Details of Public Law 119-21, section 70414 , One Big Beautiful Bill Act

Applies to distributions made after 07/04/2025.

The provision provides that qualified postsecondary credentialing expenses are to be treated as qualified higher education expenses eligible for an IRC section 529 distribution. The provision defines eligible postsecondary credentialing expenses to include tuition, fees, books, supplies, and equipment required for enrollment or attendance at a recognized, postsecondary credential program, and any other expense incurred in connection with enrollment or attendance at a recognized postsecondary credential program if the expense would be considered a higher education expense if incurred in connection with enrollment or attendance at an eligible education institution. Qualified postsecondary credentialing expenses also include fees for testing if it is required to obtain or maintain a recognized postsecondary credential, and fees for continuing education is required to maintain a recognized postsecondary credential.

Recognized postsecondary credential means a credential that is issued by a program accredited by the Institute for Credentialing Excellence, the National Commission on Certifying Agencies, or the American National Standards Institute, as well as any program included in the Credentialing Opportunities On-Line directory maintained by the Department of Defense or any branch of the Armed Forces, or programs identified by the Secretary.

California law, under the PITL and the CTL, conforms to IRC section 529, relating to qualified tuition programs, as of the specified date of January 1, 2025, with modifications, and does not conform to IRC section 529 rules relating to postsecondary credentialing expenses. As a result, CA does not conform to the provision’s new federal rules for treating postsecondary credentialing expenses as qualified higher education expenses.

The California Kids Investment and Development Savings Program (CalKIDS), administered by the Scholarshare Investment Board, authorizes low-income individuals to establish accounts in accordance with IRC section 529 for qualified higher education expenses, as defined in IRC section 529. The CalKIDS program allows for an exclusion from gross income for funds deposited and investment returns accrued in a CalKIDS account. The CalKIDS program conforms to federal amendments to the IRC if the Scholarshare Investment Board determines that the IRC amendment is consistent with the purposes of the CalKIDS program. If the Scholarshare Investment Board determines that the amendment to the definition of qualified higher education expenses to include qualified postsecondary credentialing expenses as eligible for an IRC section 529 distribution furthers the purposes of the CalKIDS program, the board may conform to those provisions.

The estimated revenue impact to conform to the above provision would result in the following loss:

26/27 27/28 28/29 29/30 ($250,000) ($250,000) ($350,000) ($500,000)