LEGISLATIVE SERVICES AGENCY
OFFICE OF FISCAL AND MANAGEMENT ANALYSIS
FISCAL IMPACT STATEMENT
LS 6972 NOTE PREPARED: Jan 2, 2025
BILL NUMBER: HB 1150 BILL AMENDED:
SUBJECT: 529 College Savings Distributions.
FIRST AUTHOR: Rep. Prescott BILL STATUS: As Introduced
FIRST SPONSOR:
FUNDS AFFECTED:XGENERAL IMPACT: State
DEDICATED
FEDERAL
Summary of Legislation: The bill excludes from Indiana adjusted gross income distributions made from
a 529 College Choice Education Savings Plan that are not used to pay qualified higher education expenses
but that satisfy each of the requirements under Section 126 of the SECURE 2.0 Act of 2022. The bill
provides that such distributions are not subject to the: (1) penalty provisions established by the board of
directors of the Indiana Education Savings Authority; or (2) repayment provisions for the income tax credit
for contributions to an individual's 529 account.
Effective Date: January 1, 2025 (retroactive).
Explanation of State Expenditures: Department of State Revenue (DOR): The DOR will incur additional
expenses to revise tax forms, instructions, and computer programs to reflect the changes made by the bill.
The DOR’s current level of resources should be sufficient to implement these changes.
Explanation of State Revenues: Under the bill, the state would receive less state General Fund revenue
beginning in FY 2026 from recapture of the Indiana 529 Education Saving Plan Tax Credits for taxpayers
who rollover money from their 529 accounts to a Roth IRA as allowed under the federal SECURE 2.0 Act
of 2022. Under current Indiana law, a rollover distribution to a Roth IRA is not a qualified distribution and
would be subject to credit recapture. Under the bill, such a rollover would not be subject to the credit
recapture beginning in tax year 2025. It is unknown how many taxpayers will rollover money into their Roth
IRA from their 529 account.
Credit recaptures for non-qualified distributions equal the lesser of 20% of the total amount of non-qualified
withdrawals made during the taxable year from the account or the excess of the cumulative amount of all
credits claimed on the taxpayer’s contributions to the account since 2007 minus the cumulative amount of
tax credits repaid by the account owner for all prior taxable years since 2008.
Additional Information - Beginning in 2024, Section 126 of the SECURE 2.0 Act of 2022 allows
beneficiaries of 529 accounts to rollover up to $35,000 (lifetime limit) from their 529 account to a Roth IRA
without paying federal taxes or penalties. Rollovers are subject to Roth IRA contribution limits, the 529
HB 1150 1 account must have been open for more than 15 years, and the rollover amount must have been the in the
account for five years. Under current Indiana law, such rollovers to a Roth IRA in tax year 2024 or
afterwards would not be subject to state income tax; however, they would be subject to credit recapture.
Explanation of Local Expenditures:
Explanation of Local Revenues:
State Agencies Affected: Department of State Revenue; Indiana Education Savings Authority.
Local Agencies Affected:
Information Sources: Section 126 of the SECURE 2.0 Act of 2022 [P.L. 117-328].
https://www.congress.gov/117/plaws/publ328/PLAW-117publ328.pdf; Indiana Department of Revenue.
(2024, August). Income Tax Information Bulletin #98. Indiana 529 Education Savings Plan Credit.
https://www.in.gov/dor/files/ib98.pdf
Fiscal Analyst: Camille Tesch, 317-232-5293.
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