17141.

 (a) Notwithstanding any other provision of this part or Part 11 (commencing with Section 23001) to the contrary, any amount deposited by a taxpayer during the taxable year in an education savings account shall not be includable in the gross income of the beneficiary of the account, except as otherwise provided in this section.

(b) For purposes of this section:

(1) “Education savings account” means a trustee or custodial account that meets both of the following requirements:

(A) Is established by an individual, or established jointly by an individual and his or her spouse, and designated as an education savings account by the trustee or custodian.

(B) Is established for the exclusive benefit of any individual establishing the account or his or her spouse, or their dependents, if the written governing instrument creating the account provides for the following:

(i) All contributions to the account are required to be in cash.

(ii) The account is established to pay, pursuant to the requirements and limitations of this section, for the qualified education expenses of an individual establishing the account or his or her spouse, or their dependents.

(2) “Trustee or custodian” means a bank as defined by Section 408(n) of the Internal Revenue Code, or any person authorized pursuant to Section 409(a) of the Internal Revenue Code, to act as the trustee or custodian of an individual retirement account.

(3) “Qualified education expenses” means education expenses related to attending a school teaching kindergarten and grades 1 to 12, inclusive, in this state. “Education expenses” include tuition, fees, books, supplies, equipment, room and board, academic tutoring, the purchase of computer technology, equipment, or Internet access or related services, uniforms, transportation, and supplementary items and services such as extended day programs as required or provided by the school.

(4) “Dependent” shall have the same meaning as that term is defined by Section 152 of the Internal Revenue Code.

(c) Any amount withdrawn or distributed from an education savings account shall be subject to a penalty in an amount equal to 10 percent of the payment or distribution, unless the payment or distribution is made to pay for the qualified education expenses of an individual that established the account or his or her spouse or their dependents.

(d) Notwithstanding any other provision of this part, the transfer of an individual’s interest in an education savings account to his or her former spouse under a dissolution decree or under a written instrument incident to a dissolution is not to be considered a taxable transfer made by that individual as long as the transferred moneys are deposited into another education savings account established by the former spouse.

(e) The trustee or custodian of an education savings account shall make annual calendar year reports concerning the status of the account. The report shall contain the information required in paragraph (1) and be furnished or filed in the manner and time specified in paragraph (2).

(1) The annual calendar year report shall contain the following information for transactions occurring during the calendar year:

(A) The amount of contributions.

(B) The amount of distributions.

(C) The name and address of the trustee or custodian.

(D) Any other information as the Franchise Tax Board may require.

(2) The annual report shall be furnished to the individual on whose behalf the account is established. The report shall be furnished on or before the first day of February following the calendar year for which the report is required. The Franchise Tax Board may require the annual report to be filed with the board at the time the board specifies.

(f) The trustee or custodian of an education savings account shall provide a disclosure statement to the individual for whom the account is established. The disclosure statement shall contain the information and shall be in a form as may be required by the Franchise Tax Board.

(g) Notwithstanding any other law, for purposes of this part and Part 11 (commencing with Section 23001), any interest earned by the education savings account shall be exempt from taxation if the distributions are made for purposes of paying qualified education expenses.