The Iowa ABLE savings plan trust was created so that
individuals can contribute funds on behalf of designated beneficiaries into
accounts administered by the treasurer of state. The funds contributed to the
trust may be used to cover future disability-related expenses of the designated
beneficiary. The funds contributed to the trust are intended to supplement, but
not supplant, other benefits provided to the designated beneficiary by various
federal, state, and private sources. The Iowa ABLE savings plan program is
administered by the treasurer of state under the terms of Iowa Code chapter
12I. The following subrules provide details about how an individual's net
income is affected by contributions to a beneficiary's account, by interest and
any other earnings on a beneficiary's account, and by distributions of
contributions which were previously deducted.
(1)
Definitions.
"Account owner" means an individual who
enters into a participation agreement under Iowa Code chapter 12I for the
payment of qualified disability expenses on behalf of a designated
beneficiary.
"Designated beneficiary" means an individual
who is a resident of this state or a resident of a contracting state and who
meets the definition of "eligible individual" found in Section
529A of the Internal Revenue Code.
"Iowa ABLE savings plan trust" means a
qualified ABLE program administered by the Iowa treasurer of state under the
terms of Iowa Code chapter 12I.
"Other qualified ABLE program" refers to any
qualified ABLE program administered by another state with which the Iowa
treasurer of state has entered into an agreement under the terms of Iowa Code
section 12I.10 (see subrule 302.81(2)
below).
"Qualified ABLE program" means the same as
defined in Section 529A of the Internal Revenue Code.
"Qualified disability expenses" means the
same as defined in Section 529A of the Internal
Revenue Code.
(2)
Contracting with other states. Iowa Code section
12I.10 allows the treasurer of
state to choose to defer implementation of Iowa's own qualified ABLE program
and instead enter into an agreement with another state that already has a
qualified ABLE program, to provide Iowa residents access to that state's
qualified ABLE program, provided that the other state's program meets the
qualifications set out in Iowa Code section
12I.10(1).
(3)
Subtraction from net income for
contributions made to the Iowa ABLE savings plan trust or other qualified ABLE
program. For tax years beginning on or after January 1, 2016,
individuals can subtract from their Iowa net income the amount contributed to
the Iowa ABLE savings plan trust or other qualified ABLE program on behalf of a
designated beneficiary during the tax year, subject to the maximum contribution
level for that year. This subtraction is not allowed for any contribution that
is a transfer from an Iowa educational savings plan trust account and that was
previously deducted as a contribution to the Iowa educational savings plan
trust.
(4)
Exclusion of
interest and earnings on beneficiary accounts in the Iowa ABLE savings plan
trust or other qualified ABLE program. For tax years beginning on or
after January 1, 2016, to the extent that interest or other earnings accrue on
an account in the Iowa ABLE savings plan trust or other qualified ABLE program
(if the account owner is an Iowa resident), the interest or other earnings are
excluded for purposes of computing net income on the designated beneficiary's
Iowa individual income tax return.
(5)
Addition to net income of amounts
distributed to the participant from the Iowa ABLE savings plan trust or other
qualified ABLE program that had previously been deducted.
a. For tax years beginning on or after
January 1, 2016, if a taxpayer, as an account owner, cancels the account
owner's account in the Iowa ABLE savings plan trust or other qualified ABLE
program and receives a distribution of the funds in the account, the amount of
the distribution shall be included in net income on the account owner's Iowa
individual income tax return to the extent that contributions to the account
had been deducted on prior state individual income tax returns of the account
owner or any other person as a contribution to the Iowa ABLE savings plan trust
or other qualified ABLE program or as a contribution to an Iowa educational
savings plan trust account.
b. For
tax years beginning on or after January 1, 2016, if a taxpayer makes a
withdrawal of funds previously deducted by the taxpayer or any other person
from the Iowa ABLE savings plan trust or other qualified ABLE program for
purposes other than the payment of qualified disability expenses, the amount of
the withdrawal shall be included in net income on the taxpayer's Iowa
individual income tax return to the extent that contributions to the account
had been deducted on prior Iowa individual income tax returns of the taxpayer
or any other person as contributions to a qualified ABLE program or an Iowa
educational savings plan trust account.
(6)
Maximum contribution
level. The amount of the deduction available for an individual
taxpayer each year for contributions on behalf of any one designated
beneficiary to the Iowa ABLE savings plan trust or other qualified ABLE program
may not exceed the maximum contribution level for that year. The maximum
contribution level is set by the treasurer of state. The maximum contribution
level is indexed yearly for inflation pursuant to Iowa Code section
12D.3(1).
This rule is intended to implement Iowa Code section
422.7.
