26 U.S.C. § 529 — Qualified tuition programs

Page 1732 TITLE 26—INTERNAL REVENUE CODE § 529 sociation were a corporation and as though the home- owners association taxable income were the taxable in- come referred to in section 11’’ and struck out provi- sion that for purposes of this subsection, the surtax ex- emption provided by section 11(d) not be allowed. Subsec. (b)(2)(B). Pub. L. 95–600, § 403(c)(2), substituted provision related to amount being determined accord- ing to section 1201(a) for provision requiring an amount of 30 percent. Subsec. (c)(2). Pub. L. 95–600, § 701(n)(1), substituted ‘‘by individuals for residences’’ for ‘‘as residences’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1997 AMENDMENT Pub. L. 105–34, title IX, § 966(e), Aug. 5, 1997, 111 Stat. 895, provided that: ‘‘The amendments made by this sec- tion [amending this section] shall apply to taxable years beginning after December 31, 1996.’’ EFFECTIVE DATE OF 1980 AMENDMENT Pub. L. 96–605, title I, § 105(b), Dec. 28, 1980, 94 Stat. 3523, provided that: ‘‘The amendment made by sub- section (a) [amending this section] shall apply to tax- able years beginning after December 31, 1980.’’ EFFECTIVE DATE OF 1978 AMENDMENT Amendment by section 301(b)(7) of Pub. L. 95–600 ap- plicable to taxable years beginning after Dec. 31, 1978, see section 301(c) of Pub. L. 95–600, set out as a note under section 11 of this title. Pub. L. 95–600, title IV, § 403(d)(3), Nov. 6, 1978, 92 Stat. 2869, provided that: ‘‘The amendments made by para- graphs (2), (3), and (4) of subsection (c) [amending this section and sections 857 and 904 of this title] shall take effect on the date of the enactment of this Act [Nov. 6, 1978].’’ Pub. L. 95–600, title VII, § 701(n)(2), Nov. 6, 1978, 92 Stat. 2907, provided that: ‘‘The amendment made by paragraph (1) [amending this section] shall apply to taxable years beginning after December 31, 1973.’’ EFFECTIVE DATE Pub. L. 94–455, title XXI, § 2101(e), Oct. 4, 1976, 90 Stat. 1899, provided that: ‘‘Except as provided in subsection (f)(2) [set out as a note under section 216 of this title], the amendments made by this section [enacting this section and amending sections 216 and 6012 of this title] shall apply to taxable years beginning after December 31, 1973.’’ PART VIII—CERTAIN SAVINGS ENTITIES Sec. 529. Qualified tuition programs. 529A. Qualified ABLE programs. 530. Coverdell education savings accounts. Editorial Notes AMENDMENTS 2014—Pub. L. 113–295, div. B, title I, § 102(e)(4), (6), Dec. 19, 2014, 128 Stat. 4062, substituted ‘‘CERTAIN’’ for ‘‘HIGHER EDUCATION’’ in heading and added item 529A. 2004—Pub. L. 108–311, title IV, § 408(b)(2), Oct. 4, 2004, 118 Stat. 1192, amended directory language of Pub. L. 107–22, § 1(a)(6). See 2001 Amendment note below. 2001—Pub. L. 107–22, § 1(a)(6), July 26, 2001, 115 Stat. 196, as amended by Pub. L. 108–311, title IV, § 408(b)(2), Oct. 4, 2004, 118 Stat. 1192, substituted ‘‘Coverdell edu- cation savings accounts’’ for ‘‘Education individual re- tirement accounts’’ in item 530. Pub. L. 107–16, title IV, § 402(a)(4)(E), June 7, 2001, 115 Stat. 61, struck out ‘‘State’’ before ‘‘tuition’’ in item 529. 1997—Pub. L. 105–34, title II, §§ 211(e)(1)(A), 213(e)(3), Aug. 5, 1997, 111 Stat. 812, 817, substituted ‘‘HIGHER EDUCATION SAVINGS ENTITIES’’ for ‘‘QUALIFIED STATE TUITION PROGRAMS’’ in heading and added item 530. § 529. Qualified tuition programs (a) General rule A qualified tuition program shall be exempt from taxation under this subtitle. Notwith- standing 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). (b) Qualified tuition program For purposes of this section— (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 institu- tions— (A) under which a person— (i) may purchase tuition credits or cer- tificates on behalf of a designated bene- ficiary which entitle the beneficiary to the waiver or payment of qualified higher edu- cation expenses of the beneficiary, or (ii) in the case of a program established and maintained by a State or agency or in- strumentality thereof, may make con- tributions to an account which is estab- lished for the purpose of meeting the qualified higher education expenses of the designated beneficiary of the account, and (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 require- ments for a qualified tuition program. For purposes of the preceding sentence, the term ‘‘qualified trust’’ means a trust which is cre- ated 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. (2) Cash contributions A program shall not be treated as a qualified tuition program unless it provides that pur- chases or contributions may only be made in cash. (3) Separate accounting A program shall not be treated as a qualified tuition program unless it provides separate ac- counting for each designated beneficiary. (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 indi- rectly, direct the investment of any contribu- tions to the program (or any earnings thereon) no more than 2 times in any calendar year. Page 1733 TITLE 26—INTERNAL REVENUE CODE § 529 (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. (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. (c) Tax treatment of designated