Internal Revenue Code, § 529. Qualified Tuition Programs

I.R.C. § 529(a) General Rule —

A qualified tuition program shall be exempt from taxation under this subtitle. Notwithstanding the preceding sentence, such program shall be subject to the taxes imposed by section 511 (relating to imposition of tax on unrelated business income of charitable organizations).

I.R.C. § 529(b) Qualified Tuition Program —

For purposes of this section—

I.R.C. § 529(b)(1) In General —

The term “qualified tuition program” means a program established and maintained by a State or agency or instrumentality thereof or by 1 or more eligible educational institutions—

I.R.C. § 529(b)(1)(A) —

under which a person—

I.R.C. § 529(b)(1)(A)(i) —

may purchase tuition credits or certificates on behalf of a designated beneficiary which entitle the beneficiary to the waiver or payment of qualified higher education expenses of the beneficiary, or

I.R.C. § 529(b)(1)(A)(ii) —

in the case of a program established and maintained by a State or agency or instrumentality thereof, may make contributions to an account which is established for the purpose of meeting the qualified higher education expenses of the designated beneficiary of the account, and

I.R.C. § 529(b)(1)(B) —

which meets the other requirements of this subsection.

Except to the extent provided in regulations, a program established and maintained by 1 or more eligible educational institutions shall not be treated as a qualified tuition program unless such program provides that amounts are held in a qualified trust and such program has received a ruling or determination that such program meets the applicable requirements for a qualified tuition program. For purposes of the preceding sentence, the term “qualified trust” means a trust which is created or organized in the United States for the exclusive benefit of designated beneficiaries and with respect to which the requirements of paragraphs (2) and (5) of section 408(a) are met.

I.R.C. § 529(b)(2) Cash Contributions —

A program shall not be treated as a qualified tuition program unless it provides that purchases or contributions may only be made in cash.

I.R.C. § 529(b)(3) Separate Accounting —

A program shall not be treated as a qualified tuition program unless it provides separate accounting for each designated beneficiary.

I.R.C. § 529(b)(4) Limited Investment Direction —

A program shall not be treated as a qualified tuition program unless it provides that any contributor to, or designated beneficiary under, such program may, directly or indirectly, direct the investment of any contributions to the program (or any earnings thereon) no more than 2 times in any calendar year.

I.R.C. § 529(b)(5) No Pledging Of Interest As Security —

A program shall not be treated as a qualified tuition program if it allows any interest in the program or any portion thereof to be used as security for a loan.

I.R.C. § 529(b)(6) Prohibition On Excess Contributions —

A program shall not be treated as a qualified tuition program unless it provides adequate safeguards to prevent contributions on behalf of a designated beneficiary in excess of those necessary to provide for the qualified higher education expenses of the beneficiary.

I.R.C. § 529(c) Tax Treatment Of Designated Beneficiaries And Contributors

I.R.C. § 529(c)(1) In General —

Except as otherwise provided in this subsection, no amount shall be includible in gross income of—

I.R.C. § 529(c)(1)(A) —

a designated beneficiary under a qualified tuition program, or

I.R.C. § 529(c)(1)(B) —

a contributor to such program on behalf of a designated beneficiary,

with respect to any distribution or earnings under such program.

I.R.C. § 529(c)(2) Gift Tax Treatment Of Contributions —

For purposes of chapters 12 and 13—

I.R.C. § 529(c)(2)(A) In General —

Any contribution to a qualified tuition program on behalf of any designated beneficiary—

I.R.C. § 529(c)(2)(A)(i) —

shall be treated as a completed gift to such beneficiary which is not a future interest in property, and

I.R.C. § 529(c)(2)(A)(ii) —

shall not be treated as a qualified transfer under section 2503(e).

I.R.C. § 529(c)(2)(B) Treatment Of Excess Contributions —

If the aggregate amount of contributions described in subparagraph (A) during the calendar year by a donor exceeds the limitation for such year under section 2503(b), such aggregate amount shall, at the election of the donor, be taken into account for purposes of such section ratably over the 5-year period beginning with such calendar year.

I.R.C. § 529(c)(3) Distributions

I.R.C. § 529(c)(3)(A) In General —

Any distribution under a qualified tuition program shall be includible in the gross income of the distributee in the manner as provided under section 72 to the extent not excluded from gross income under any other provision of this chapter.

I.R.C. § 529(c)(3)(B) Distributions For Qualified Higher Education Expenses —

For purposes of this paragraph—

I.R.C. § 529(c)(3)(B)(i) In-Kind Distributions —

No amount shall be includible in gross income under subparagraph (A) by reason of a distribution which consists of providing a benefit to the distributee which, if paid for by the distributee, would constitute payment of a qualified higher education expense.

