Personal Income Tax Law: deferred compensation: exclusions: long-term qualified tuition program.

Plain English Breakdown

The candidate explanation included a claim about requiring additional information for bills authorizing new tax expenditures, which is not supported by the official source material.

Exclusion of Certain Tuition Program Distributions from State Income Tax

The bill excludes certain distributions made from long-term qualified tuition programs to Roth IRAs from state gross income for tax purposes, aligning with federal law changes.

What This Bill Does

• Defines 'long-term qualified tuition program' and allows distributions paid directly to a Roth IRA to be excluded from state gross income during specific years.
• Aligns California's personal income tax laws with recent federal changes regarding the exclusion of certain qualified tuition program distributions for tax purposes.

Who It Names or Affects

• People who participate in long-term qualified tuition programs and make direct trustee-to-trustee transfers to Roth IRAs.

Terms To Know

Roth IRA

A type of individual retirement account where contributions are made with after-tax dollars and qualified distributions are tax-free.

Qualified tuition program

A plan that allows individuals to save for education expenses on a tax-advantaged basis, such as the Scholarshare trust in California.

Limits and Unknowns

• The bill does not specify how long-term qualified tuition programs will be defined or what criteria they must meet.
• It is unclear if there are any limits to the amount of distributions that can be excluded from state gross income under this provision.

Official Summary Text

SB 657, as amended, Niello.
Personal Income Tax Law: deferred compensation: exclusions: long-term qualified tuition program.
The Personal Income Tax Law, in conformity with federal income tax law, generally defines “gross income” as income from whatever source derived, except as specifically excluded, and provides various exclusions from gross income. Existing law, known as the Golden State Scholarshare Trust Act, establishes the Golden State Scholarshare College Savings Trust (Scholarshare trust), under the administration of the Scholarshare Investment Board, to provide financial aid for postsecondary education costs of participating students. Existing state and federal law generally includes in gross income distributions from a qualified tuition program, as defined to include the Scholarshare trust, except as provided.
Existing federal law, the Consolidated Appropriations Act, 2023, excludes from gross income, for federal income tax purposes, distributions from a
qualified tuition program that are made after December 31, 2023, and are paid in a direct trustee-to-trustee transfer to a Roth IRA, as described.
This bill would exempt from gross income distribution made from a long-term qualified tuition program during the taxable years beginning on or after January 1, 2025, and before January 1, 2030, that are paid in a direct trustee-to-trustee transfer to a Roth IRA, and would conform state tax law to those changes relating to federal law, as described above.
Existing law requires a bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives the tax expenditure will achieve, detailed performance indicators, and data collection requirements.
This bill would include additional information required for any bill authorizing a new tax expenditure.
This bill would take effect immediately as a tax levy.

Current Bill Text

Download Bill PDF