Par. 2. An undesignated centerheading and Secs. 1.529-0 through 1.529-6 are added to read as follows:
This section lists the following captions contained in Secs. 1.529- 1 through 1.529-6:
Sec. 1.529-1 Qualified State tuition program, unrelated business income tax and definitions.
(a) In general. (b) Unrelated business income tax rules. (1) Application of section 514. (2) Penalties and forfeitures. (3) Administrative and other fees. (c) Definitions.
Sec. 1.529-2 Qualified State tuition program described.
(a) In general. (b) Established and maintained by a State or agency or instrumentality of a State. (1) Established. (2) Maintained. (3) Actively involved. (c) Permissible uses of contributions. (d) Cash contributions. (e) Penalties on refunds. (1) General rule. (2) More than de minimis penalty. (i) In general. (ii) Safe harbor.
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(3) Separate distributions. (4) Procedures for verifying use of distributions and imposing and collecting penalties. (i) In general. (ii) Safe harbor. (A) Distributions treated as payments of qualified higher education expenses. (B) Treatment of all other distributions. (C) Refunds of penalties. (D) Documentation of amounts refunded and not used for qualified higher education expenses. (E) Procedures to collect penalty. (f) Separate accounting. (g) No investment direction. (h) No pledging of interest as security. (i) Prohibition on excess contributions. (1) In general. (2) Safe harbor.
Sec. 1.529-3 Income tax treatment of distributees.
(a) Taxation of distributions. (1) In general. (2) Rollover distributions. (b) Computing taxable earnings. (1) Amount of taxable earnings in a distribution. (i) Educational savings account. (ii) Prepaid educational services account. (2) Adjustment for programs that treated distributions and earnings in a different manner for years beginning before January 1, 1999. (3) Examples. (c) Change in designated beneficiaries. (1) General rule. (2) Scholarship program. (d) Aggregation of accounts.
Sec. 1.529-4 Time, form, and manner of reporting distributions from QSTPs and backup withholding.
(a) Taxable distributions. (b) Requirement to file return. (1) Form of return. (2) Payor. (3) Information included on return. (4) Time and place for filing return. (5) Returns required on magnetic media. (6) Extension of time to file return. (c) Requirement to furnish statement to the distributee. (1) In general. (2) Information included on statement. (3) Time for furnishing statement. (4) Extension of time to furnish statement. (d) Backup withholding. (e) Effective date.
Sec. 1.529-5 Estate, gift, and generation-skipping transfer tax rules relating to qualified State tuition programs.
(a) Gift and generation-skipping transfer tax treatment of contributions after August 20, 1996, and before August 6, 1997. (b) Gift and generation-skipping transfer tax treatment of contributions after August 5, 1997. (1) In general. (2) Contributions that exceed the annual exclusion amount. (3) Change of designated beneficiary or rollover. (c) Estate tax treatment for estates of decedents dying after August 20, 1996, and before June 9, 1997. (d) Estate tax treatment for estates of decedents dying after June 8, 1997. (1) In general. (2) Excess contributions. (3) Designated beneficiary decedents.
Sec. 1.529-6 Transition rules.
(a) Effective date. (b) Programs maintained on August 20, 1996. (c) Retroactive effect. (d) Contracts entered into and accounts opened before August 20, 1996. (1) In general. (2) Interest in program pledged as security for a loan. (3) Member of the family. (4) Eligible educational institution.