This bill amends New Jersey law to allow distributions from a New Jersey Better Educational Savings Trust (NJBEST) account to a Roth IRA to be classified as qualified withdrawals, thereby exempting these distributions from state income tax. The amendments align state law with recent changes in federal tax law under section 529 of the Internal Revenue Code, which permits special rollovers from 529 savings accounts to Roth IRAs. The bill specifies that for a rollover to qualify, the 529 account must have been open for at least 15 years, the Roth IRA must be in the name of the designated beneficiary, the funds must originate from deposits made at least five years prior to the rollover, and the total rollover amount cannot exceed $35,000.

In addition to defining the conditions for the rollover, the bill updates the definitions of "qualified withdrawal" and "qualified higher education expenses" in accordance with federal law. It clarifies that a qualified withdrawal now includes the special rollover to a Roth IRA, ensuring that such transactions do not incur state income tax. The bill is set to take effect immediately and will be retroactive to taxable years beginning on or after January 1, 2024.

Statutes affected:
Introduced: 54A:6-25