beneficiaries and contributors (1) In general Except as otherwise provided in this sub- section, no amount shall be includible in gross income of— (A) a designated beneficiary under a quali- fied tuition program, or (B) a contributor to such program on be- half of a designated beneficiary, with respect to any distribution or earnings under such program. (2) Gift tax treatment of contributions For purposes of chapters 12 and 13— (A) In general Any contribution to a qualified tuition program on behalf of any designated bene- ficiary— (i) shall be treated as a completed gift to such beneficiary which is not a future in- terest in property, and (ii) shall not be treated as a qualified transfer under section 2503(e). (B) Treatment of excess contributions If the aggregate amount of contributions described in subparagraph (A) during the calendar year by a donor exceeds the limita- tion for such year under section 2503(b), such aggregate amount shall, at the election of the donor, be taken into account for pur- poses of such section ratably over the 5-year period beginning with such calendar year. (3) Distributions (A) In general Any distribution under a qualified tuition program shall be includible in the gross in- come 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. (B) Distributions for qualified higher edu- cation expenses For purposes of this paragraph— (i) In-kind distributions No amount shall be includible in gross income under subparagraph (A) by reason of a distribution which consists of pro- viding a benefit to the distributee which, if paid for by the distributee, would con- stitute payment of a qualified higher edu- cation expense. (ii) Cash distributions In the case of distributions not described in clause (i), if— (I) such distributions do not exceed the qualified higher education expenses (re- duced by expenses described in clause (i)), no amount shall be includible in gross income, and (II) in any other case, the amount oth- erwise includible in gross income shall be reduced by an amount which bears the same ratio to such amount as such ex- penses bear to such distributions. (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 dis- tribution during such taxable year under a qualified tuition program established and maintained by 1 or more eligible edu- cational institutions. (iv) Treatment as distributions Any benefit furnished to a designated beneficiary under a qualified tuition pro- gram shall be treated as a distribution to the beneficiary for purposes of this para- graph. (v) Coordination with American Oppor- tunity and Lifetime Learning credits The total amount of qualified higher education expenses with respect to an indi- vidual for the taxable year shall be re- duced— (I) as provided in section 25A(g)(2), and (II) by the amount of such expenses which were taken into account in deter- mining the credit allowed to the tax- payer or any other person under section 25A. (vi) Coordination with Coverdell education savings accounts If, with respect to an individual for any taxable year— (I) the aggregate distributions to which clauses (i) and (ii) and section 530(d)(2)(A) apply, exceed (II) the total amount of qualified high- er 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). (C) Change in beneficiaries or programs (i) Rollovers Subparagraph (A) shall not apply to that portion of any distribution which, within 60 days of such distribution, is trans- ferred— (I) to another qualified tuition pro- gram for the benefit of the designated beneficiary, (II) to the credit of another designated beneficiary under a qualified tuition pro- gram who is a member of the family of the designated beneficiary with respect to which the distribution was made, or Page 1734 TITLE 26—INTERNAL REVENUE CODE § 529 (III) before January 1, 2026, to an ABLE account (as defined in section 529A(e)(6)) of the designated beneficiary or a mem- ber of the family of the designated bene- ficiary. Subclause (III) shall not apply to so much of a distribution which, when added to all other contributions made to the ABLE ac- count for the taxable year, exceeds the limitation under section 529A(b)(2)(B)(i). (ii) Change in designated beneficiaries Any change in the designated bene- ficiary of an interest in a qualified tuition program shall not be treated as a distribu- tion for purposes of subparagraph (A) if the new beneficiary is a member of the family of the old beneficiary. (iii) Limitation on certain rollovers Clause (i)(I) shall not apply to any trans- fer if such transfer occurs within 12 months from the date of a previous trans- fer to any qualified tuition program for the benefit of the designated beneficiary. (D) Special rule for contributions of re- funded amounts In the case of a beneficiary who receives a refund of any qualified higher education ex- penses from an eligible educational institu- tion, subparagraph (A) shall not apply to that portion of any distribution for the tax- able year which is recontributed to a quali- fied tuition program of which such indi- vidual is a beneficiary, but only to the ex- tent such recontribution is made not later than 60 days after the date of such refund and does not exceed the refunded amount. (E) Special