Indiana 2025 Regular Session

Indiana House Bill HB1150 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1
2	2	Introduced Version
3	3	HOUSE BILL No. 1150
4	4	_____
5	5	DIGEST OF INTRODUCED BILL
6	6	Citations Affected: IC 6-3; IC 21-9.
7	7	Synopsis: 529 college savings distributions. Excludes from Indiana
8	8	adjusted gross income distributions made from a 529 college choice
9	9	education savings plan (529 account) that are not used to pay qualified
10	10	higher education expenses but that satisfy each of the requirements
11	11	under Section 126 of the SECURE 2.0 Act of 2022. Provides that such
12	12	distributions are not subject to the: (1) penalty provisions established
13	13	by the board of directors of the Indiana education savings authority; or
14	14	(2) repayment provisions for the income tax credit for contributions to
15	15	an individual's 529 account.
16	16	Effective: January 1, 2025 (retroactive).
17	17	Prescott, Manning, DeLaney,
18	18	Rowray
19	19	January 8, 2025, read first time and referred to Committee on Ways and Means.
20	20	2025 IN 1150—LS 6972/DI 129 Introduced
21	21	First Regular Session of the 124th General Assembly (2025)
22	22	PRINTING CODE. Amendments: Whenever an existing statute (or a section of the Indiana
23	23	Constitution) is being amended, the text of the existing provision will appear in this style type,
24	24	additions will appear in this style type, and deletions will appear in this style type.
25	25	Additions: Whenever a new statutory provision is being enacted (or a new constitutional
26	26	provision adopted), the text of the new provision will appear in this style type. Also, the
27	27	word NEW will appear in that style type in the introductory clause of each SECTION that adds
28	28	a new provision to the Indiana Code or the Indiana Constitution.
29	29	Conflict reconciliation: Text in a statute in this style type or this style type reconciles conflicts
30	30	between statutes enacted by the 2024 Regular Session of the General Assembly.
31	31	HOUSE BILL No. 1150
32	32	A BILL FOR AN ACT to amend the Indiana Code concerning
33	33	taxation.
34	34	Be it enacted by the General Assembly of the State of Indiana:
35	35	1 SECTION 1. IC 6-3-2-19 IS AMENDED TO READ AS FOLLOWS
36	36	2 [EFFECTIVE JANUARY 1, 2025 (RETROACTIVE)]: Sec. 19. (a) As
37	37	3 used in this section, "account beneficiary" has the meaning set forth in
38	38	4 IC 21-9-2-3.
39	39	5 (b) As used in this section, "account owner" has the meaning set
40	40	6 forth in IC 21-9-2-4.
41	41	7 (c) As used in this section, "individual account" has the meaning set
42	42	8 forth in IC 21-9-2-2.
43	43	9 (d) As used in this section, "qualified higher education expenses"
44	44	10 has the meaning set forth in IC 21-9-2-19.5.
45	45	11 (e) Distributions from an individual account used to pay qualified
46	46	12 higher education expenses are exempt from the adjusted gross income
47	47	13 tax imposed by IC 6-3-1 through IC 6-3-7 as income of an account
48	48	14 beneficiary or an account owner.
49	49	15 (f) This subsection applies only to a distribution from an
50	50	16 individual account not used to pay qualified higher education
51	51	17 expenses but that satisfies each of the requirements under Section
52	52	2025 IN 1150—LS 6972/DI 129 2
53	53	1 126 of the SECURE 2.0 Act of 2022 (P.L. 117-328 (136 Stat. 5316)).
54	54	2 A distribution to which this subsection applies is exempt from the
55	55	3 adjusted gross income tax imposed by IC 6-3-1 through IC 6-3-7 as
56	56	4 income of an account owner or account beneficiary.
57	57	5 SECTION 2. IC 6-3-3-12, AS AMENDED BY P.L.236-2023,
58	58	6 SECTION 65, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
59	59	7 JANUARY 1, 2025 (RETROACTIVE)]: Sec. 12. (a) As used in this
60	60	8 section, "account" has the meaning set forth in IC 21-9-2-2.
61	61	9 (b) As used in this section, "account beneficiary" has the meaning
62	62	10 set forth in IC 21-9-2-3.
