SSB 3128

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