§ 47–4509. Local tax exemption.

(a) An account owner who files an income tax return in the District of Columbia may claim a deduction in an annual amount not to exceed $4,000 for contributions made to all accounts under the Program. With respect to married individuals (or domestic partners registered under § 32-702) filing a joint return, each married individual (or domestic partner registered under § 32-702) may claim a deduction in an annual amount not to exceed $4,000 for contributions made to all accounts under the Program for which the married individual (or domestic partner registered under § 32-702) is the account owner.

(b) If an amount greater than $4,000 is contributed to one or more accounts in a tax year, the excess may be carried forward as a deduction, subject to the annual limit, for 5 years.

(c) Any deduction taken under this section shall be subject to recapture with respect to a withdrawal or rollover taken within 2 years of the establishment of the account for any reason other than provided in subsection (d) of this section. In addition, notwithstanding the statute of limitations on assessments in § 47-912 [repealed], any deduction taken under this section shall be subject to recapture in the taxable year in which the withdrawal or rollover is made after 2 years of the establishment of the account for any reason other than provided in subsection (d) of this section or to transfer to another qualified tuition program.

(d) Deductions taken under this section shall not be subject to recapture as provided in subsection (c) of this section if:

(1) The funds are used to pay for qualified higher education expenses;

(2) The beneficiary dies, develops a disability, or receives a scholarship;

(3) The beneficiary receives a scholarship; provided, that the exemption shall be limited to the amount of the scholarship; or

(4) The funds are transferred to another account maintained under the Program.

(e) Subject to subsection (f) of this section, earnings on accounts shall be exempt from District of Columbia income taxation.

(f) Qualified withdrawals shall be exempt from District of Columbia income taxation. The portion of any other withdrawal that is attributable to account earnings shall be subject to District of Columbia income taxation in the year in which the withdrawal is made.

(Mar. 31, 2001, D.C. Law 13-212, § 2(b), 47 DCR 9457; June 5, 2003, D.C. Law 14-307, § 2402(i), 49 DCR 11664; Mar. 14, 2007, D.C. Law 16-292, § 2(i), 54 DCR 1080; Apr. 24, 2007, D.C. Law 16-305, § 73(j), 53 DCR 6198; May 13, 2008, D.C. Law 17-153, § 2, 55 DCR 3460; Mar. 25, 2009, D.C. Law 17-353,§ 172(e)(3), 56 DCR 1117.)

Effect of Amendments

D.C. Law 14-307 rewrote the section which had read as follows: “Contributions made by account owners to, and earnings on, accounts shall be exempt from District of Columbia income taxation.”

D.C. Law 16-292, in subsec. (a), substituted “married individuals (or domestic partners registered under § 32-702)” for “married individuals” and “married individual (or domestic partner registered under § 32-702)” for “married individual”.

D.C. Law 16-305, in subsec. (d)(2), substituted “has a disability” for “becomes disabled”.

D.C. Law 17-153, in subsecs. (a) and (b), substituted “$4,000” for “$3,000”.

D.C. Law 17-353, in subsec. (d)(2), substituted “develops a disability” for “has a disability”.

Emergency Legislation

For temporary (90 day) amendment of section, see § 2402(i) of Fiscal Year 2003 Budget Support Amendment Emergency Act of 2002 (D.C. Act 14-544, December 4, 2002, 49 DCR 11700).

For temporary (90 day) amendment of section, see § 2(f) of College Savings Program Emergency Act of 2002 (D.C. Act 14-374, May 20, 2002, 49 DCR 5114).

For temporary (90 day) amendment of section, see § 2402(i) of the Fiscal Year 2003 Budget Support Amendment Congressional Review Emergency Act of 2003 (D.C. Act 15-27, February 24, 2003, 50 DCR 2151).

For temporary (90 day) amendment of section, see § 2402(i) of Fiscal Year 2003 Budget Support Amendment Second Congressional Review Emergency Act of 2003 (D.C. Act 15-103, June 20, 2003, 50 DCR 5499).

Temporary Legislation

For temporary (225 day) amendment of section, see 2(b) of College Savings Program Temporary Act of 2002 (D.C. Law 14-186, October 1, 2002, 49 DCR 9244).

Editor's Notes

Section 3 of D.C. Law 17-153 provided: “This act shall apply upon the inclusion of its fiscal effect in an approved budget and financial plan.”