63	63	11 (c) As used in this section, "account owner" has the meaning set
64	64	12 forth in IC 21-9-2-4.
65	65	13 (d) As used in this section, "college choice 529 education savings
66	66	14 plan" refers to a college choice 529 plan established under IC 21-9.
67	67	15 (e) As used in this section, "contribution" means the amount of
68	68	16 money directly provided to a college choice 529 education savings plan
69	69	17 account by a taxpayer. A contribution does not include any of the
70	70	18 following:
71	71	19 (1) Money credited to an account as a result of bonus points or
72	72	20 other forms of consideration earned by the taxpayer that result in
73	73	21 a transfer of money to the account.
74	74	22 (2) Money transferred from any other qualified tuition program
75	75	23 under Section 529 of the Internal Revenue Code or from any other
76	76	24 similar plan.
77	77	25 (3) Money transferred from any qualified ABLE program under
78	78	26 Section 529A of the Internal Revenue Code or any other similar
79	79	27 plan.
80	80	28 (f) As used in this section, "nonqualified withdrawal" means a
81	81	29 withdrawal or distribution from a college choice 529 education savings
82	82	30 plan that is not a qualified withdrawal, except that the term does not
83	83	31 include a withdrawal or distribution that satisfies each of the
84	84	32 requirements under Section 126 of the SECURE 2.0 Act of 2022
85	85	33 (P.L. 117-328 (136 Stat. 5316)).
86	86	34 (g) As used in this section, "qualified higher education expenses"
87	87	35 has the meaning set forth in IC 21-9-2-19.5, except that the term does
88	88	36 not include qualified education loan repayments under Section
89	89	37 529(c)(9) of the Internal Revenue Code.
90	90	38 (h) As used in this section, "qualified K-12 education expenses"
91	91	39 means expenses that are for tuition in connection with enrollment or
92	92	40 attendance at an elementary or secondary public, private, or religious
93	93	41 school located in Indiana and are permitted under Section 529 of the
94	94	42 Internal Revenue Code.
95	95	2025 IN 1150—LS 6972/DI 129 3
96	96	1 (i) As used in this section, "qualified withdrawal" means a
97	97	2 withdrawal or distribution from a college choice 529 education savings
98	98	3 plan that is made:
99	99	4 (1) to pay for qualified higher education expenses, excluding any
100	100	5 withdrawals or distributions used to pay for qualified higher
101	101	6 education expenses, if the withdrawals or distributions are made
102	102	7 from an account of a college choice 529 education savings plan
103	103	8 that is terminated within twelve (12) months after the account is
104	104	9 opened;
105	105	10 (2) as a result of the death or disability of an account beneficiary;
106	106	11 (3) because an account beneficiary received a scholarship that
107	107	12 paid for all or part of the qualified higher education expenses of
108	108	13 the account beneficiary, to the extent that the withdrawal or
109	109	14 distribution does not exceed the amount of the scholarship; or
110	110	15 (4) by a college choice 529 education savings plan as the result of
111	111	16 a transfer of funds by a college choice 529 education savings plan
112	112	17 from one (1) third party custodian to another.
113	113	18 However, a qualified withdrawal does not include a withdrawal or
114	114	19 distribution that will be used for expenses that are for tuition in
115	115	20 connection with enrollment or attendance at an elementary or
116	116	21 secondary public, private, or religious school unless the school is
117	117	22 located in Indiana. A qualified withdrawal does not include a rollover
118	118	23 distribution or transfer of assets from a college choice 529 education
119	119	24 savings plan to any other qualified tuition program under Section 529
120	120	25 of the Internal Revenue Code, to any qualified ABLE program under
121	121	26 Section 529A other than an Indiana ABLE 529A savings plan adopted
122	122	27 by the state under IC 12-11, or to any other similar plan.
123	123	28 (j) As used in this section, "taxpayer" means:
124	124	29 (1) an individual filing a single return;
125	125	30 (2) a married couple filing a joint return; or
126	126	31 (3) for taxable years beginning after December 31, 2019, a
127	127	32 married individual filing a separate return.
