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HB 5783

AN ACT RELATING TO TAXATION -- ESTATE AND TRANSFER TAXES -- LIABILITY AND COMPUTATION

2025 Regular Session Introduced by Deb Fellela and 1 co-sponsor

Michigan updates its 529-like MESP to match federal changes, allowing funds to pay apprenticeship expenses and student loan principal/interest, with updated IRC references.

05/06/2025 Committee recommended measure be held for further study
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Bill Summary · HB 5783

Summary — HB 5783 (Public Act 195 of 2024)

Status: Enacted (PA 195’24). Approved by Governor Jan 16, 2025. Effective date: April 2, 2025.
Statutory changes: Amends the Michigan Education Savings Program Act (2000 PA 161), sections 2 and 16 (MCL 390.1472 & 390.1486).

Purpose

To update the Michigan Education Savings Program (MESP) law so state treatment of 529-style education savings accounts conforms to recent federal changes to Internal Revenue Code (IRC) Section 529 — specifically to allow 529 funds to be used for certain apprenticeship-related expenses and for repayment of qualified education loans, and to update the IRC reference date used in the statute.

Key provisions

  • Updates the statutory definition of “Internal revenue code” used in the MESP Act to mean the U.S. IRC of 1986 in effect on January 1, 2024, or, at the taxpayer’s option, the IRC in effect for the current year. (Previously referenced the IRC as of Jan. 1, 2002.)
  • Expands the definition of “qualified higher education expenses” (i.e., the permitted tax-favored uses of account funds) to expressly include:
    • Fees, books, supplies, and equipment required for participation in an apprenticeship program (consistent with IRC §529(c)(8)); and
    • Amounts paid as principal or interest on any qualified education loan (consistent with IRC §529(c)(9)).
  • Clarifies tax treatment in the act: contributions to and interest earned on an education savings account are exempt from state taxation as provided in the income tax act (section 30); withdrawals are taxable as provided in that same section when applicable.

Who is affected

  • Account owners and designated beneficiaries of Michigan education savings (529-like) accounts — including individuals, governmental agencies, 501(c)(3) nonprofits, estates/trusts, and corporations that establish accounts under MESP.
  • Families and students participating in apprenticeship programs or repaying qualified education loans, who can now use MESP account funds for those expenses without losing tax-preferred status under state law (subject to applicable federal/state rules).
  • State administrators — minor updates to program materials and account documentation to reflect the definitional and allowable-use changes.

Fiscal and administrative impact

  • Nonpartisan legislative analyses estimate a negligible or minimal fiscal impact on state and local revenue.
  • Administrative costs are expected to be limited (e.g., updating guidance, websites, account materials).

Timeline / Procedural history (selected)

  • Introduced: June 5, 2024 (Rep. Christine Morse).
  • Passed House: Dec 5, 2024; passed Senate: Dec 19, 2024 (38–0).
  • Enrolled/Presented to Governor: Dec 23, 2024 / Jan 8, 2025.
  • Approved by Governor and filed with Secretary of State: Jan 16, 2025.
  • Effective: April 2, 2025.

Note: The changes align Michigan’s statutory references and permissible 529 uses with federal modifications enacted to IRC §529 prior to 2024.

Compiled from official sources — confirm details with the bill’s official record.

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