ICI Supports Measures to Conform State, Federal Tax Treatment of 529 Plans

Washington, DC, April 29, 2003 - The Institute strongly supports measures to conform individual states' tax treatment of 529 plan withdrawals to federal tax treatment. In recent letters to Maine and Illinois legislators, the Institute urges the states to conform with federal law and exclude the tax on the earnings portion of distributions from all 529 plans (both in-state and out-of-state plans).

In a letter to Illinois legislators, the Institute expresses support for SB 529, a bill that would amend Illinois law to provide residents with an exclusion from gross income for amounts withdrawn from any state 529 plan that would qualify for exclusion under federal law.

The Institute also urged the governor of Maine to work to conform state law to federal treatment of withdrawals from 529 plans for higher education expenses. Specifically, a letter from the Institute notes that conformity between state and federal law would simplify tax compliance and eliminate unnecessary confusion for investors.

The Institute has long supported efforts to educate investors about the benefits of saving for education, including regulatory efforts to promote investor understanding of the state tax consequences associated with an investment in a Section 529 college savings plan.