128	128	33 (k) A taxpayer is entitled to a credit against the taxpayer's adjusted
129	129	34 gross income tax imposed by IC 6-3-1 through IC 6-3-7 for a taxable
130	130	35 year equal to the least of the following:
131	131	36 (1) The following amount:
132	132	37 (A) For taxable years beginning before January 1, 2019, the
133	133	38 sum of twenty percent (20%) multiplied by the amount of the
134	134	39 total contributions that are made by the taxpayer to an account
135	135	40 or accounts of a college choice 529 education savings plan
136	136	41 during the taxable year and that will be used to pay for
137	137	42 qualified higher education expenses that are not qualified K-12
138	138	2025 IN 1150—LS 6972/DI 129 4
139	139	1 education expenses, plus the lesser of:
140	140	2 (i) five hundred dollars ($500); or
141	141	3 (ii) ten percent (10%) multiplied by the amount of the total
142	142	4 contributions that are made by the taxpayer to an account or
143	143	5 accounts of a college choice 529 education savings plan
144	144	6 during the taxable year and that will be used to pay for
145	145	7 qualified K-12 education expenses.
146	146	8 (B) For taxable years beginning after December 31, 2018, the
147	147	9 sum of:
148	148	10 (i) twenty percent (20%) multiplied by the amount of the
149	149	11 total contributions that are made by the taxpayer to an
150	150	12 account or accounts of a college choice 529 education
151	151	13 savings plan during the taxable year and that are designated
152	152	14 to pay for qualified higher education expenses that are not
153	153	15 qualified K-12 education expenses; plus
154	154	16 (ii) twenty percent (20%) multiplied by the amount of the
155	155	17 total contributions that are made by the taxpayer to an
156	156	18 account or accounts of a college choice 529 education
157	157	19 savings plan during the taxable year and that are designated
158	158	20 to pay for qualified K-12 education expenses.
159	159	21 (2) One thousand five hundred dollars ($1,500), or seven hundred
160	160	22 fifty dollars ($750) in the case of a married individual filing a
161	161	23 separate return.
162	162	24 (3) The amount of the taxpayer's adjusted gross income tax
163	163	25 imposed by IC 6-3-1 through IC 6-3-7 for the taxable year,
164	164	26 reduced by the sum of all credits (as determined without regard to
165	165	27 this section) allowed by IC 6-3-1 through IC 6-3-7.
166	166	28 (l) This subsection applies after December 31, 2018. At the time a
167	167	29 contribution is made to or a withdrawal is made from an account or
168	168	30 accounts of a college choice 529 education savings plan, the person
169	169	31 making the contribution or withdrawal shall designate whether the
170	170	32 contribution is made for or the withdrawal will be used for:
171	171	33 (1) qualified higher education expenses that are not qualified
172	172	34 K-12 education expenses; or
173	173	35 (2) qualified K-12 education expenses.
174	174	36 The Indiana education savings authority (IC 21-9-3) shall use
175	175	37 subaccounting to track the designations.
176	176	38 (m) A taxpayer who makes a contribution to a college choice 529
177	177	39 education savings plan is considered to have made the contribution on
178	178	40 the date that:
179	179	41 (1) the taxpayer's contribution is postmarked or accepted by a
180	180	42 delivery service, for contributions that are submitted to a college
181	181	2025 IN 1150—LS 6972/DI 129 5
182	182	1 choice 529 education savings plan by mail or delivery service; or
183	183	2 (2) the taxpayer's electronic funds transfer is initiated, for
184	184	3 contributions that are submitted to a college choice 529 education
185	185	4 savings plan by electronic funds transfer.
186	186	5 (n) A taxpayer is not entitled to a carryback, carryover, or refund of
187	187	6 an unused credit.
188	188	7 (o) A taxpayer may not sell, assign, convey, or otherwise transfer the
189	189	8 tax credit provided by this section.
190	190	9 (p) To receive the credit provided by this section, a taxpayer must
191	191	10 claim the credit on the taxpayer's annual state tax return or returns in
192	192	11 the manner prescribed by the department. The taxpayer shall submit to
193	193	12 the department all information that the department determines is
194	194	13 necessary for the calculation of the credit provided by this section.
