§ 6-84-111 — Funds exempt from tax - Definitions

(a) (1) Except as otherwise indicated in this chapter, interest, dividends, and capital gains from funds invested in the Arkansas Brighter Future Fund Plan or a tax-deferred tuition savings program established by another state under 26 U.S.C. § 529 , as in effect on January 1, 2020, shall be exempt from Arkansas income taxes. (2) For purposes of this section: (A) "Taxpayer employee" means an employee of an employer with an account established under this chapter; and (B) "Taxpayer employer" means a person that employs an individual with an account established under this chapter. (b) (1) Contributions to a tuition savings account established under this plan may be deducted from the taxpayer's adjusted gross income for the purpose of calculating Arkansas income tax under § 26-51-403(b) . (2) (A) The deductible contributions shall not exceed five thousand dollars ($5,000) per taxpayer employee in any tax year. (B) If the aggregate amount of contributions by a taxpayer during a tax year exceeds the limitation under subdivision (b)(2)(A) of this section, the unused aggregate amount may be carried forward to the next succeeding four (4) tax years. (C) A taxpayer employer may make a matching contribution to the account of a taxpayer employee with an account established under this chapter that does not exceed five hundred dollars ($500) per contributing employee per year. (3) Contributions to this plan that have been deducted from the taxpayer employee's adjusted gross income for prior tax years shall be subject to recapture from the taxpayer employee if the taxpayer employee: (A) Makes a subsequent nonqualified withdrawal from the account; or (B) Rolls the account over to a tax-deferred tuition savings program established by another state or institution under 26 U.S.C. § 529 , as in effect on January 1, 2020. (4) (A) The contribution shall be recaptured by adding the amount previously deducted, not to exceed the amount of the nonqualified withdrawal or rollover, to the taxpayer employee's adjusted gross income for the tax year in which the nonqualified withdrawal or rollover occurred. (B) The nonqualified withdrawal or rollover shall be taxable to the taxpayer employee, party, account owner, or designated beneficiary who actually makes the nonqualified withdrawal or rollover. (c) (1) (A) For tax years beginning on or after January 1, 2017, contributions to a tuition savings account established under this plan or a tax-deferred tuition savings program established by another state under 26 U.S.C. § 529 , as it existed on January 1, 2017, may be deducted from the taxpayer's adjusted gross income for the purpose of calculating Arkansas income tax under § 26-51-403(b) . (B) A taxpayer may not deduct from the taxpayer's adjusted gross income a contribution to a tax-deferred tuition savings program established by another state if the taxpayer deducted the contribution in another state or on another state's income taxes. (2) (A) The deductible contributions for a tuition savings account established under this chapter shall not exceed five thousand dollars ($5,000) per taxpayer in any tax year. (B) If the aggregate amount of contributions by a taxpayer during a tax year exceeds the limitation under subdivision (c)(2)(A) of this section, the unused aggregate amount may be carried forward to the next succeeding four (4) tax years. (C) The deductible contributions for a tax-deferred tuition savings program established by another state under 26 U.S.C. § 529 , as it existed on January 1, 2017, shall not exceed three thousand dollars ($3,000) per taxpayer in any tax year. (D) The deductible contributions for a tax-deferred tuition savings program established by another state under 26 U.S.C. § 529 , as it existed on January 1, 2017, that are rolled over into a tuition savings account established under this chapter shall not exceed seven thousand five hundred dollars ($7,500) per taxpayer in the tax year in which they were rolled over. (d) (1) (A) For tax years beginning on or after January 1, 2018, contributions to a tuition savings account established under the plan or a tax-deferred tuition savings program established by another state under 26 U.S.C. § 529 , as it existed on January 1, 2018, may be deducted from the taxpayer's adjusted gross income for the purpose of calculating Arkansas income tax under § 26-51-403(b) . (B) A taxpayer may not deduct from the taxpayer's adjusted gross income a contribution to a tax-deferred tuition savings program established by another state if the taxpayer deducted the contribution in another state or on another state's income taxes. (2) (A) The deductible contributions for a tuition savings account established under this chapter shall not exceed five thousand dollars ($5,000) per taxpayer in any tax year. (B) If the aggregate amount of contributions by a taxpayer during a tax year exceeds the limitation under subdivision (d)(2)(A) of this section, the unused aggregate amount may be carried forward to the next succeeding four (4) tax years. (C) The deductible contributions for a tax-deferred tuition savings program established by another state under 26 U.S.C. § 529 , as it existed on January 1, 2018, shall not exceed three thousand dollars ($3,000) per taxpayer in any tax year. (D) The deductible contributions for a tax-deferred tuition savings program established by another state under 26 U.S.C. § 529 , as it existed on January 1, 2018, that are rolled over into a tuition savings account established under this chapter shall not exceed seven thousand five hundred dollars ($7,500) per taxpayer in the tax year in which they were rolled. (e) (1) (A) For tax years beginning on and after January 1, 2021, contributions to a tuition savings account established under the plan or a tax-deferred tuition savings program established by another state under 26 U.S.C. § 529 , as in effect on January 1, 2020, may be deducted from the taxpayer's adjusted gross income for the purpose of calculating Arkansas income tax under § 26-51-403(b) . (B) A taxpayer may not deduct from the taxpayer's adjusted gross income a contribution to a tax-deferred tuition savings program established by another state if the taxpayer deducted the contribution in another state or on another state's income taxes. (2) (A) The deductible contributions for a tuition savings account established under this chapter shall not exceed five thousand dollars ($5,000) per taxpayer in any tax year. (B) If the aggregate amount of contributions by a taxpayer during a tax year exceeds the limitation under subdivision (e)(2)(A) of this section, the unused aggregate amount may be carried forward to the next succeeding four (4) tax years. (C) The deductible contributions for a tax-deferred tuition savings program established by another state under 26 U.S.C. § 529 , as in effect on January 1, 2020, shall not exceed three thousand dollars ($3,000) per taxpayer in any tax year. (D) The deductible contributions for a tax-deferred tuition savings program established by another state under 26 U.S.C. § 529 , as in effect on January 1, 2020, that are rolled over into a tuition savings account established under this chapter shall not exceed seven thousand five hundred dollars ($7,500) per taxpayer in the tax year in which they were rolled over. (f) (1) Qualified withdrawals from a tuition savings account established under this plan or a tax-deferred tuition savings program established by another state under 26 U.S.C. § 529 , as in effect on January 1, 2020, will be exempt from Arkansas income tax with respect to the designated beneficiary's income. (2) (A) Nonqualified withdrawals from a tuition savings account established under this plan or a tax-deferred tuition savings program established by another state under 26 U.S.C. § 529 , as in effect on January 1, 2020, will be subject to Arkansas income tax. (B) The nonqualified withdrawal will be taxable to the party, account owner, or designated beneficiary who actually makes the withdrawal. (g) Any earnings on the contribution that are included in the refund will be subject to Arkansas income tax if an account owner receives a refund of contributions to a tuition savings account established under this plan or a tax-deferred tuition savings program established by another state under 26 U.S.C. § 529 , as in effect on January 1, 2020, because of either: (1) The death or disability of the designated beneficiary; or (2) A scholarship, allowance, or payment described in 26 U.S.C. § 135(d)(1)(B) or (d)(1)(C) , as in effect on January 1, 2018, received by the designated beneficiary.

