Read the full stored bill text
HB2477 - 572R - H Ver
House Engrossed
Arizona's education
savings plan; revisions
State of Arizona
House of Representatives
Fifty-seventh Legislature
Second Regular Session
2026
HOUSE BILL 2477
AN
ACT
amending sections 15-1871 and 15-1875,
Arizona Revised Statutes; relating to AZ529, Arizona's education savings plan.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it
enacted by the Legislature of the State of Arizona:
Section 1. Section 15-1871, Arizona Revised
Statutes, is amended to read:
START_STATUTE
15-1871.
Definitions
In this article, unless the context otherwise requires:
1. "Account" means an individual trust
account in the fund that is established as prescribed in this article.
2. "Account owner" means the person who
enters into a tuition savings agreement pursuant to this article, who is an
account owner within the meaning of section 529 of the internal revenue code
and who is designated at the time an account is opened as having the right to
withdraw monies from the account before the account is disbursed to or for the
benefit of the designated beneficiary.
3. "Board" means the state board of
investment.
4. "Designated beneficiary" means a person
who qualifies as a designated beneficiary under section 529 of the internal
revenue code and, except as provided in section 15-1875, subsections P
and Q, with respect to an account, who is designated at the time the account is
opened as the person whose qualified higher education expenses are expected to
be paid from the account or, if this designated beneficiary is replaced in accordance
with section 15-1875, subsections D, E and F, the replacement
beneficiary.
5. "Eligible educational institution"
means an institution of higher education that qualifies under section 529 of
the internal revenue code as an eligible educational institution.
6. "Financial institution" means the state
treasurer's office or any bank, commercial bank, national bank, savings bank,
savings and loan association, credit union, insurance company, brokerage firm
or other similar entity that is authorized to do business in this state.
7. "Fund" means AZ529, Arizona's education
savings plan trust fund that constitutes a public instrumentality of this state
and that is established by section 15-1873.
8. "Member of the family"
means
any of the following:
(a) A son or daughter of a person or a
descendant of the son or daughter of the person.
(b) A stepson or stepdaughter of a
person.
(c) A brother, sister, stepbrother or
stepsister of a person. For the purposes of this subdivision,
"brother" and "sister" includes a brother or sister by the
half-blood.
(d) The father or mother of a person
or the ancestor of the father or mother of a person.
(e) A stepfather or stepmother of a
person.
(f) A son or daughter of a person's
brother or sister. For the purposes of this subdivision,
"brother" and "sister" includes a brother or sister by the
half-blood.
(g) A brother or sister of the
person's father or mother. For the purposes of this subdivision,
"brother" and "sister" includes a brother or sister by the
half-blood.
(h) A son-in-law, daughter-in-law,
father-in-law, mother-in-law, brother-in-law
or sister-in-law of a person.
(i) The spouse of a person or the
spouse of any individual described in this paragraph.
(j) A first cousin of a person.
(k) Any individual who meets the
criteria for family membership described in this paragraph as a result of legal
adoption.
has the same meaning prescribed in section 529
of the internal revenue code.
9. "Nonqualified withdrawal" means a
withdrawal from an account other than one of the following:
(a) A qualified withdrawal.
(b) A withdrawal made as the result of the death or
disability of the designated beneficiary of an account.
(c) A withdrawal that is made on the account of a
scholarship, or the allowance or payment described in section 135(d)(1)(B) or
(C) of the internal revenue code, and that is received by the designated
beneficiary, but only to the extent of the amount of this scholarship,
allowance or payment.
(d) A rollover or change of designated beneficiary.
10. "Person" means an individual, an
individual's legal representative or any other legal entity authorized to
establish a savings account under section 529 of the internal revenue code and
the corresponding regulations.
11. "Plan" means AZ529, Arizona's
education savings plan that is established under this article and that
constitutes a qualified tuition program as defined in section 529 of the
internal revenue code.
12. "Qualified higher education expenses"
:
(a) Means:
(i) Tuition, fees, books, supplies,
room and board and equipment required for a designated beneficiary to enroll at
or attend an eligible educational institution.
(ii) Expenses for special needs
services in the case of a special needs beneficiary that are incurred in
connection with enrolling or attending, if these expenses meet the definition
of qualified higher education expenses in section 529 of the internal revenue
code.
(iii) Expenses to purchase a computer,
peripheral equipment, computer software or internet access and related services
if the computer equipment, software or services are to be used primarily by the
beneficiary during the years the beneficiary is enrolled at an eligible
educational institution and if these expenses meet the definition of qualified
higher education expenses in section 529 of the internal revenue code.