rollover to roth iras from long- term qualified tuition programs (i) In general In the case of a distribution from a qualified tuition program of a designated beneficiary which has been maintained for the 15-year period ending on the date of such distribution, subparagraph (A) shall not apply to so much the portion of such distribution which— (I) does not exceed the aggregate amount contributed to the program (and earnings attributable thereto) before the 5-year period ending on the date of the distribution, and (II) is paid in a direct trustee-to-trust- ee transfer to a Roth IRA maintained for the benefit of such designated bene- ficiary. (ii) Limitations (I) Annual limitation Clause (i) shall only apply to so much of any distribution as does not exceed the amount applicable to the designated bene- ficiary under section 408A(c)(2) for the tax- able year (reduced by the amount of aggre- gate contributions made during the tax- able year to all individual retirement plans maintained for the benefit of the designated beneficiary). (II) Aggregate limitation This subparagraph shall not apply to any distribution described in clause (i) to the extent that the aggregate amount of such distributions with respect to the des- ignated beneficiary for such taxable year and all prior taxable years exceeds $35,000. (4) Estate tax treatment (A) In general No amount shall be includible in the gross estate of any individual for purposes of chap- ter 11 by reason of an interest in a qualified tuition program. (B) Amounts includible in estate of des- ignated beneficiary in certain cases Subparagraph (A) shall not apply to amounts distributed on account of the death of a beneficiary. (C) Amounts includible in estate of donor making excess contributions In the case of a donor who makes the elec- tion described in paragraph (2)(B) and who dies before the close of the 5-year period re- ferred to in such paragraph, notwithstanding subparagraph (A), the gross estate of the donor shall include the portion of such con- tributions properly allocable to periods after the date of death of the donor. (5) Other gift tax rules For purposes of chapters 12 and 13— (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. (B) Treatment of designation of new bene- ficiary 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 bene- ficiary is— (i) assigned to the same generation as (or a higher generation than) the old bene- ficiary (determined in accordance with section 2651), and (ii) a member of the family of the old beneficiary. (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 distribu- tion from a Coverdell education savings ac- count. This paragraph shall not apply to any payment or distribution in any taxable year beginning before January 1, 2004, which is in- cludible in gross income but used for qualified higher education expenses of the designated beneficiary. (7) Treatment of elementary and secondary tui- tion Any reference in this subsection to the term ‘‘qualified higher education expense’’ shall in- clude a reference to expenses for tuition in Page 1735 TITLE 26—INTERNAL REVENUE CODE § 529 connection with enrollment or attendance at an elementary or secondary public, private, or religious school. (8) Treatment of certain expenses associated with registered apprenticeship programs Any reference in this subsection to the term ‘‘qualified higher education expense’’ shall in- clude a reference to expenses for fees, books, supplies, and equipment required for the par- ticipation of a designated beneficiary in an ap- prenticeship program registered and certified with the Secretary of Labor under section 1 of the National Apprenticeship Act (29 U.S.C. 50). (9) Treatment of qualified education loan re- payments (A) In general Any reference in this subsection to the term ‘‘qualified higher education expense’’ shall include a reference to amounts paid as principal or interest on any qualified edu- cation loan (as defined in section 221(d)) of the designated beneficiary or a sibling of the designated beneficiary. (B) Limitation The amount of distributions treated as a qualified higher education expense under this paragraph with respect to the loans of any individual shall not exceed $10,000 (re- duced by the amount of distributions so treated for all prior taxable years). (C) Special rules for siblings of the des- ignated beneficiary (i) Separate accounting For purposes of subparagraph (B) and subsection (d), amounts treated as a quali- fied higher education expense with respect to the loans of a sibling of the designated beneficiary shall be taken into account with respect to such sibling and not with respect to such designated beneficiary. (ii) Sibling defined For purposes of this paragraph, the term ‘‘sibling’’ means an individual who bears a relationship to the designated beneficiary which is described in section 152(d)(2)(B). (d) Reports (1) In general Each officer or employee having control of the qualified tuition program or their designee shall make such reports regarding such pro- gram to the Secretary and to designated bene- ficiaries with respect to contributions, dis- tributions, and such other matters as the Sec- retary may require. The reports