I.R.C. § 529(c)(3)(B)(ii) Cash Distributions —

In the case of distributions not described in clause (i), if—

I.R.C. § 529(c)(3)(B)(ii)(I) —

such distributions do not exceed the qualified higher education expenses (reduced by expenses described in clause (i)), no amount shall be includible in gross income, and

I.R.C. § 529(c)(3)(B)(ii)(II) —

in any other case, the amount otherwise includible in gross income shall be reduced by an amount which bears the same ratio to such amount as such expenses bear to such distributions.

I.R.C. § 529(c)(3)(B)(iii) Exception For Institutional Programs —

In the case of any taxable year beginning before January 1, 2004, clauses (i) and (ii) shall not apply with respect to any distribution during such taxable year under a qualified tuition program established and maintained by 1 or more eligible educational institutions.

I.R.C. § 529(c)(3)(B)(iv) Treatment As Distributions —

Any benefit furnished to a designated beneficiary under a qualified tuition program shall be treated as a distribution to the beneficiary for purposes of this paragraph.

I.R.C. § 529(c)(3)(B)(v) Coordination With American Opportunity And Lifetime Learning Credits —

The total amount of qualified higher education expenses with respect to an individual for the taxable year shall be reduced—

I.R.C. § 529(c)(3)(B)(v)(I) —

as provided in section 25A(g)(2), and

I.R.C. § 529(c)(3)(B)(v)(II) —

by the amount of such expenses which were taken into account in determining the credit allowed to the taxpayer or any other person under section 25A.

I.R.C. § 529(c)(3)(B)(vi) Coordination With Coverdell Education Savings Accounts —

If, with respect to an individual for any taxable year—

I.R.C. § 529(c)(3)(B)(vi)(I) —

the aggregate distributions to which clauses (i) and (ii) and section 530(d)(2)(A) apply, exceed

I.R.C. § 529(c)(3)(B)(vi)(II) —

the total amount of qualified higher education expenses otherwise taken into account under clauses (i) and (ii) (after the application of clause (v)) for such year,

the taxpayer shall allocate such expenses among such distributions for purposes of determining the amount of the exclusion under clauses (i) and (ii) and section 530(d)(2)(A).

I.R.C. § 529(c)(3)(C) Change In Beneficiaries Or Programs

I.R.C. § 529(c)(3)(C)(i) Rollovers —

Subparagraph (A) shall not apply to that portion of any distribution which, within 60 days of such distribution, is transferred—

I.R.C. § 529(c)(3)(C)(i)(I) —

to another qualified tuition program for the benefit of the designated beneficiary,

I.R.C. § 529(c)(3)(C)(i)(II) —

to the credit of another designated beneficiary under a qualified tuition program who is a member of the family of the designated beneficiary with respect to which the distribution was made, or

I.R.C. § 529(c)(3)(C)(i)(III) —

before January 1, 2026, to an ABLE account (as defined in section 529A(e)(6)) of the designated beneficiary or a member of the family of the designated beneficiary.

Subclause (III) shall not apply to so much of a distribution which, when added to all other contributions made to the ABLE account for the taxable year, exceeds the limitation under section 529A(b)(2)(B)(i).

I.R.C. § 529(c)(3)(C)(ii) Change In Designated Beneficiaries —

Any change in the designated beneficiary of an interest in a qualified tuition program shall not be treated as a distribution for purposes of subparagraph (A) if the new beneficiary is a member of the family of the old beneficiary.

I.R.C. § 529(c)(3)(C)(iii) Limitation On Certain Rollovers —

Clause (i)(I) shall not apply to any transfer if such transfer occurs within 12 months from the date of a previous transfer to any qualified tuition program for the benefit of the designated beneficiary.

I.R.C. § 529(c)(3)(D) Special Rule For Contributions Of Refunded Amounts —

In the case of a beneficiary who receives a refund of any qualified higher education expenses from an eligible educational institution, subparagraph (A) shall not apply to that portion of any distribution for the taxable year which is recontributed to a qualified tuition program of which such individual is a beneficiary, but only to the extent such recontribution is made not later than 60 days after the date of such refund and does not exceed the refunded amount.

I.R.C. § 529(c)(4) Estate Tax Treatment

I.R.C. § 529(c)(4)(A) In General —

No amount shall be includible in the gross estate of any individual for purposes of chapter 11 by reason of an interest in a qualified tuition program.

I.R.C. § 529(c)(4)(B) Amounts Includible In Estate Of Designated Beneficiary In Certain Cases —

Subparagraph (A) shall not apply to amounts distributed on account of the death of a beneficiary.

I.R.C. § 529(c)(4)(C) Amounts Includible In Estate Of Donor Making Excess Contributions —

In the case of a donor who makes the election described in paragraph (2)(B) and who dies before the close of the 5-year period referred to in such paragraph, notwithstanding subparagraph (A), the gross estate of the donor shall include the portion of such contributions properly allocable to periods after the date of death of the donor.

I.R.C. § 529(c)(5) Other Gift Tax Rules —

For purposes of chapters 12 and 13—

I.R.C. § 529(c)(5)(A) Treatment Of Distributions —

Except as provided in subparagraph (B), in no event shall a distribution from a qualified tuition program be treated as a taxable gift.

