17206.2.
(a) For taxable years beginning on or after January 1, 2020, and before January 1, 2025, 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, but in no event shall the deduction amount exceed the following:(1) In the case of a qualified taxpayer who is a head of household, a surviving spouse, as defined in Section 17046, or a married couple filing a joint return, ten thousand dollars ($10,000).
(2) In
the case of a qualified taxpayer filing a return other than as described in paragraph (1), five thousand dollars ($5,000).
(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 qualified tuition program for which the individual, or a spouse in the case of a married couple filing a joint return, is the account owner and whose adjusted gross income does not exceed the following:
(A) In the case of a qualified 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 qualified 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) For each taxable year beginning on or after January 1, 2021, the Franchise Tax Board shall recompute the adjusted gross income limits specified in paragraph (2) of subdivision (b) by multiplying the adjusted gross income limit for the preceding taxable year by the inflation adjustment factor computed pursuant to subparagraph (A) of paragraph (2) of subdivision (h) of Section 17041, rounded off to the nearest dollar.
(d) (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, 2020, and before January 1, 2025.
(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.
(e) 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.
(f) A qualified taxpayer shall maintain records that are adequate to substantiate any deduction allowed under this section, and shall, upon request, provide such records to the Franchise Tax Board.
(g) (1) The Franchise Tax Board may adopt
regulations necessary or appropriate to carry out the purposes of this section.
(2) The Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) does not apply to any standard, criterion, procedure, determination, rule, notice, or guideline established or issued by the Franchise Tax Board pursuant to this section.
(h) This section shall be repealed on December 1, 2025.