required by this paragraph shall be filed at such time and in such manner and furnished to such individ- uals at such time and in such manner as may be required by the Secretary. (2) Rollover distributions In the case of any distribution described in subsection (c)(3)(E), the officer or employee having control of the qualified tuition pro- gram (or their designee) shall provide a report to the trustee of the Roth IRA to which the distribution is made. Such report shall be filed at such time and in such manner as the Sec- retary may require and shall include informa- tion with respect to the contributions, dis- tributions, and earnings of the qualified tui- tion program as of the date of the distribution described in subsection (c)(3)(A), together with such other matters as the Secretary may re- quire. (e) Other definitions and special rules For purposes of this section— (1) Designated beneficiary The term ‘‘designated beneficiary’’ means— (A) the individual designated at the com- mencement of participation in the qualified tuition program as the beneficiary of amounts paid (or to be paid) to the program, (B) in the case of a change in beneficiaries described in subsection (c)(3)(C), the indi- vidual who is the new beneficiary, and (C) in the case of an interest in a qualified tuition program purchased by a State or local government (or agency or instrumen- tality 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 or- ganization, the individual receiving such in- terest as a scholarship. (2) Member of family The term ‘‘member of the family’’ means, with respect to any designated beneficiary— (A) the spouse of such beneficiary; (B) an individual who bears a relationship to such beneficiary which is described in subparagraphs (A) through (G) of section 152(d)(2); (C) the spouse of any individual described in subparagraph (B); and (D) any first cousin of such beneficiary. (3) Qualified higher education expenses (A) In general The term ‘‘qualified higher education ex- penses’’ means— (i) tuition, fees, books, supplies, and equipment required for the enrollment or attendance of a designated beneficiary at an eligible educational institution, (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 (iii) expenses for the purchase of com- puter or peripheral equipment (as defined in section 168(i)(2)(B)), computer software (as defined in section 197(e)(3)(B)), or Inter- net 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 pre- dominantly educational in nature. The amount of cash distributions from all quali- fied tuition programs described in sub- section (b)(1)(A)(ii) with respect to a bene- ficiary during any taxable year shall, in the Page 1736 TITLE 26—INTERNAL REVENUE CODE § 529 aggregate, include not more than $10,000 in expenses described in subsection (c)(7) in- curred during the taxable year. (B) Room and board included for students who are at least half-time (i) In general In the case of an individual who is an eli- gible 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 pur- poses of subsection (b)(6), a designated beneficiary shall be treated as meeting the requirements of this clause. (ii) Limitation The amount treated as qualified higher education expenses by reason of clause (i) shall not exceed— (I) the allowance (applicable to the student) for room and board included in the cost of attendance (as defined in sec- tion 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 (II) if greater, the actual invoice amount the student residing in housing owned or operated by the eligible edu- cational institution is charged by such institution for room and board costs for such period. (4) Application of section 514 An interest in a qualified tuition program shall not be treated as debt for purposes of section 514. (5) Eligible educational institution The term ‘‘eligible educational institution’’ means an institution— (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 (B) which is eligible to participate in a program under title IV of such Act. (f) Regulations Notwithstanding any other provision of this section, the Secretary shall prescribe such regu- lations as may be necessary or appropriate to carry out the purposes of this section and to pre- vent abuse of such purposes, including regula- tions under chapters 11, 12, and 13 of this title. (Added Pub. L. 104–188, title I, § 1806(a), Aug. 20, 1996, 110 Stat. 1895; amended Pub. L. 105–34, title II, § 211(a), (b), (d), (e)(2)(A), title XVI, § 1601(h)(1)(A), (B), Aug. 5, 1997, 111 Stat. 810, 812, 1092; Pub. L. 105–206, title VI, § 6004(c)(2), (3), July 22, 1998, 112 Stat. 793; Pub. L. 106–554, § 1(a)(7) [title III, § 319(5)], Dec. 21, 2000, 114 Stat. 2763, 2763A–646; Pub. L. 107–16, title IV, § 402(a)(1)–(3), (4)(A), (C), (D), (b)(1), (c)–(g), June 7, 2001, 115 Stat. 60–63; Pub. L. 107–22, § 1(b)(3)(C), July 26, 2001, 115 Stat. 197; Pub. L. 107–147, title IV, § 417(11), Mar. 9, 2002, 116 Stat. 56; Pub. L. 108–311, title II, § 207(21), title IV, § 406(a), Oct. 4, 2004, 118 Stat. 1178, 1189; Pub. L. 109–135, title IV, § 412(ee)(3), Dec. 21, 2005, 119 Stat. 2639; Pub. L. 109–280, title XIII, § 1304(b), Aug. 17, 2006, 120 Stat. 1110; Pub. L. 111–5, div. B, title I, § 1005(a), Feb. 