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 under specific conditions. These conditions include the requirement that 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 rolled over must have been deposited at least five years prior, and the total rollover amount cannot exceed $35,000.

The bill also updates the definitions within the NJBEST program, specifically modifying the definition of "qualified withdrawal" to include these special rollovers and ensuring that such distributions do not count towards a taxpayer's gross income for state tax purposes. This change is intended to facilitate the use of NJBEST accounts for long-term savings and investment in higher education while providing tax benefits consistent with federal regulations. The act 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