I.R.C. § 529(c)(5)(B) Treatment Of Designation Of New Beneficiary —

The taxes imposed by chapters 12 and 13 shall apply to a transfer by reason of a change in the designated beneficiary under the program (or a rollover to the account of a new beneficiary) unless the new beneficiary is—

I.R.C. § 529(c)(5)(B)(i) —

assigned to the same generation as (or a higher generation than) the old beneficiary (determined in accordance with section 2651), and

I.R.C. § 529(c)(5)(B)(ii) —

a member of the family of the old beneficiary.

I.R.C. § 529(c)(6) Additional Tax —

The tax imposed by section 530(d)(4) shall apply to any payment or distribution from a qualified tuition program in the same manner as such tax applies to a payment or distribution from a Coverdell education savings account. This paragraph shall not apply to any payment or distribution in any taxable year beginning before January 1, 2004, which is includible in gross income but used for qualified higher education expenses of the designated beneficiary.

I.R.C. § 529(c)(7) Treatment Of Elementary And Secondary Tuition —

Any reference in this subsection to the term “qualified higher education expense” shall include a reference to expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school.

I.R.C. § 529(d) Reports —

Each officer or employee having control of the qualified tuition program or their designee shall make such reports regarding such program to the Secretary and to designated beneficiaries with respect to contributions, distributions, and such other matters as the Secretary may require. The reports required by this subsection shall be filed at such time and in such manner and furnished to such individuals at such time and in such manner as may be required by the Secretary.

I.R.C. § 529(e) Other Definitions And Special Rules —

For purposes of this section—

I.R.C. § 529(e)(1) Designated Beneficiary —

The term “designated beneficiary” means—

I.R.C. § 529(e)(1)(A) —

the individual designated at the commencement of participation in the qualified tuition program as the beneficiary of amounts paid (or to be paid) to the program,

I.R.C. § 529(e)(1)(B) —

in the case of a change in beneficiaries described in subsection (c)(3)(C), the individual who is the new beneficiary, and

I.R.C. § 529(e)(1)(C) —

in the case of an interest in a qualified tuition program purchased by a State or local government (or agency or instrumentality thereof) or an organization described in section 501(c)(3) and exempt from taxation under section 501(a) as part of a scholarship program operated by such government or organization, the individual receiving such interest as a scholarship.

I.R.C. § 529(e)(2) Member Of Family —

The term “member of the family” means, with respect to any designated beneficiary—

I.R.C. § 529(e)(2)(A) —

the spouse of such beneficiary;

I.R.C. § 529(e)(2)(B) —

an individual who bears a relationship to such beneficiary which is described in subparagraphs (A) through (G) of section 152(d)(2);

I.R.C. § 529(e)(2)(C) —

the spouse of any individual described in subparagraph (B); and

I.R.C. § 529(e)(2)(D) —

any first cousin of such beneficiary.

I.R.C. § 529(e)(3) Qualified Higher Education Expenses —

I.R.C. § 529(e)(3)(A) In General —

The term “qualified higher education expenses” means—

I.R.C. § 529(e)(3)(A)(i) —

tuition, fees, books, supplies, and equipment required for the enrollment or attendance of a designated beneficiary at an eligible educational institution,

I.R.C. § 529(e)(3)(A)(ii) —

expenses for special needs services in the case of a special needs beneficiary which are incurred in connection with such enrollment or attendance, and

I.R.C. § 529(e)(3)(A)(iii) —

expenses for the purchase of computer or peripheral equipment (as defined in section 168(i)(2)(B)), computer software (as defined in section 197(e)(3)(B)), or Internet access and related services, if such equipment, software, or services are to be used primarily by the beneficiary during any of the years the beneficiary is enrolled at an eligible educational institution.

Clause (iii) shall not include expenses for computer software designed for sports, games, or hobbies unless the software is predominantly educational in nature. The amount of cash distributions from all qualified tuition programs described in subsection (b)(1)(A)(ii) with respect to a beneficiary during any taxable year shall, in the aggregate, include not more than $10,000 in expenses described in subsection (c)(7) incurred during the taxable year.

I.R.C. § 529(e)(3)(B) Room And Board Included For Students Who Are At Least Half-Time

I.R.C. § 529(e)(3)(B)(i) In General —

In the case of an individual who is an eligible student (as defined in section 25A(b)(3)) for any academic period, such term shall also include reasonable costs for such period (as determined under the qualified tuition program) incurred by the designated beneficiary for room and board while attending such institution. For purposes of subsection (b)(6), a designated beneficiary shall be treated as meeting the requirements of this clause.