17, 2009, 123 Stat. 316; Pub. L. 113–295, div. B, title I, § 105(a), Dec. 19, 2014, 128 Stat. 4064; Pub. L. 114–113, div. Q, title III, § 302(a)(1), (b)(1), (c)(1), Dec. 18, 2015, 129 Stat. 3086; Pub. L. 115–97, title I, §§ 11025(a), 11032(a), Dec. 22, 2017, 131 Stat. 2076, 2081; Pub. L. 115–141, div. U, title I, § 101(l)(15), title IV, § 401(a)(127), (128), Mar. 23, 2018, 132 Stat. 1165, 1190; Pub. L. 116–94, div. O, title III, § 302(a), (b)(1), Dec. 20, 2019, 133 Stat. 3175; Pub. L. 117–328, div. T, title I, § 126(a), (c), Dec. 29, 2022, 136 Stat. 5316, 5317.) Editorial Notes REFERENCES IN TEXT The date of the enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001, referred to in subsec. (e)(3)(B)(ii)(I), is the date of enactment of Pub. L. 107–16, which was approved June 7, 2001. The date of the enactment of this paragraph, referred to in subsec. (e)(5)(A), probably means the date of en- actment of Pub. L. 105–34, which enacted subsec. (e)(5) and which was approved Aug. 5, 1997. The Higher Education Act of 1965, referred to in sub- sec. (e)(5), is Pub. L. 89–329, Nov. 8, 1965, 79 Stat. 1219. Title IV of the Act is classified generally to subchapter IV (§ 1070 et seq.) of chapter 28 of Title 20, Education. For complete classification of this Act to the Code, see Short Title note set out under section 1001 of Title 20 and Tables. AMENDMENTS 2022—Subsec. (c)(3)(E). Pub. L. 117–328, § 126(a), added subpar. (E). Subsec. (d). Pub. L. 117–328, § 126(c), designated exist- ing provisions as par. (1), inserted heading, substituted ‘‘by this paragraph’’ for ‘‘by this subsection’’, and added par. (2). 2019—Subsec. (c)(8). Pub. L. 116–94, § 302(a), added par. (8). Subsec. (c)(9). Pub. L. 116–94, § 302(b)(1), added par. (9). 2018—Subsec. (c)(3)(B)(v). Pub. L. 115–141, § 101(l)(15), substituted ‘‘American Opportunity’’ for ‘‘Hope’’ in heading. Subsec. (c)(6). Pub. L. 115–141, § 401(a)(127), substituted ‘‘a Coverdell’’ for ‘‘an Coverdell’’. Subsec. (e)(3)(A). Pub. L. 115–141, § 401(a)(128), sub- stituted comma for semicolon at end of cl. (i) and in- serted ‘‘, and’’ at end of cl. (ii). 2017—Subsec. (c)(3)(C)(i). Pub. L. 115–97, § 11025(a), added subcl. (III) and inserted concluding provisions. Subsec. (c)(7). Pub. L. 115–97, § 11032(a)(1), added par. (7). Subsec. (e)(3)(A). Pub. L. 115–97, § 11032(a)(2), inserted at end of concluding provisions ‘‘The amount of cash distributions from all qualified tuition programs de- scribed in subsection (b)(1)(A)(ii) with respect to a ben- eficiary during any taxable year shall, in the aggre- gate, include not more than $10,000 in expenses de- scribed in subsection (c)(7) incurred during the taxable year.’’ 2015—Subsec. (c)(3)(D). Pub. L. 114–113, § 302(c)(1), added subpar. (D). Pub. L. 114–113, § 302(b)(1), struck out subpar. (D). Text read as follows: ‘‘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 pro- gram, Page 1737 TITLE 26—INTERNAL REVENUE CODE § 529 ‘‘(ii) except to the extent provided by the Sec- retary, all distributions during a taxable year shall be treated as one distribution, and ‘‘(iii) except to the extent provided by the Sec- retary, the value of the contract, income on the con- tract, and investment in the contract shall be com- puted as of the close of the calendar year in which the taxable year begins.’’ Subsec. (e)(3)(A)(iii). Pub. L. 114–113, § 302(a)(1), amended cl. (iii) generally. Prior to amendment, cl. (iii) read as follows: ‘‘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 Inter- net 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 insti- tution.’’ 2014—Subsec. (b)(4). Pub. L. 113–295 substituted ‘‘Lim- ited’’ for ‘‘No’’ in heading and ‘‘may, directly or indi- rectly, 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).’’ in text. 2009—Subsec. (e)(3)(A). Pub. L. 111–5 added cl. (iii) and concluding provisions. 2006—Subsec. (f). Pub. L. 109–280, which directed the addition of subsec. (f) to section 529, without specifying the act to be amended, was executed by making the ad- dition to this section, which is section 529 of the Inter- nal Revenue Code of 1986, to reflect the probable intent of Congress. 2005—Subsec. (c)(6). Pub. L. 109–135 substituted ‘‘Coverdell education savings account’’ for ‘‘education individual retirement account’’. 2004—Subsec. (c)(5)(B). Pub. L. 108–311, § 406(a), reen- acted heading without change and amended text gen- erally. Prior to amendment, text read as follows: ‘‘The taxes imposed by chapters 12 and 13 shall apply to a transfer by reason of a change in the designated bene- ficiary 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, § 207(21), substituted ‘‘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 substituted ‘‘subsection (b)(6)’’ for ‘‘subsection (b)(7)’’. 