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USC Title 26 enacted through 2008

§ 529. Qualified tuition programs

 
(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).
 
(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 institutions -
 
(A)
under which a person -
 
(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
 
(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
 
(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.
 
(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.
 
(3)
Separate accounting
 
A program shall not be treated as a qualified tuition program unless it provides separate accounting for each designated beneficiary.
 
(4)
No 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 not directly or indirectly direct the investment of any contributions to the program (or any earnings thereon).
 
(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 subsection, no amount shall be includible in gross income of -
 
(A)
a designated beneficiary under a qualified tuition program, or
 
(B)
a contributor to such program on behalf 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 beneficiary -
 
(i)
shall be treated as a completed gift to such beneficiary which is not a future interest 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 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.
 
(3)
Distributions
 
(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.
 
(B)
Distributions for qualified higher education 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 providing a benefit to the distributee which, if paid for by the distributee, would constitute payment of a qualified higher education 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 (reduced by expenses described in clause (i)), no amount shall be includible in gross income, and
 
(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.
 
(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.
 
(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.
 
(v)
Coordination with Hope 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)
as provided in section 25A(g)(2), and
 
(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.
 
(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 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).
 
(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 transferred -
 
(I)
to another qualified tuition program for the benefit of the designated beneficiary, or
 
(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.
 
(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.
 
(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.
 
(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.
 
(4)
Estate tax treatment
 
(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.
 
(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.
 
(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.
 
(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 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)
assigned to the same generation as (or a higher generation than) the old beneficiary (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 distribution from an[FN 1] 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.
 
So in original. Probably should be "a".
 
(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.
 
(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 commencement 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 individual 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 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.
 
(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 expenses" means -
 
(i)
tuition, fees, books, supplies, and equipment required for the enrollment or attendance of a designated beneficiary at an eligible educational institution; and
 
(ii)
expenses for special needs services in the case of a special needs beneficiary which are incurred in connection with such enrollment or attendance.
 
(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 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.
 
(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 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
 
(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.
 
(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 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.








Tax Code (Internal Revenue Code) Section Index


U.S. GAAP by Codification Topic
 
105 GAAP Hierarchy
105 GAAP History

205 Presentation of Financial Statements
205-20 Discontinued Operations
210 Balance Sheet
210-20 Offsetting
220 Comprehensive Income
225 Income Statement
225-20 Extraordinary and Unusual Items
230 Statement of Cash Flows
250 Accounting Changes and Error Corrections
260 Earnings per Share
270 Interim Reporting

310 Impairment of a Loan
320 Investment Securities
320 Other-Than-Temporary Impairments, FSP FAS 115-2
320-10-05 Overview of Investments in Other Entities
320-10-35 Reclassification of Investments in Securities
323-10 Equity Method Investments
323-30 Investments in Partnerships and Joint Ventures
325-20 Cost Method Investments
330 Inventory

340-20 Capitalized Advertising Costs
350-20 Goodwill
350-30 Intangibles Other than Goodwill
350-40 Internal-Use Software
350-50 Website Development Costs
360 Property, Plant and Equipment
360-20 Real Estate Sales

410 Asset Retirement and Environmental Obligations
420 Exit or Disposal Cost Obligations
450 Contingencies
450-20 Loss Contingencies
450-30 Gain Contingencies
480 Redeemable Financial Instruments

505-20 Stock Dividends, Stock Splits
505-30 Treasury Stock

605 SEC Staff Accounting Bulletin, Topic 13
605-25 Revenue Recognition - Multiple Element Arrangements

715-30 Defined Benefit Plans - Pension
718 Share-Based Payment
730 Research and Development
730-20 Research and Development Arrangements

805 Business Combinations
810 Consolidation
810 Noncontrolling Interests
810 Consolidation of Variable Interest Entities, SFAS 167

815 Derivatives and Hedging Overview

820 Fair Value Measurements
820 Fair value when the markets are not active, FSP FAS 157-4
825 Fair Value Option

830 Foreign Currency Matters
830-20 Foreign Currency Transactions
830-30 Translation of Financial Statements
835 Interest
835-20 Capitalization of Interest
835-30 Imputation of Interest

840 Leases
840-20 Operating Leases
840-30 Capital Leases
840-40 Sale-Leaseback Transactions
845 Nonmonetary Transactions

855 Subsequent Events
860-20 Sale of Financial Assets, SFAS 166
860-50 Servicing Assets and Liabilities, SFAS 156

985-20 Costs of software to be sold


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