Legislative History

Amended by Act 2021, No. 966,§ 20, eff. 7/28/2021. Amended by Act 2021, No. 966,§ 19, eff. 7/28/2021. Amended by Act 2021, No. 966,§ 18, eff. 7/28/2021. Amended by Act 2021, No. 966,§ 17, eff. 7/28/2021. Amended by Act 2021, No. 966,§ 16, eff. 7/28/2021. Amended by Act 2021, No. 966,§ 15, eff. 7/28/2021. Amended by Act 2018EX2, No. 15,§ 4, eff. for tax years beginning on or after 1/1/2018. Amended by Act 2018EX2, No. 8,§ 4, eff. 1/1/2018. Amended by Act 2017, No. 884,§ 13, eff. 8/1/2017. Amended by Act 2017, No. 883,§ 1, eff. 8/1/2017. Amended by Act 2017, No. 481,§ 1, eff. 8/1/2017. Amended by Act 2017, No. 155,§ 7, eff. for tax years beginning on and after 1/1/2015. Amended by Act 2015, No. 580,§ 11, eff. for tax years beginning on or after January 1, 2014. Acts 1999, No. 996, § 13; 2003, No. 515, § 1; 2003, No. 663, § 1; 2005, No. 1973, § 1; 2007, No. 218, § 7; 2011, No. 787, § 7.