2001—Pub. L. 107–16, § 402(a)(4)(D), struck out ‘‘State’’ before ‘‘tuition’’ in section catchline. Subsec. (a). Pub. L. 107–16, § 402(a)(4)(A), substituted ‘‘qualified tuition’’ for ‘‘qualified State tuition’’. Subsec. (b). Pub. L. 107–16, § 402(a)(4)(C), substituted ‘‘Qualified tuition’’ for ‘‘Qualified State tuition’’ in heading. Subsec. (b)(1). Pub. L. 107–16, § 402(a)(1), (4)(A), in in- troductory provisions, substituted ‘‘qualified tuition’’ for ‘‘qualified State tuition’’ and inserted ‘‘or by 1 or more eligible educational institutions’’ after ‘‘thereof’’, and added concluding provisions. Subsec. (b)(1)(A)(ii). Pub. L. 107–16, § 402(a)(2), inserted ‘‘in the case of a program established and maintained by a State or agency or instrumentality thereof,’’ be- fore ‘‘may make’’. Subsec. (b)(2). Pub. L. 107–16, § 402(a)(4)(A), sub- stituted ‘‘qualified tuition’’ for ‘‘qualified State tui- tion’’. Subsec. (b)(3) to (7). Pub. L. 107–16, § 402(a)(3)(A), (4)(A), redesignated pars. (4) to (7) as (3) to (6), respec- tively, substituted ‘‘qualified tuition’’ for ‘‘qualified State tuition’’ wherever appearing, and struck out heading and text of former par. (3). Text read as fol- lows: ‘‘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 ac- count 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)) re- ceived by the designated beneficiary to the extent the amount of the refund does not exceed the amount of the scholarship, allowance, or payment.’’ Subsec. (c)(1)(A), (3)(A). Pub. L. 107–16, § 402(a)(4)(A), substituted ‘‘qualified tuition’’ for ‘‘qualified State tui- tion’’. Subsec. (c)(3)(B). Pub. L. 107–16, § 402(b)(1), amended heading and text of subpar. (B) generally. Prior to amendment, text read as follows: ‘‘Any benefit fur- nished to a designated beneficiary under a qualified tuition program shall be treated as a distribution to the beneficiary.’’ Pub. L. 107–16, § 402(a)(4)(A), substituted ‘‘qualified tuition’’ for ‘‘qualified State tuition’’. Subsec. (c)(3)(B)(vi). Pub. L. 107–22 substituted ‘‘Coverdell education savings’’ for ‘‘education indi- vidual retirement’’ in heading. Subsec. (c)(3)(C). Pub. L. 107–16, § 402(c)(3), inserted ‘‘or programs’’ after ‘‘beneficiaries’’ in heading. Subsec. (c)(3)(C)(i). Pub. L. 107–16, § 402(c)(1), sub- stituted ‘‘transferred—’’ for ‘‘transferred’’, added subcl. (I), and designated existing provisions ‘‘to the credit’’ as subcl. (II). Pub. L. 107–16, § 402(a)(4)(A), substituted ‘‘qualified tuition’’ for ‘‘qualified State tuition’’. Subsec. (c)(3)(C)(ii). Pub. L. 107–16, § 402(a)(4)(A), sub- stituted ‘‘qualified tuition’’ for ‘‘qualified State tui- tion’’. Subsec. (c)(3)(C)(iii). Pub. L. 107–16, § 402(c)(2), added cl. (iii). Subsec. (c)(3)(D)(i). Pub. L. 107–16, § 402(a)(4)(A), sub- stituted ‘‘qualified tuition’’ for ‘‘qualified State tui- tion’’. Subsec. (c)(3)(D)(ii). Pub. L. 107–16, § 402(g)(1), inserted ‘‘except to the extent provided by the Secretary,’’ be- fore ‘‘all distributions’’. Subsec. (c)(3)(D)(iii). Pub. L. 107–16, § 402(g)(2), in- serted ‘‘except to the extent provided by the Sec- retary,’’ before ‘‘the value’’. Subsec. (c)(6). Pub. L. 107–16, § 402(a)(3)(B), added par. (6). Subsecs. (d), (e)(1)(A), (C). Pub. L. 107–16, § 402(a)(4)(A), substituted ‘‘qualified tuition’’ for ‘‘qualified State tui- tion’’. Subsec. (e)(2)(D). Pub. L. 107–16, § 402(d), added subpar. (D). Subsec. (e)(3)(A). Pub. L. 107–16, § 402(f), reenacted heading without change and amended text of subpar. (A) generally. Prior to amendment, text read as fol- lows: ‘‘The term ‘qualified higher education expenses’ means tuition, fees, books, supplies, and equipment re- quired for the enrollment or attendance of a designated beneficiary at an eligible educational institution.’’ Subsec. (e)(3)(B)(i). Pub. L. 107–16, § 402(a)(4)(A), sub- stituted ‘‘qualified tuition’’ for ‘‘qualified State tui- tion’’. Subsec. (e)(3)(B)(ii). Pub. L. 107–16, § 402(e), reenacted heading without change and amended text of cl. (ii) generally. Prior to amendment, text read as follows: ‘‘The amount treated as qualified higher education ex- penses by reason of the preceding sentence shall not ex- ceed 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 eli- gible educational institution for such period.’’ Subsec. (e)(4). Pub. L. 107–16, § 402(a)(4)(A), substituted ‘‘qualified tuition’’ for ‘‘qualified State tuition’’. 2000—Subsec. (e)(3)(B). Pub. L. 106–554 struck out ‘‘under guaranteed plans’’ after ‘‘students’’ in heading. 1998—Subsec. (c)(3)(A). Pub. L. 105–206, § 6004(c)(2), substituted ‘‘section 72’’ for ‘‘section 72(b)’’. Subsec. (e)(2). Pub. L. 105–206, § 6004(c)(3), reenacted heading without change and amended text of par. (2) generally. Prior to amendment, text read as follows: ‘‘The term ‘member of the family’ means— Page 1738 TITLE 26—INTERNAL REVENUE CODE § 529 ‘‘(A) an individual who bears a relationship to an- other individual which is a relationship described in paragraphs (1) through (8) of section 152(a), and ‘‘(B) the spouse of any individual described in sub- paragraph (A).’’ 