I.R.C. § 529(e)(3)(B)(ii) Limitation —

The amount treated as qualified higher education expenses by reason of clause (i) shall not exceed—

I.R.C. § 529(e)(3)(B)(ii)(I) —

the allowance (applicable to the student) for room and board included in the cost of attendance (as defined in section 472 of the Higher Education Act of 1965 (20 U.S.C. 1087ll), as in effect on the date of the enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001) as determined by the eligible educational institution for such period, or

I.R.C. § 529(e)(3)(B)(ii)(II) —

if greater, the actual invoice amount the student residing in housing owned or operated by the eligible educational institution is charged by such institution for room and board costs for such period.

I.R.C. § 529(e)(4) Application Of Section 514 —

An interest in a qualified tuition program shall not be treated as debt for purposes of section 514.

I.R.C. § 529(e)(5) Eligible Educational Institution —

The term “eligible educational institution” means an institution—

I.R.C. § 529(e)(5)(A) —

which is described in section 481 of the Higher Education Act of 1965 (20 U.S.C. 1088), as in effect on the date of the enactment of this paragraph, and

I.R.C. § 529(e)(5)(B) —

which is eligible to participate in a program under title IV of such Act.

I.R.C. § 529(f) Regulations —

Notwithstanding any other provision of this section, the Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section and to prevent abuse of such purposes, including regulations under chapters 11, 12, and 13 of this title.

(Aug. 20, 1996, Pub. L. 104-188, title I, Sec. 1806(a), 110 Stat. 1755; Pub. L. 105-34, title II, XVI, Sec. 211, 1601(h)(1), Aug. 5, 1997, 111 Stat 788; Pub. L. 105-206, title VI, Sec. 6004(c), July 22, 1998, 112 Stat 685; Pub. L. 106-554, title III, Sec. 319, Dec. 21, 2000, 114 Stat. 2763; Pub. L. 107-16, title IV, Sec. 402, June 7, 2001, 115 Stat. 38; Pub. L. 107-22, Sec. 1, July 26, 2001, 115 Stat. 196; Pub. L. 107-147, title IV, Sec. 417(11), Mar. 9, 2002, 116 Stat. 21; Pub. L. 108-311, title II, IV, Sec. 207(21), 406(a), Oct. 4, 2004, 118 Stat. 1166; Pub. L. 109-135, title IV, Sec. 412, Dec. 21, 2005, 119 Stat. 2577; Pub. L. 109-280, title XIII, Sec. 1304(b), Aug. 17, 2006, 120 Stat. 780; Pub. L. 111-5, div. B, title I, Sec. 1005(a), Feb. 17, 2009, 123 Stat. 115; Pub. L. 113-295, Div. B, Sec. 105(a), Dec. 19, 2014, 128 Stat. 4010; Pub. L. 114-113, Div. Q, title III, Sec. 302; Pub. L. 115-97, title I, Sec. 11025(a), 11032(a), Dec. 22, 2017, 131 Stat. 2054; Pub. L. 115-141, Div. U, title I, Sec. 101(l)(15), title IV, Sec. 401(a)(127), (128); Pub. L. 115-141, Div. U, title IV, Sec. 401(a)(127)-(128), Mar. 23, 2018, 132 Stat. 348.)

BACKGROUND NOTES

Amendments to Part

2001-Pub. L. 107-16, Sec. 402(a)(4)(D), amended the heading of Part VIII by striking “State”.

1997--Pub. L. 105-34, Sec. 211(e)(1) amended the heading of Part VIII. Prior to amendment it read as: “Qualified State Tuition Programs”.

1996--Pub. L. 104-188, title I, Subtitle H, 1806(a), Aug. 20, 1996, added Part VIII.

AMENDMENTS

2018--Subsec.(c)(6). Pub. L. 115-141, Div. U, Sec. 401(a)(127), amended par. (6) by substituting “a Coverdell” for “an Coverdell”.

Subsec. (c)(3)(B)(v). Pub. L. 115-141, Div. U, Sec. 101(l)(15), amended the heading of clause (v) by substituting “American Opportunity” for “Hope”.

Subsec. (e)(3)(A)(i). Pub. L. 115-141, Div. U, Sec. 401(a)(128)(A), amended clause (i) by substituting a comma for the semicolon at the end.

Subsec. (e)(3)(A)(ii). Pub. L. 115-141, Div. U, Sec. 401(a)(128)(B), amended clause (ii) by adding “, and” at the end.

2017 - Subsec. (c)(3)(C)(i). Pub. L. 115-97, Sec. 11025(a), amended clause (i) by striking “or” at the end of subclause (I), by substituting “, or” for the period at the end of subclause (II), by adding new subclause (III), and by adding the sentence at the end.

Subsec. (c)(7). Pub. L. 115-97, Sec. 11032(a)(1), amended subsec. (c) by adding par. (7).

Subsec. (e)(3)(A). Pub. L. 115-97, Sec. 11032(a)(2), amended par. (A) by adding the sentence at the end.

