ISSUE

Non-technical degrees, certificate programs, and apprenticeship programs may be opportunities that figure into your institution’s future.  The Department of Education offers options in these arenas.  Now, a new bill – introduced last week – in the House of Representatives could provide further incentives.

SITUATION

Troas Bible College (TBC) is a private college exempt under Internal Revenue Code section 501(c)(3) and 170(b)(1)(A)(ii).  They are required to file Form 990 annually.

TBC’s Controller called to ask about a certificate program that they are contemplating instituting.  “Can Section 529 – college savings funds – be used for things other than degree programs?”

“Well,” we say, “the ‘Tax Cuts and Jobs Act’ opened the 529 door to expenses for K-12 education expenses.  Historically, Section 529 plans could pay for ‘qualified higher education expenses’ including tuition, fees, textbooks, supplies and equipment required for enrollment, etc.  And, now, there is a new bill that has been introduced in Congress that could expand the use of ‘529 funds’ by expanding the definition of ‘qualified higher education expenses.’  Again, it’s just a ‘bill’ at this point (refer to Schoolhouse Rock, ‘I’m Just a Bill’ for more information), but we will be watching the progress of it and keep you informed.”

“Okay, so what would the expanded definition of qualified higher education expenses include.”

“Technically, according to the verbiage in the Workforce Innovation and Opportunity Act, ‘a credential consisting of an industry-recognized certificate or certification, a certificate of completion of an apprenticeship, a license recognized by the State involved or Federal Government, or an associate or baccalaureate degree.’”

 

RULES

Text of H.R. 4469, American Workforce Empowerment Act:

SECTION 1. Short title.

This Act may be cited as the “American Workforce Empowerment Act”.

SEC. 2. 529 account funding for non-degree technical training certificate programs and apprenticeship programs.

(a) In general. – Section 529(c) of the Internal Revenue Code of 1986 is amended by adding at the end the following:

“(8) TREATMENT OF TECHNICAL TRAINING CERTIFICATE PROGRAMS AND APPRENTICESHIP PROGRAMS. –

“(A) IN GENERAL. – Any reference in this subsection to the term ‘qualified higher education expense’ shall include a reference to expenses described in paragraph (3) in connection with—

“(i) enrollment or attendance in a program leading to a recognized post-secondary credential (as defined in section 3 of the Workforce Innovation and Opportunity Act, and

“(ii) an apprenticeship registered under the Act of August 16, 1937 (commonly known as the ‘National Apprenticeship Act’).

“(B) TOOLS AND EQUIPMENT. – For purposes of subparagraph (A), expenses includes expenses for tools and equipment required for enrollment or attendance in a program described in subparagraph (A)(i) or participation in an apprenticeship described in subparagraph (A)(ii).”.

(b) Effective date. – The amendment made by this section shall apply to expenses paid or incurred after the date of the enactment of this Act for programs beginning after the date of the enactment of this Act.

From Text of “Workforce Innovation and Opportunity Act”, Section 3:

Sec. 3.  Definitions.

(52) Recognized postsecondary credential. — The term “recognized postsecondary credential” means a credential consisting of an industry-recognized certificate or certification, a certificate of completion of an apprenticeship, a license recognized by the State involved or Federal Government, or an associate or baccalaureate degree.

 

BOTTOM LINE

  • You likely have students using I.R.C. Section 529 plans to pay for “qualified higher education expenses.”
  • The TCJA expanded the uses of Section 529 funds to K-12 expenses allowing withdrawals of up to $10,000 per year to pay for public, private, religious elementary or secondary school tuition.
  • Many Section 529 plans are sponsored by states and may have specific state-by-state limitations.
  • Let’s keep an eye on H.R. 4469 as it works its way through Congress.  This provision, if enacted, might help to open creative opportunities for your institution.

Specific questions? Email Dave Moja

The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.

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