195	195	14 (q) An account owner of an account of a college choice 529
196	196	15 education savings plan must repay all or a part of the credit in a taxable
197	197	16 year in which any nonqualified withdrawal is made from the account.
198	198	17 The amount the taxpayer must repay is equal to the lesser of:
199	199	18 (1) twenty percent (20%) of the total amount of nonqualified
200	200	19 withdrawals made during the taxable year from the account; or
201	201	20 (2) the excess of:
202	202	21 (A) the cumulative amount of all credits provided by this
203	203	22 section that are claimed by any taxpayer with respect to the
204	204	23 taxpayer's contributions to the account for all prior taxable
205	205	24 years beginning on or after January 1, 2007; over
206	206	25 (B) the cumulative amount of repayments paid by the account
207	207	26 owner under this subsection for all prior taxable years
208	208	27 beginning on or after January 1, 2008.
209	209	28 The repayment requirement under this subsection does not apply
210	210	29 to a withdrawal or distribution for an account beneficiary who
211	211	30 satisfies each of the requirements under Section 126 of the
212	212	31 SECURE 2.0 Act of 2022 (P.L. 117-328 (136 Stat. 5316)).
213	213	32 (r) Any required repayment under subsection (q) shall be reported
214	214	33 by the account owner on the account owner's annual state income tax
215	215	34 return for any taxable year in which a nonqualified withdrawal is made.
216	216	35 (s) A nonresident account owner who is not required to file an
217	217	36 annual income tax return for a taxable year in which a nonqualified
218	218	37 withdrawal is made shall make any required repayment on the form
219	219	38 required under IC 6-3-4-1(2). If the nonresident account owner does
220	220	39 not make the required repayment, the department shall issue a demand
221	221	40 notice in accordance with IC 6-8.1-5-1.
222	222	41 (t) The executive director of the Indiana education savings authority
223	223	42 shall submit or cause to be submitted to the department a copy of all
224	224	2025 IN 1150—LS 6972/DI 129 6
225	225	1 information returns or statements issued to account owners, account
226	226	2 beneficiaries, and other taxpayers for each taxable year with respect to:
227	227	3 (1) nonqualified withdrawals made from accounts, including
228	228	4 subaccounts of a college choice 529 education savings plan for
229	229	5 the taxable year; or
230	230	6 (2) account closings for the taxable year.
231	231	7 (u) The following apply to contributions made after December 31,
232	232	8 2023:
233	233	9 (1) For purposes of this section, all or part of a contribution made
234	234	10 after the end of a taxable year, and not later than the due date of
235	235	11 the taxpayer's adjusted gross income tax return for the taxable
236	236	12 year under this article (as determined without regard to any
237	237	13 allowable extensions), shall be considered as having been made
238	238	14 during the taxable year preceding the contribution if:
239	239	15 (A) the taxpayer elects to treat all or part of a contribution as
240	240	16 occurring in the taxable year preceding the contribution;
241	241	17 (B) the taxpayer designates the amounts of the contribution to
242	242	18 be treated as occurring in each taxable year, in the case of a
243	243	19 single contribution that is to be allowable under this section in
244	244	20 two (2) separate years; and
245	245	21 (C) the taxpayer irrevocably waives the right to claim the
246	246	22 contribution claimed in the taxable year preceding the
247	247	23 contribution as occurring in the taxable year of the
248	248	24 contribution.
249	249	25 (2) The Indiana education savings authority may prescribe any
250	250	26 forms necessary for purposes of this subsection.
251	251	27 SECTION 3. IC 21-9-7-1 IS AMENDED TO READ AS FOLLOWS
252	252	28 [EFFECTIVE JANUARY 1, 2025 (RETROACTIVE)]: Sec. 1. In
253	253	29 addition to any other powers granted by this article, the board has all
254	254	30 powers necessary or convenient to carry out and effectuate the purposes
255	255	31 and objectives of this chapter and IC 21-9-8, the purposes and
256	256	32 objectives of an education savings program that may be established
257	257	33 under this article, and the powers delegated by other laws or executive
258	258	34 orders, including the following:
259	259	35 (1) To establish policies and procedures to govern distributions
260	260	36 from accounts that are not:
261	261	37 (A) made on account of the death or disability of an account
262	262	38 beneficiary;
263	263	39 (B) made on account of the receipt of a scholarship (or
264	264	40 allowance or payment described in Section 135(d)(1)(B) or (C)
265	265	41 of the Internal Revenue Code) by the account beneficiary to
266	266	42 the extent the amount of the distribution does not exceed the
267	267	2025 IN 1150—LS 6972/DI 129 7
268	268	1 amount of the scholarship, allowance, or payment; or
269	269	2 (C) rollovers, including distributions that satisfy each of the
270	270	3 requirements under Section 126 of the SECURE 2.0 Act of
271	271	4 2022 (P.L. 117-328 (136 Stat. 5316)).