2015 - Subsec. (c)(3)(D). Pub. L. 114-113, Div. Q, Sec. 302(b)(1), amended par. (3) by striking subpar. (D). Before being struck, it read as follows:

“(D) Operating Rules.—For purposes of applying section 72—

“(i) to the extent provided by the Secretary, all qualified tuition programs of which an individual is a designated beneficiary shall be treated as one program,

“(ii) except to the extent provided by the Secretary, all distributions during a taxable year shall be treated as one distribution, and

“(iii) except to the extent provided by the Secretary, the value of the contract, income on the contract, and investment in the contract shall be computed as of the close of the calendar year in which the taxable year begins.”

Subsec. (c)(3)(D). Pub. L. 114-113, Div Q, Sec. 302(c)(1), amended par. (3) by adding a new subpar. (D).

Subsec. (e)(3)(A)(iii). Pub. L. 114-113, Div. Q, Sec. 302(a), amended clause (iii). Before amendment, it read as follows:

“(iii) expenses paid or incurred in 2009 or 2010 for the purchase of any computer technology or equipment (as defined in section 170(e)(6)(F)(i)) or Internet access and related services, if such technology, equipment, or services are to be used by the beneficiary and the beneficiary's family during any of the years the beneficiary is enrolled at an eligible educational institution.”

2014 - Subsec. (b)(4). Pub. L. 113-295, Div. B, Sec. 105(a), amended par. (4) by substituting “No” for “Limited” in the heading and by substituting “may, directly or indirectly, direct the investment of any contributions to the program (or any earnings thereon) no more than 2 times in any calendar year” for “may not directly or indirectly direct the investment of any contributions to the program (or any earnings thereon).”

2009 - Subsec. (e)(3)(A)(i)-(iii). Pub. L. 111-5, Div. B, Sec. 1005(a), amended subpar. (A) by striking “and” at the end of clause (i), by striking the period at the end of clause (ii), and by adding clause (iii) and the flush material at the end.

2006 - Subsec. (f). Pub. L. 109-280, Sec. 1304(b), added subsec. (f).

2005 - Subsec. (c)(6). Pub. L. 109-135, Sec. 412(ee)(3), amended par. (6) by substituting “Coverdell education savings account" for “education individual retirement account”.

2004 - Subsec. (c)(5)(B). Pub. L. 108-311, Sec. 406(a), amended subpar. (B). Before amendment it read as follows:

“(B) Treatment of designation of new beneficiary.--

“The taxes imposed by chapters 12 and 13 shall apply to a transfer by reason of a change in the designated beneficiary under the program (or a rollover to the account of a new beneficiary) only if the new beneficiary is a generation below the generation of the old beneficiary (determined in accordance with section 2651).”

Subsec. (e)(2)(B). Pub. L. 108-311, Sec. 207(21), amended subpar. (B) by substituting “subparagraphs (A) through (G) of section 152(d)(2)” for “paragraphs (1) through (8) of section 152(a)”.

2002 - Subsec. (e)(3)(B)(i). Pub. L. 107-147, Sec. 417(11), amended clause (i) by substituting “subsection (b)(6)” for “subsection (b)(7)”.

2001 - Subsec. (c)(3)(B)(vi). Pub. L. 107-22, Sec. 1(b)(3)(C), amended the heading of clause (vi) by substituting “Coverdell education savings” for “education individual retirement”.

Section 529. Pub. L. 107-16, Sec. 402(a)(4)(D), amended the heading of Sec. 529 by striking “State”.

Sec. 529. Pub. L. 107-16, Sec. 402(a)(4)(A), amended sec. 529 by substituting “qualified tuition” for “qualified State tuition” each place it appeared.

Subsec. (b). Pub. L. 107-16, Sec. 402(a)(4)(C), amended the heading of subsec. (b) by substituting “qualified tuition" for “qualified State tuition”.

Subsec. (b)(1). Pub. L. 107-16, Sec. 402(a)(1), amended par. (1) by inserting “or by 1 or more eligible educational institutions” after “maintained by a State or agency or instrumentality thereof ‘’ in the matter preceding subparagraph (A), and by adding at the flush sentence at the end.

Subsec. (b)(1)(A)(ii). Pub. L. 107-16, Sec. 402(a)(2), amended clause (ii) by inserting “in the case of a program established and maintained by a State or agency or instrumentality thereof,” before “may make”.

Subsec. (b)(3). Pub. L. 107-16, Sec. 402(a)(3)(A), struck par. (3). Before being struck it read as follows:

“(3) Refunds

“A program shall not be treated as a qualified State tuition program unless it imposes a more than de minimis penalty on any refund of earnings from the account which are not--

“(A) used for qualified higher education expenses of the designated beneficiary,

“(B) made on account of the death or disability of the designated beneficiary, or

“(C) made on account of a scholarship (or allowance or payment described in section 135(d)(1)(B) or (C)) received by the designated beneficiary to the extent the amount of the refund does not exceed the amount of the scholarship, allowance, or payment.”

Subsec. (b)(4)-(7). Pub. L. 107-16, Sec. 402(a)(3)(A), redesignated par. (4)-(7) as par. (3)-(6), respectively.

