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

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 percent withdrawal penalty. The bill applies retroactively to January 1, 2024, and applies to tax years beginning on or after that date.