(iv) Expenses for fees, books,
supplies and equipment required for a designated beneficiary to participate in
an apprenticeship program that is registered and certified with the United
States secretary of labor under section 1 of the national apprenticeship act
(50 Stat. 664; 29 United States Code section 50) if these expenses meet the
definition of qualified higher education expenses in section 529 of the
internal revenue code.
(b) Includes tuition to enroll in or
attend an elementary or secondary public, private or religious school pursuant
to section 529 of the internal revenue code.
(c) Includes amounts paid as principal
or interest on any qualified education loan as defined in section 221(d) of the
internal revenue code of the designated beneficiary or a brother, sister,
stepbrother or stepsister of the designated beneficiary pursuant to section 529
of the internal revenue code.
has the same meaning
prescribed in section 529 of the internal revenue code, as modified by 26
United States code section 529(
c
)(7) and (9).
13. "Qualified withdrawal" means a
withdrawal from an account to pay any
of the following:
(a) the
qualified higher
education expenses of the designated beneficiary of the account, but only if
the withdrawal is made in accordance with this article
, subject
to the following limitations:
.
(b)
(
a
)
Tuition of less than $10,000
Not more than $20,000 in the aggregate for expenses incurred for the
designated beneficiary
to enroll in or attend an elementary or secondary
public, private or religious school pursuant to section 529 of the internal
revenue code
of the designated beneficiary of the account, but
only if the withdrawal is made in accordance with this article
.
(c)
(
b
) not more than $10,000 for
amounts paid as
principal or interest on any qualified education loan as defined in section
221(d) of the internal revenue code of the designated beneficiary or a brother,
sister, stepbrother or stepsister of the designated beneficiary,
but
only if the withdrawal is made in accordance with this article.� The amount of
qualified withdrawals under this article with respect to the loans of any
designated beneficiary or a brother, sister, stepbrother or stepsister of the
designated beneficiary may not exceed $10,000,
reduced by the amount of
withdrawals so treated for all prior taxable years.
14. "Section 529 of the internal revenue
code" means section 529 of the internal revenue code of 1986, as amended,
and the final regulations issued pursuant to that section.
15. "Treasurer" means the state treasurer.
16. "Trust interest" means an account
owner's interest in the fund created by a tuition savings agreement for the
benefit of a designated beneficiary.
17. "Tuition savings agreement" means an
agreement between the board, as trustee of the fund, and an account owner that
creates an interest in the fund and that provides for participation in the
plan.
END_STATUTE
Sec. 2. Section 15-1875, Arizona Revised
Statutes, is amended to read:
START_STATUTE
15-1875.
Plan requirements
A. The plan shall be operated through the use of
accounts in the fund established by account owners.
Account
owners shall make
payments to the fund
for participation
to participate
in the plan
shall be made by
account owners
pursuant to tuition savings agreements. An
account may be opened by any person who desires to invest in the fund and to
save to pay qualified higher education expenses by satisfying each of the
following requirements:
1. Completing an application in the form prescribed
by the treasurer. The application shall include the following
information:
(a) The name, address and social
security number or employer identification number of the contributor.
(b)
(
a
)
The name, address and social security number of
the account owner if the account owner is not the contributor.
(c)
(
b
)
The name, address and social security number of
the designated beneficiary.
(d)
(
c
)
The certification relating to no excess
contributions required by subsection L of this section.
(e)
(
d
)
Any other information that the treasurer may
require.
2. Paying the onetime application fee established by
the treasurer.
3. Making the minimum contribution required by the
treasurer or by opening an account.
4. Designating the type of account to be opened if
more than one type of account is offered.
B. Any person may make contributions to an account
after the account is opened.
C. Contributions to accounts may be made only in
cash.
D. An account owner may change the designated
beneficiary of an account to an individual who is a member of the family of the
former designated beneficiary in accordance with procedures established by the
treasurer.
E. On the direction of an account owner, all or a
portion of an account may be transferred to another account of which the
designated beneficiary is a member of the family of the designated beneficiary
of the transferee account.
F. Changes in designated beneficiaries and rollovers
under this section are not allowed if the changes or rollovers would violate
either of the following:
1. Subsection L of this section, relating to excess
contributions.
2. Subsection I of this section, relating to
investment choice.
G. Each account shall be maintained separately from
each other account under the plan.
H. Separate records and accounting shall be
maintained for each account for each designated beneficiary.
