph c, 33 subparagraph (2), subparagraph division (a), Code 2024, is 34 amended to read as follows: 35 -1- LSB 5329SC (5) 90 jm/jh 1/ 3

S.F. _____ (a) “Apprenticeship program” means a program registered 1 and certified with the United States secretary of labor under 2 section 1 of the National Apprenticeship Act , 29 U.S.C. §50 the 3 same as defined in section 12D.1 . 4 Sec. 5. RETROACTIVE APPLICABILITY. This Act applies 5 retroactively to January 1, 2024, for tax years beginning on 6 or after that date. 7 EXPLANATION 8 The inclusion of this explanation does not constitute agreement with 9 the explanation’s substance by the members of the general assembly. 10 This bill relates to the Iowa educational savings plan 11 trust (529 plan) by expanding the definition of qualified 12 education expenses and apprenticeship programs for purposes 13 of withdrawals from the 529 plan qualifying for an individual 14 income tax exclusion. 15 The bill specifies that “qualified education expenses” 16 include expenses paid to an institution of higher education for 17 career-related programs that do not qualify for college credit. 18 As a result, the expenses paid to the institution of higher 19 education for career-related programs that do not earn college 20 credit are excluded from the computation of net income for the 21 individual income tax. An institution of higher education is 22 defined in Code section 12D.1. 23 Under current law, withdrawals from a 529 plan for 24 expenses related to an apprenticeship program registered and 25 certified with the United States secretary of labor under 26 the federal National Apprenticeship Act, are excluded from 27 the computation of net income for the individual income tax. 28 The bill expands the definition of “apprenticeship program” 29 to include apprenticeships registered with the Iowa office 30 of apprenticeship under Code chapter 84D, and as a result 31 the withdrawals from a 529 plan for expenses related to an 32 apprenticeship program registered with the Iowa office of 33 apprenticeship are excluded from the computation of net income 34 for the individual income tax. 35 -2- LSB 5329SC (5) 90 jm/jh 2/ 3

S.F. _____ The federal tax treatment of the type of withdrawal 1 described in the bill may differ from the state tax treatment 2 under the bill. For federal tax purposes, if a withdrawal is 3 considered a nonqualified withdrawal, the earnings portion of 4 the nonqualified withdrawal is subject to federal taxation and 5 a 10 percent withdrawal penalty. 6 The bill applies retroactively to January 1, 2024, and 7 applies to tax years beginning on or after that date. 8 -3- LSB 5329SC (5) 90 jm/jh 3/ 3