272	272	5 (2) To establish penalties for withdrawals of money from accounts
273	273	6 that are not used exclusively for the qualified higher education
274	274	7 expenses of an account beneficiary unless a circumstance
275	275	8 described in subdivision (1) applies.
276	276	9 (3) To establish policies and procedures regarding the transfer of
277	277	10 individual accounts and the designation of substitute account
278	278	11 beneficiaries.
279	279	12 (4) To establish policies and procedures for withdrawal of money
280	280	13 from accounts for, or in reimbursement of, qualified higher
281	281	14 education expenses.
282	282	15 (5) To enter into agreements with account owners, account
283	283	16 beneficiaries, and contributors, with the agreements naming:
284	284	17 (A) the account owner; and
285	285	18 (B) the account beneficiary.
286	286	19 (6) To establish accounts for account beneficiaries. However:
287	287	20 (A) the authority shall establish a separate account for each
288	288	21 account beneficiary; and
289	289	22 (B) an individual may be the beneficiary of more than one (1)
290	290	23 account.
291	291	24 (7) To enter into agreements with financial institutions relating to
292	292	25 accounts as well as deposits, withdrawals, penalties, allocation of
293	293	26 benefits or incentives, and transfers of accounts, account owners,
294	294	27 and account beneficiaries.
295	295	28 (8) To conform the education savings program to federal tax
296	296	29 advantages or incentives, as the advantages or incentives may
297	297	30 exist periodically, to the extent consistent with the purposes and
298	298	31 objectives of this article.
299	299	32 (9) To interpret, in rules, policies, guidelines, and procedures, the
300	300	33 provisions of this article broadly considering the purposes and
301	301	34 objectives of this article.
302	302	35 SECTION 4. IC 21-9-10-2 IS AMENDED TO READ AS
303	303	36 FOLLOWS [EFFECTIVE JANUARY 1, 2025 (RETROACTIVE)]:
304	304	37 Sec. 2. (a) Accounts and all earnings or interest on accounts are exempt
305	305	38 from taxation in Indiana to the extent that those accounts, earnings, and
306	306	39 interest are exempt from federal taxation under the Internal Revenue
307	307	40 Code, subject to any penalties that are established for education savings
308	308	41 programs under this article.
309	309	42 (b) Distributions under IC 6-3-2-19 from an account used to pay
310	310	2025 IN 1150—LS 6972/DI 129 8
311	311	1 qualified higher education expenses are exempt from the adjusted gross
312	312	2 income tax imposed by IC 6-3-1 through IC 6-3-7.
313	313	3 (c) Distributions under IC 6-3-2-19(f) from an account that are
314	314	4 not used to pay qualified higher education expenses but that satisfy
315	315	5 each of the requirements under Section 126 of the SECURE 2.0 Act
316	316	6 of 2022 (P.L. 117-328 (136 Stat. 5316)) are exempt from the
317	317	7 adjusted gross income tax imposed by IC 6-3-1 through IC 6-3-7.
318	318	8 SECTION 5. [EFFECTIVE JANUARY 1, 2025 (RETROACTIVE)]
319	319	9 (a) IC 6-3-2-19, IC 6-3-3-12, IC 21-9-7-1, and IC 21-9-10-2, all as
320	320	10 amended by this act, apply to taxable years beginning after
321	321	11 December 31, 2024.
322	322	12 (b) This SECTION expires January 1, 2027.
323	323	13 SECTION 6. An emergency is declared for this act.
324	324	2025 IN 1150—LS 6972/DI 129