1997—Subsec. (b)(5). Pub. L. 105–34, § 211(b)(4), inserted ‘‘directly or indirectly’’ after ‘‘may not’’. Subsec. (c)(2). Pub. L. 105–34, § 211(b)(3)(A)(i), amended heading and text of par. (2) generally. Prior to amend- ment, text read as follows: ‘‘In no event shall a con- tribution 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, § 211(d), substituted ‘‘section 72(b)’’ for ‘‘section 72’’. Subsec. (c)(4). Pub. L. 105–34, § 211(b)(3)(B), amended heading and text of par. (4) generally. Prior to amend- ment, text read as follows: ‘‘The value of any interest in any qualified State tuition program which is attrib- utable 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, § 211(b)(3)(A)(ii), amend- ed heading and text of par. (5) generally. Prior to amendment, text read as follows: ‘‘For purposes of sec- tion 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, § 211(e)(2)(A), amended sub- sec. (d) generally. Prior to amendment, subsec. (d) 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 des- ignated 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 mat- ter 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, § 1601(h)(1)(A), sub- stituted ‘‘subsection (c)(3)(C)’’ for ‘‘subsection (c)(2)(C)’’. Subsec. (e)(1)(C). Pub. L. 105–34, § 1601(h)(1)(B), in- serted ‘‘(or agency or instrumentality thereof)’’ after ‘‘local government’’. Subsec. (e)(2). Pub. L. 105–34, § 211(b)(1), amended heading and text of par. (2) generally. Prior to amend- ment, text read as follows: ‘‘The term ‘member of the family’ has the same meaning given such term as sec- tion 2032A(e)(2).’’ Subsec. (e)(3). Pub. L. 105–34, § 211(a), amended head- ing and text of par. (3) generally. Prior to amendment, text read as follows: ‘‘The term ‘qualified higher edu- cation expenses’ means tuition, fees, books, supplies, and equipment required for the enrollment or attend- ance of a designated beneficiary at an eligible edu- cational institution (as defined in section 135(c)(3)).’’ Subsec. (e)(5). Pub. L. 105–34, § 211(b)(2), added par. (5). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2022 AMENDMENT Amendment by Pub. L. 117–328 applicable with re- spect to distributions after Dec. 31, 2023, see section 126(d) of Pub. L. 117–328, set out as a note under section 408A of this title. EFFECTIVE DATE OF 2019 AMENDMENT Amendment by Pub. L. 116–94 applicable to distribu- tions made after Dec. 31, 2018, see section 302(c) of Pub. L. 116–94, set out as a note under section 221 of this title. EFFECTIVE DATE OF 2018 AMENDMENT Amendment by section 101(l)(15) of Pub. L. 115–141 ef- fective as if included in the provision of the Protecting Americans from Tax Hikes Act of 2015, div. Q of Pub. L. 114–113, to which such amendment relates, see section 101(s) of Pub. L. 115–141, set out as a note under section 24 of this title. EFFECTIVE DATE OF 2017 AMENDMENT Pub. L. 115–97, title I, § 11025(b), Dec. 22, 2017, 131 Stat. 2076, provided that: ‘‘The amendments made by this section [amending this section] shall apply to distribu- tions after the date of the enactment of this Act [Dec. 22, 2017].’’ Pub. L. 115–97, title I, § 11032(b), Dec. 22, 2017, 131 Stat. 2082, provided that: ‘‘The amendments made by this section [amending this section] shall apply to distribu- tions made after December 31, 2017.’’ EFFECTIVE DATE OF 2015 AMENDMENT Pub. L. 114–113, div. Q, title III, § 302(a)(2), Dec. 18, 2015, 129 Stat. 3086, provided that: ‘‘The amendment made by this subsection [amending this section] shall apply to taxable years beginning after December 31, 2014.’’ Pub. L. 114–113, div. Q, title III, § 302(b)(2), Dec. 18, 2015, 129 Stat. 3086, provided that: ‘‘The amendment made by this subsection [amending this section] shall apply to distributions after December 31, 2014.’’ Pub. L. 114–113, div. Q, title III, § 302(c)(2), Dec. 18, 2015, 129 Stat. 3087, provided that: ‘‘(A) IN GENERAL.—The amendment made by this sub- section [amending this section] shall apply with re- spect to refunds of qualified higher education expenses after December 31, 2014. ‘‘(B) TRANSITION RULE.—In the case of a refund of qualified higher education expenses received after De- cember 31, 2014, and before the date of the enactment of this Act [Dec. 18, 2015], section 529(c)(3)(D) of the Inter- nal 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 [Dec. 18, 2015]’ for ‘not later than 60 days after the date of such refund’.’’ EFFECTIVE DATE OF 2014 AMENDMENT Pub. L. 113–295, div. B, title I, § 105(b), Dec. 19, 2014, 128 Stat. 4064, provided that: ‘‘The amendments made by this section [amending this section] shall apply to tax- able years beginning after December 31, 2014.’’ EFFECTIVE DATE OF 2009 AMENDMENT Pub. L. 111–5, div. B, title I, § 1005(b), Feb. 17, 2009, 123 Stat. 316, provided that: ‘‘The amendments made by this section [amending this section] shall apply to ex- penses paid or incurred after December 31, 2008.’’ EFFECTIVE DATE OF 2004 AMENDMENT Amendment by section 207(21) of Pub. L. 108–311 appli- cable to taxable years beginning after Dec. 31, 2004, see section 208 of Pub. L. 108–311, set out as a note under section 2 of this title. Amendment by section 406(a) of Pub. L. 108–311 effec- tive as if included in the provisions of the Taxpayer Re- lief Act of 1997, Pub. L. 105–34, to which such amend- ment relates, see section 406(h) of Pub. L. 108–311, set out as a note under section 55 of this title. EFFECTIVE DATE OF 2001 AMENDMENTS Amendment by Pub. L. 107–22 effective July 26, 2001, see section 1(c) of Pub. L. 107–22, set out as a note under section 26 of this title. Amendment by Pub. L. 107–16 applicable to taxable years beginning after Dec. 31, 2001, see section 402(h) of Pub. L. 107–16, set out as a note under section 72 of this title. Page 1739 TITLE 26—INTERNAL REVENUE CODE § 529A EFFECTIVE DATE OF 1998 AMENDMENT Amendment by Pub. L. 105–206 effective, except as otherwise provided, as if included in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates, see section 6024 of Pub. L. 105–206, set out as a note under section 1 of this title. EFFECTIVE DATE OF 1997 AMENDMENT Pub. L. 105–34, title II, § 211(f), Aug. 5, 1997, 111 Stat. 812, provided that: ‘‘(1) IN GENERAL.