17206.2.
(a) For taxable years beginning on or after January 1, 2023, and before January 1, 2028, there shall be allowed a deduction in the amount equal to the monetary contribution made by a qualified taxpayer during the taxable year to one or more accounts established pursuant to the California qualified tuition program on behalf of a beneficiary. beneficiary, not to exceed five thousand dollars ($5,000) per beneficiary per taxable year.(b) For the purposes of this section, the following definitions shall
apply:
(1) “Monetary contribution” means cash contributions, pursuant to Section 529(b)(2) of the Internal Revenue Code, relating to cash contributions, to the California qualified tuition program, but shall not include cash contributions to the California qualified tuition program with respect to either of the following:
(A) Any amount transferred to the California qualified tuition program from a qualified tuition program established pursuant to Section 529 of the Internal Revenue Code, relating to qualified tuition programs, that is not the California qualified tuition program.
(B) Any amount transferred from the credit of one beneficiary under the California qualified tuition program to the credit of another
beneficiary under the California qualified tuition program.
(2) “Qualified taxpayer” means an individual, or a married couple if filing a joint return, who, on behalf of a beneficiary, contributes money to a California qualified tuition program for which the individual,
taxpayer, or a spouse in the case of a married couple filing a joint return, is the account owner. owner, and whose adjusted gross income does not exceed the following:
(A) In the case of a taxpayer who is a head of household, a surviving spouse, as defined in Section 17046, or a married couple filing a joint return, one hundred fifty thousand dollars ($150,000).
(B) In the case of a taxpayer filing a return other than as described in subparagraph (A), seventy-five thousand dollars ($75,000).
(3) “California qualified tuition program” means a qualified tuition program, as defined in Section 529 of the Internal Revenue Code, relating to qualified tuition programs, and as established pursuant to the Golden State Scholarshare Trust Act (Article 19 (commencing with Section 69980) of Chapter 2 of Part 42 of Division 5 of Title 3 of the Education Code).
(4) “Qualified higher education expenses” means qualified higher education expenses, as defined in Section 529(e)(3) of the Internal Revenue Code.
(c) (1) In the case of any distribution in excess of qualified higher education expenses, the aggregate amount of the deduction allowed under subdivision (a) that reduced the qualified taxpayer’s gross income in any taxable year shall be added to the
gross income of the qualified taxpayer in the taxable year of the distribution to the extent that the distribution is attributable to the aggregate amount of contributions for which a deduction is allowed under this section in taxable years beginning on or after January 1, 2023, and before January 1, 2028.
(2) Paragraph (1) shall not apply to that portion of a distribution that, within 60 days of the distribution, is transferred to another California qualified tuition program.
(d) For the purposes of Section 529(c)(3) of the Internal Revenue Code, relating to distributions, amounts allowed as a deduction under this section shall not be treated as investment in the contract in applying Section 72 of the Internal Revenue Code, relating to annuities; certain proceeds of endowment and
life insurance contracts.
(e) For purposes of complying with Section 41, the Legislature finds and declares the following:
(1) The specific goals, purposes, and objectives of the deduction is to provide additional incentives to those who would not qualify for state benefits, such as medical, to save for college by allowing a deduction on their taxes to allow them to qualify for social programs, as applicable, and to prepare their child for college.
(2) The performance indicator is the number of taxpayers whom both took the deduction and qualified for a program they did not qualify for previously.
(3) By July 1, 2024, and annually thereafter, the Franchise Tax
Board shall prepare a report on the number of taxpayers whom both made a deduction and qualified for a program they did not qualify for previously.
(e)
(f) This section shall remain in effect only until December 1, 2028, and as of that date is repealed.