(C) Iowa Capital Dispatch
This story was originally published by Iowa Capital Dispatch and is unaltered.
. . . . . . . . . .



Bill proposes extending state’s college savings plan to more apprenticeships [1]

['Robin Opsahl', 'More From Author', '- February']

Date: 2024-02

A bill moved forward by lawmakers Tuesday would expand what secondary education and training programs can be funded through the state’s college savings plan.

The Iowa 529 Plan is a way for families to save funds for education costs for colleges, universities, trade schools and apprenticeship programs, with earnings not subject to federal or state tax when used for “qualified education expenses.”

Under current law, withdrawals from a 529 Plan related to apprenticeship programs that do not earn college credits are excluded from the calculation of net income for individual income tax if its a program certified through the federal National Apprenticeship Act. Senate Study Bill 3128 would expand that definition to include apprenticeships registered with the Iowa Office of Apprenticeship.

The bill would expand the definition for accepted apprenticeships through the state tax system, allowing for these programs to be excluded from the computation net income for individual income taxes when using 529 Plan funds.

It would not apply to federal tax treatment, however. If the apprenticeship program is only registered with the Iowa office and not with the U.S. Secretary of Labor, using funds from the account for that education would be considered a “nonqualified withdrawal” and earnings would be subject to federal tax as well as a 10% withdrawal penalty.

Molly Widen with the State Treasurer’s Office said these conflicts with federal law could not be resolved through state legislation, but there has been recent movement in the U.S. House Ways and Means Committee to expand 529 plan fund use to more apprenticeship and training programs like Commercial Driver’s License programs for trucking.

Widen said that in Iowa, there are already opportunities to use 529 Plan dollars on these programs, as many are trade-specific training programs offered at Iowa community colleges.

“So there are opportunities, and we would be really excited and champion the federal government expanding the use of the 529,” she said.

Jim Obradovich, a lobbyist speaking on behalf of the Iowa Public Airports Association, said the organization was supportive of steps to expand the permitted use of 529 funds to cover professional training costs like training for pilot’s licenses. Though there are some professional pilot training programs at Iowa community colleges, under the bill people would be able to use the education investment funds for other training opportunities.

“That’s why the concept in somehow providing some more access to maybe these types of savings programs for folks who decide that that’s the career they want to go into, would be a benefit to take a look at,” Obradovich said.

There are still questions about why certain apprenticeship and training programs are not currently allowed under the federal 529 Plan regulations — issues like the ability to accept federal funding may be a qualifying factor for institutions, Sen. Adrian Dickey, R-Packwood said. Dickey said that moving forward, he plans to discuss the bill with members of industries that would be impacted, to see if they would be interested in working to meet those requirements or advocate for changes in federal law regarding 529 plans.

Dickey said while there are “too many unknowns” with how the bill would operate right now, that he believed it was important to keep it alive in order to continue working on the issue. He also said the bill could still play an important role in sending a message to federal lawmakers that this is a topic states care about.

“Hopefully during this session even, we will find out what it is that we need to change into this or what those organizations need to be able to accept (federal money) that is the roadblock, to change the bill to accommodate that,” Dickey said.

Jim Obradovich is married to Iowa Capital Dispatch Editor-in-chief Kathie Obradovich.

[END]
---
[1] Url: https://iowacapitaldispatch.com/briefs/bill-proposes-extending-states-college-savings-plan-to-more-apprenticeships/

Published and (C) by Iowa Capital Dispatch
Content appears here under this condition or license: Creative Commons CC BY-ND-NC 4.0.

via Magical.Fish Gopher News Feeds:
gopher://magical.fish/1/feeds/news/iowacapitaldispatch/