Subsec. (c)(3)(B). Pub. L. 107-16, Sec. 402(b)(1), amended subpar. (B). Before amendment it read as follows:

“(B) In-kind distributions

“Any benefit furnished to a designated beneficiary under a qualified tuition program shall be treated as a distribution to the beneficiary.”

Subsec. (c)(3)(C). Pub. L. 107-16, Sec. 402(c)(3), amended the heading of subpar. (C) by inserting “or programs” after “beneficiaries”.

Subsec. (c)(3)(C)(i). Pub. L. 107-16, Sec. 402(c)(1), amended clause (i) by substituting “transferred-

“(I) to another qualified tuition program for the benefit of the designated beneficiary, or

“(II) to the credit”

for “transferred to the credit”.

Subsec. (c)(3)(C)(iii). Pub. L. 107-16, Sec. 402(c)(2), added clause (iii).

Subsec. (c)(3)(D)(ii). Pub. L. 107-16, Sec. 402(g)(1), amended clause (ii) by inserting “except to the extent provided by the Secretary,” before “all distributions.

Subsec. (c)(3)(D)(iii). Pub. L. 107-16, Sec. 402(g)(2), amended clause (iii) by inserting “except to the extent provided by the Secretary,” before “the value”.

Subsec. (c)(6). Pub. L. 107-16, Sec. 402(a)(3)(B), added par. (6).

Subsec. (e)(2)(B)-(D). Pub. L. 107-16, Sec. 402(d), struck “and” at the end of subpar. (B), substituted “; and” for the period at the end of subpar. (C), and added subpar. (D).

Subsec. (e)(3)(A). Pub. L. 107-16, Sec. 402(f), amended subpar. (A). Before amendment it read as follows:

“(A) In general.--The term ‘qualified higher education expenses’ means tuition, fees, books, supplies, and equipment required for the enrollment or attendance of a designated beneficiary at an eligible educational institution.”

Subsec. (e)(3)(B)(ii). Pub. L. 107-16, Sec. 402(e), amended clause (ii). Before amendment it read as follows:

“(ii) Limitation.--The amount treated as qualified higher education expenses by reason of the preceding sentence shall not exceed the minimum amount (applicable to the student) included for room and board for such period in the cost of attendance (as defined in section 472 of the Higher Education Act of 1965, 20 U.S.C. 1087ll, as in effect on the date of the enactment of this paragraph) for the eligible educational institution for such period.”

2000 - Subsec. (e)(3)(B). Pub. L. 106-554, Sec. 319(5), amended the heading by striking “under guaranteed plans” after “students”.

1998 - Subsec. (c)(3)(A). Pub. L. 105-206, Sec. 6004(c)(2), amended subpar. (A) by substituting “section 72” for “section 72(b)”.

Subsec. (e)(2). Pub. L. 105-206, Sec. 6004(c)(3), amended par. (2). Prior to amendment it read as follows:

“(2) Member of family.--

The term ‘member of the family’ means--

“(A) an individual who bears a relationship to another individual which is a relationship described in paragraphs (1) through (8) of section 152(a), and

“(B) the spouse of any individual described in subparagraph (A).”

1997 - Subsec. (b)(5). Pub. L. 105-34, Sec. 211(b)(4), amended par. (5) by inserting “directly or indirectly” after “may not”.

Subsec. (c)(2). Pub. L. 105-34, Sec. 211(b)(3)(A)(i), amended par. (2). Prior to amendment it read as follows:

“(2) Contributions

In no event shall a contribution to a qualified State tuition program on behalf of a designated beneficiary be treated as a taxable gift for purposes of chapter 12.”

Subsec. (c)(3)(A). Pub. L. 105-34, Sec. 211(d), amended subpar. (A) by substituting “section 72(b)” for “section 72”.

Subsec. (c)(4). Pub. L. 105-34, Sec. 211(b)(3)(b), amended par. (4). Prior to amendment it read as follows:

“(4) Estate tax inclusion

The value of any interest in any qualified State tuition program which is attributable to contributions made by an individual to such program on behalf of any designated beneficiary shall be includible in the gross estate of the contributor for purposes of chapter 11.”

Subsec.. (c)(5). Pub. L. 105-34, Sec. 211(b)(3)(A)(ii), amended par. (5). Prior to amendment it read as follows:

“(5) Special rule for applying section 2503(e)

For purposes of section 2503(e), the waiver (or payment to an educational institution) of qualified higher education expenses of a designated beneficiary under a qualified State tuition program shall be treated as a qualified transfer.”

Subsec. (d). Pub. L. 105-34, Sec. 211(e)(2)(A), amended subsec (d). Prior to amendment it read as follows:

“(d) Reporting Requirements

(1) In general

If there is a distribution to any individual with respect to an interest in a qualified State tuition program during any calendar year, each officer or employee having control of the qualified State tuition program or their designee shall make such reports as the Secretary may require regarding such distribution to the Secretary and to the designated beneficiary or the individual to whom the distribution was made. Any such report shall include such information as the Secretary may prescribe.

