Bill
AB 2444
California adds a temporary deduction (2026–2031/32) for Scholarshare 529 contributions and conforms to federal QTP rules, plus enhanced data reporting.
Proposed by Assembly Member Michelle Rodriguez, AB 2444 would make California conforming and newly targeted changes to the state tax code related to qualified tuition programs (QTPs), specifically the Scholarshare 529 college savings program, with several temporary (sunset-like) provisions and data-related requirements. The measure takes immediate effect as a tax levy.
Key purposes and intent
- Align California tax treatment with certain federal tax provisions for qualified tuition programs, and create a state-specific deduction for contributions to the California 529 program.
- Provide a temporary deduction to encourage families to save for higher education costs through Scholarshare.
- Enhance data collection and reporting on the use and impact of the Scholarshare program to measure the program’s effectiveness and outcomes.
Main provisions and changes
1) Conformity to federal exclusion for certain QTP distributions
- For tax years beginning on or after January 1, 2026, and before January 1, 2030 (2031 in the text’s later reference), California conforms to the federal exclusion that distributions from a qualified tuition program transferred directly to a Roth IRA are not included in gross income for federal purposes. This is a change from current state treatment and brings CA in line with federal rules for those years.
2) New deduction for Scholarshare contributions
- From tax years beginning on or after January 1, 2026, through December 31, 2031 (2032 is listed in the text), individuals may claim a deduction for cash contributions to a California qualified tuition program (Scholarshare) on their federal-conformity-adjusted California gross income.
- Deduction limits:
- Head of household, surviving spouse, or married filing jointly: up to $10,000 per tax year.
- All other qualified taxpayers: up to $5,000 per tax year.
- The deduction is tied to contributions to Scholarshare accounts established under the Scholarshare Trust Act (Education Code provisions governing the Scholarshare program) and applies only to cash contributions to the California-qualified 529 program.
- The deduction applies to contributions made on behalf of a beneficiary where the taxpayer (or spouse, if joint return) is the account owner, and the taxpayer’s adjusted gross income must not exceed:
- For the higher-income categories (head of household, surviving spouse, or joint filers): AGI up to $150,000 (HOH/surviving) or $200,000 (joint).
- For other filers: AGI up to $75,000 (HOH/surviving) or $100,000 (joint).
- A phase-in of AGI limits occurs, with annual inflation-based adjustments commencing in future years (rising through subsequent tax years).
3) Revisions to 529-related provisions
- The bill modifies sections of the Revenue and Taxation Code to reflect the revised treatment of QTP distributions and the new deduction, and it aligns cross-references with the 529 plan provisions and the California Scholarshare Trust Act.
- The bill maintains compatibility with federal 529 rules, including how qualified higher education expenses and rollovers are treated, but carves out California-specific conforming changes for the 2026–2031 window.
4) Data collection, reporting, and transparency
- The bill adds specific data collection requirements for any new tax expenditure:
- The Scholarshare Investment Board must collect data on deductions claimed, total Scholarshare contributions, and conduct surveys of new and existing Scholarshare account owners regarding motivations and behavior.
- The Board must deliver periodic reports to the Legislature (by July 1, 2027, and annually thereafter) detailing baseline and trend data, including the impact of the deduction and program participation.
- The 19548.3.5 section requires sharing of identifying information between the Scholarshare Investment Board and the Franchise Tax Board to support these data collection efforts, with protections for destruction of data after use.
5) Administrative and procedural notes
- The bill explicitly states it provides a tax levy and takes immediate effect.
- The Franchise Tax Board is empowered to adopt regulations necessary to implement the new deduction and conformity provisions. The bill provides an exception to the normal Administrative Procedure Act for these standards and guidelines.
Who would be affected
- California taxpayers who contribute cash to the California-qualified Scholarshare 529 program.
- Households with children or dependents planning for postsecondary education who contribute to Scholarshare and meet the AGI thresholds.
- The Franchise Tax Board, Scholarshare Investment Board, and participating financial institutions administering Scholarshare accounts.
Timeline and effective dates
- Immediate effect as a tax levy upon enactment.
- Conformity and deduction provisions apply for tax years beginning 2026 through 2031 (2032 reference appears in the text—matters of who is included in the applicable range should be clarified in final language).
- Annual inflation adjustments to AGI-based eligibility beginning in 2027 or as specified.
Notes for readers
- The bill introduces a temporary California deduction for Scholarshare contributions and aligns some California 529 provisions with federal changes, accompanied by enhanced data reporting to track outcomes.
- As a levy with immediate effect, stakeholders will want to monitor for regulatory guidance from the Franchise Tax Board and the Scholarshare Investment Board, as well as any refinements in amendments during the legislative process.
Compiled from official sources — confirm details with the bill’s official record.
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