—Except as otherwise provided in this subsection, the amendments made by this section [amending this section and sections 135 and 6693 of this title] shall take effect on January 1, 1998. ‘‘(2) EXPENSES TO INCLUDE ROOM AND BOARD.—The amendment made by subsection (a) shall take effect as if included in the amendments made by section 1806 of the Small Business Job Protection Act of 1996 [Pub. L. 104–188]. ‘‘(3) ELIGIBLE EDUCATIONAL INSTITUTION.—The amend- ment made by subsection (b)(2) [amending this section] shall apply to distributions after December 31, 1997, with respect to expenses paid after such date (in tax- able years ending after such date), for education fur- nished in academic periods beginning after such date. ‘‘(4) COORDINATION WITH EDUCATION SAVINGS BONDS.— The amendment made by subsection (c) [amending sec- tion 135 of this title] shall apply to taxable years begin- ning 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 (in- cluding designations of new beneficiaries) made after the date of the enactment of this Act [Aug. 5, 1997]. ‘‘(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 CON- TRACTS.—In the case of any contract issued prior to Au- gust 20, 1996, section 529(c)(3)(C) of the Internal Rev- enue Code of 1986 shall be applied for taxable years end- ing after August 20, 1996, without regard to the require- ment that a distribution be transferred to a member of the family or the requirement that a change in bene- ficiaries may be made only to a member of the family.’’ Amendment by section 1601(h)(1)(A), (B) of Pub. L. 105–34 effective as if included in the provisions of the Small Business Job Protection Act of 1996, Pub. L. 104–188, to which it relates, see section 1601(j) of Pub. L. 105–34, set out as a note under section 23 of this title. EFFECTIVE DATE Pub. L. 104–188, title I, § 1806(c), Aug. 20, 1996, 110 Stat. 1898, as amended by Pub. L. 105–34, title XVI, § 1601(h)(1)(C), Aug. 5, 1997, 111 Stat. 1092, provided that: ‘‘(1) IN GENERAL.—The amendments made by this sec- tion [enacting this section and amending section 135 of this title] shall apply to taxable years ending after the date of the enactment of this Act [Aug. 20, 1996]. ‘‘(2) TRANSITION RULE.—If— ‘‘(A) a State or agency or instrumentality thereof maintains, on the date of the enactment of this Act, a program under which persons may purchase tuition credits or certificates on behalf of, or make contribu- tions for education expenses of, a designated bene- ficiary, 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 en- actment, 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 en- actment, 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 pro- gram 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 re- spect 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.’’ § 529A. Qualified ABLE programs (a) General rule A qualified ABLE program shall be exempt from taxation under this subtitle. Notwith- standing 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). (b) Qualified ABLE program For purposes of this section— (1) In general The term ‘‘qualified ABLE program’’ means a program established and maintained by a State, or agency or instrumentality thereof— (A) under which a person may make con- tributions for a taxable year, for the benefit of an individual who is an eligible individual for such taxable year, to an ABLE account which is established for the purpose of meet- ing the qualified disability expenses of the designated beneficiary of the account, (B) which limits a designated beneficiary to 1 ABLE account for purposes of this sec- tion, and (C) which meets the other requirements of this section. (2) Cash contributions A program shall not be treated as a qualified ABLE program unless it provides that no con- tribution will be accepted— (A) unless it is in cash, or (B) except in the case of contributions under subsection (c)(1)(C), if such contribu- tion to an ABLE account would result in ag- gregate contributions from all contributors to the ABLE account for the taxable year exceeding the sum of— (i) the amount in effect under section 2503(b) for the calendar year in which the taxable year begins, plus (ii) in the case of any contribution by a designated beneficiary described in para- graph (7) before January 1, 2026, the lesser of— (I) compensation (as defined by section 219(f)(1)) includible in the designated beneficiary’s gross income for the tax- able year, or (II) an amount equal to the poverty line for a one-person household, as deter- mined for the calendar year preceding the calendar year in which the taxable year begins. For purposes of this paragraph, rules similar to the rules of section 408(d)(4) (determined without regard to subparagraph (B) thereof) shall apply. A designated beneficiary (or a per- son acting on behalf of such beneficiary) shall