(2) Timing of reports

Any report required by this subsection--

(A) shall be filed at such time and in such matter as the Secretary prescribes, and

(B) shall be furnished to individuals not later than January 31 of the calendar year following the calendar year to which such report relates.”

Subsec. (e)(1)(B). Pub. L. 105-34, Sec. 1601(h)(1)(A), amended subpar. (B) by substituting “subsection (c)(3)(C)” for “subsection (c)(2)(C)”.

Subsec. (e)(1)(C). Pub. L. 105-34, Sec. 1601(h)(1)(B), amended subpar. (C) by inserting “(or agency or instrumentality thereof)" after “local government”.

Subsec. (e)(2). Pub. L. 105-34, Sec. 211(b)(1), amended par. (2). Prior to amendment it read as follows:

“(2) Member of family

The term ‘member of the family’ has the same meaning given such term as section 2032A(e)(2).”

Subsec. (e)(3). Pub. L. 105-34, Sec. 211(a), amended par. (3). Prior to amendment it read as follows:

“(3) Qualified higher education expenses

The term ‘qualified higher education expenses’ means tuition, fees, books, supplies, and equipment required for the enrollment or attendance of a designated beneficiary at an eligible educational institution (as defined in section 135(c)(3)).”

Subsec. (e)(5). Pub. L. 105-34, Sec. 211(b)(2), added par. (5).

EFFECTIVE DATE OF 2018 AMENDMENTS

Amendment by Pub. L. 115-141, Div. U, Sec. 401(a)(127), effective March 23, 2018.

Amendment by Pub. L. 115-141, Div. U, Sec. 401(a)(128), effective March 23, 2018.

Amendment by Pub. L. 115-141, Div. U, Sec. 101(l)(15), effective as if included in the provision of Protecting Americans from Tax Hikes Act of 2015 [Pub. L. 114-113] to which it relates.

Amendments by Pub. L. 115-141, Div. U, Sec. 401(a), effective March 23, 2018.

EFFECTIVE DATE OF 2017 AMENDMENTS

Amendments by Pub. L. 115-97, Sec. 11025(a), effective for distributions after the date of the enactment of this Act [Enacted: Dec. 22, 2017].

Amendments by Pub. L. 115-97, Sec. 11032(a), effective for distributions made after December 31, 2017.

EFFECTIVE DATE OF 2015 AMENDMENTS

Amendment by Pub. L. 114-113, Div. Q, Sec. 302(b)(1), effective for distributions after December 31, 2014.

Amendment by Pub. L. 114-113, Div. Q, Sec. 302(c)(1), effective with respect to refunds of qualified higher education expenses after December 31, 2014. Pub. L. 114-113, Div. Q, Sec. 302(c)(2)(B), provided the following transition rule:

“(B) TRANSITION RULE.—In the case of a refund of qualified higher education expenses received after December 31, 2014, and before the date of the enactment of this Act, section 529(c)(3)(D) of the Internal Revenue Code of 1986 (as added by this subsection) shall be applied by substituting “not later than 60 days after the date of the enactment of this subparagraph” for “not later than 60 days after the date of such refund”.”

Amendment by Pub. L. 114-113, Div. Q, Sec. 302(a), effective for taxable years beginning after December 31, 2014.

EFFECTIVE DATE OF 2014 AMENDMENTS

Amendments by Pub. L. 113-295, Div. B, Sec. 105(a), effective for taxable years beginning after December 31, 2014.

EFFECTIVE DATE OF 2009 AMENDMENTS

Amendments by Sec. 1005(a) of Pub. L. 111-5, Div. B, effective for expenses paid or incurred after December 31, 2008.

EFFECTIVE DATE OF 2006 AMENDMENTS

Amendment by Sec. 1304(b) of Pub. L. 109-280 applicable on the date of the enactment of this Act [Enacted: Aug. 17, 2006].

EFFECTIVE DATE OF 2005 AMENDMENTS

Amendment by Sec. 412(ee)(3) of Pub. L. 109-135 applicable on the date of the enactment of this Act [Enacted: Dec. 21, 2005].

EFFECTIVE DATE OF 2004 AMENDMENTS

Amendment by Sec. 207(21) of Pub. L. 108-311 applicable to taxable years beginning after December 31, 2004.

Amendment by Sec. 406(a) of Pub. L. 108-311 applicable as if included in the provision of the Taxpayer Relief Act of 1997 [Sec. 211] to which it relates [effective: transfers after Aug. 5, 1997].

EFFECTIVE DATE OF 2002 AMENDMENTS

Amendment by Sec. 417(11) of Pub. L. 107-147 applicable on the date of the enactment of this Act [enacted: Mar. 9, 2002].

EFFECTIVE DATE OF 2001 AMENDMENTS

Amendment by Sec. 1 of Pub. L. 107-22 applicable on the date of enactment of this Act [Enacted: July 26, 2001].