I. A contributor to, account owner of or designated
beneficiary of any account may not direct the investment, within the meaning of
section 529 of the internal revenue code, of any contributions to an account or
the earnings from the account.
J. If the treasurer terminates the authority of a
financial institution to hold accounts and accounts must be moved from that
financial institution to another financial institution, the treasurer shall
select the financial institution and type of investment to which the balance of
the account is moved unless the internal revenue service provides guidance
stating that allowing the account owner to select among several financial
institutions that are then contractors would not cause a plan to cease to be a
qualified tuition plan.
K. Neither an account owner nor a designated
beneficiary may use an interest in an account as security for a
loan. Any pledge of an interest in an account is of no force and
effect.
L. On the recommendation of the treasurer, the board
shall adopt rules to prevent contributions on behalf of a designated
beneficiary in excess of those necessary to pay the qualified higher education
expenses of the designated beneficiaries. The rules shall address
the following:
1. Procedures for aggregating the total balances of
multiple accounts established for a designated beneficiary.
2. The establishment of a maximum total balance for
the purpose of prohibiting contributions to accounts established for a
designated beneficiary if the contributions would cause the maximum total
balance to be exceeded.
3. The board shall review the quarterly reports
received from participating financial institutions and certify that the balance
in all qualified tuition programs, as defined in section 529 of the internal
revenue code, of which that person is the designated beneficiary does not
exceed the lesser of:
(a) A maximum college savings amount established by
the board from time to time.
(b) The cost in current dollars of qualified higher
education expenses that the contributor reasonably anticipates the designated
beneficiary will incur.
4. Requirements that any excess contributions with
respect to a designated beneficiary be promptly withdrawn in a nonqualified
withdrawal or rolled over to another account in accordance with this section.
M. If there is any distribution from an account to
any person or for the benefit of any person during a calendar year, the
distribution shall be reported to the internal revenue service and the account
owner or the designated beneficiary to the extent required by federal law.
N. The financial institution shall provide
statements to each account owner at least once each year within thirty-one
days after the twelve-month period to which
they
the statements
relate.
The
Each
statement shall identify the contributions made during a
preceding twelve-month period, the total contributions made through the end of
the period, the value of the account as of the end of this period,
distributions made during this period and any other matters that the treasurer
requires be reported to the account owner.
O. Statements and information returns relating to
accounts shall be prepared and filed to the extent required by federal or state
tax law.
P. A state or local government or organizations
described in section 501(c)(3) of the internal revenue code may open and become
the account owner of an account to fund scholarships for persons whose identity
will be determined after an account is opened.
Q. In the case of any account described in
subsection P of this section, the requirement that a designated beneficiary be
designated when an account is opened does not apply and each person who
receives an interest in the account as a scholarship shall be treated as a
designated beneficiary with respect to the interest.
R. Any social security numbers, addresses or
telephone numbers of individual account
holders
owners
and designated beneficiaries that come into the
possession of the treasurer are confidential, are not public records and shall
not be released by the treasurer.
S. An account owner may transfer ownership rights to
another eligible account owner.
T. An account owner may designate successor account
owners.
U.
Through December 31, 2025,
On direction of an account owner,
up to $15,000
all or a portion
of an account may
roll over
be transferred
to an achieving a better life experience
act account established pursuant to 26 United States Code section 529A
if the designated beneficiary of the account that is established
pursuant to this article is either the designated beneficiary or a member of
the family of the designated beneficiary of the transferee account
.
V. On direction of an account owner,
all or a portion of an account may be transferred to a Roth individual retirement
account that satisfies the REQUIREMENTS of section 408A of the internal revenue
code if all of the following conditions are met:
1. The account established pursuant
to this article is maintained by the designated beneficiary for at least
fifteen years before the transfer date.
2. The monies that are transferred
pursuant to this subsection are derived from contributions that were made to
the account established pursuant to this section at least five years before the
transfer date and from the earnings attributable to those contributions.
3. The designated beneficiary of the
account that is established pursuant to this article is the designated
beneficiary of the roth individual retirement account to which the transfer is
made.
4. The total amount of monies
transferred pursuant to this subsection and all other contributions to the Roth
individual retirement account for the designated beneficiary in any year do not
exceed the annual Roth individual retirement account contribution limit for the
designated beneficiary.
5. The aggregate amount of monies
transferred from any account that is established pursuant to this article to
all Roth individual retirement accounts for the designated beneficiary does not
exceed $35,000.
END_STATUTE