Amendments by Sec. 402 of Pub. L. 107-16 applicable to taxable years beginning after December 31, 2001.

Section 901 (Sunset of Provisions of Act) of Pub. L. 107-16, as amended by Pub. L. 107-358 and Pub. L. 111-312, Sec. 101(a), and struck by Pub. L. 112-240, Sec. 101(a)(1) (effective for taxable, plan, or limitation years beginning after Dec. 31, 2012, and estates of decedents dying, gifts made, or generation skipping transfers after Dec. 31, 2012), provided that:

“(a) IN GENERAL.--All provisions of, and amendments made by, this Act shall not apply--

“(1) to taxable, plan, or limitation years beginning after December 31, 2012, or

“(2) in the case of title V, to estates of decedents dying, gifts made, or generation skipping transfers, after December 31, 2012.

“(b) APPLICATION OF CERTAIN LAWS.--The Internal Revenue Code of 1986 and the Employee Retirement Income Security Act of 1974 shall be applied and administered to years, estates, gifts, and transfers described in subsection (a) as if the provisions and amendments described in subsection (a) had never been enacted.

“(c) EXCEPTION.-Subsection (a) shall not apply to section 803 (relating to no federal income tax on restitution received by victims of the Nazi regime or their heirs or estates).”

QUALIFIED TUITION PROGRAMS

Section 1304(a) of Pub. L. 109-280 provided that:

“(a) Permanent Extension of Modifications- Section 901 of the Economic Growth and Tax Relief Reconciliation Act of 2001 (relating to sunset provisions) shall not apply to section 402 of such Act (relating to modifications to qualified tuition programs).”

EFFECTIVE DATE OF 1998 AMENDMENTS

Amendments by Sec. 6004(c) of Pub. L. 105-206 applicable as if included in the provisions of the Taxpayer Relief Act of 1997 to which they relate [Effective Date of Pub. L. 105-34, Sec. 211(b)(2): Distributions after December 31, 1997, with respect to expenses paid after such date (in taxable years ending after such date), for education furnished in academic periods beginning after such date].

EFFECTIVE DATE OF 1997 AMENDMENTS

Amendments by Sec. 211 of Pub. L. 105-34 effective on January 1, 1998, except:

(2) Amendments by Sec. 211(a) of Pub. L. 105-34 effective as if included in the amendments made by section 1806 of the Small Business Job Protection Act of 1996.

(3) Amendments by Sec. 211(b)(2) of Pub. L. 105-34 applicable to distributions after December 31, 1997, with respect to expenses paid after such date (in taxable years ending after such date), for education furnished in academic periods beginning after such date.

(4) Coordination with education savings bonds.--The amendment made by subsection (c) shall apply to taxable years beginning after December 31, 1997.

(5) Estate and gift tax changes.--

(A) Gift tax changes.--Paragraphs (2) and (5) of section 529(c) of the Internal Revenue Code of 1986, as amended by this section, shall apply to transfers (including designations of new beneficiaries) made after the date of the enactment of this Act.

(B) Estate tax changes.--Paragraph (4) of such section 529(c) shall apply to estates of decedents dying after June 8, 1997.

(6) Transition rule for pre-August 20, 1996 contracts.--In the case of any contract issued prior to August 20, 1996, section 529(c)(3)(C) of the Internal Revenue Code of 1986 shall be applied for taxable years ending after August 20, 1996, without regard to the requirement that a distribution be transferred to a member of the family or the requirement that a change in beneficiaries may be made only to a member of the family.

EFFECTIVE DATE

Section 1806(c)(1) of Pub. L. 104-188, as amended by Pub. L. 105-34, Sec. 1601(h)(1)(C), provided that: “The amendments made by this section [enacting this section and amending section 135 of this title] shall apply to taxable years ending after the date of enactment of this Act [Aug. 20, 1996]." Section 1806(c)(2) provided the following transition rule:

“(2) Transition rule.--If--

(A) a State or agency or instrumentality thereof maintains, on the date of the enactment of this Act [Aug. 20, 1996], a program under which persons may purchase tuition credits or certificates on behalf of, or make contributions for education expenses of, a designated beneficiary, and

(B) such program meets the requirements of a qualified State tuition program before the later of--

(i) the date which is 1 year after such date of enactment, or

(ii) the first day of the first calendar quarter after the close of the first regular session of the State legislature that begins after such date of enactment,

then such program (as in effect on August 20, 1996) shall be treated as a qualified State tuition program with respect to contributions (and earnings allocable thereto) pursuant to contracts entered into under such program before the first date on which such program meets such requirements (determined without regard to this paragraph) and the provisions of such program (as so in effect) shall apply in lieu of section 529(b) of the Internal Revenue Code of 1986 with respect to such contributions and earnings.

For purposes of subparagraph (B)(ii), if a State has a 2-year legislative session, each year of such session shall be deemed to be a separate regular session of the State legislature.”

Internal Revenue Code, § 529. Qualified Tuition Programs

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