1Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
2act relating to tax reform and State taxation by codifying
3and enumerating certain subjects of taxation and imposing
4taxes thereon; providing procedures for the payment,
5collection, administration and enforcement thereof; providing
6for tax credits in certain cases; conferring powers and
7imposing duties upon the Department of Revenue, certain
8employers, fiduciaries, individuals, persons, corporations
9and other entities; prescribing crimes, offenses and
10penalties," in personal income tax, further providing for
11classes of income; and, in inheritance tax, further providing
12for transfers not subject to tax.

13The General Assembly of the Commonwealth of Pennsylvania
14hereby enacts as follows:

15Section 1. Section 303(a.7)(1) of the act of March 4, 1971
16(P.L.6, No.2), known as the Tax Reform Code of 1971, added July
176, 2006 (P.L.319, No.67), is amended to read:

18Section 303. Classes of Income.--* * *

19(a.7) The following apply:

20(1) (i) An amount paid as a contribution into a qualified
21tuition program shall be deductible from taxable income on the
22annual personal income tax return. The amount paid as a

1contribution to a qualified tuition program allowable as a
2deduction under this subsection shall be subject to an annual
3limitation not to exceed the threshold for exclusion from gifts
4as provided in section 2503(b) of the Internal Revenue Code of
51986, as amended, per designated beneficiary. The deduction
6shall not result in taxable income being less than zero.

7(ii) If a contribution to a qualified tuition program
8exceeds the annual limitation in any taxable year, the amount of
9the contribution that exceeds the annual limitation may be
10carried forward and may be deductible for up to five taxable
11years after the taxable year in which the contribution is made.
12The amount deducted in any taxable year may not exceed the
13annual limitation.

14(iii) For taxable years beginning after December 31, 2013, a
15deduction under this paragraph may be taken for a taxable year
16for the contribution made during the taxable year and up to the
17date the taxpayer's tax return under this article is required to
18be filed pursuant to section 330 of this act.

19* * *

20Section 2. Section 2111 of the act is amended by adding a
21subsection to read:

22Section 2111. Transfers Not Subject to Tax.--* * *

23(u) (1) Contributions made pursuant to a qualified tuition
24program.

25(2) Any increase in the value of contributions under
26paragraph (1), the retention or transfer during life or as a
27result of death of any legal interest in a qualified tuition
28program.

29(3) Payment of qualified higher education expenses of a
30designated beneficiary made pursuant to a qualified tuition

1program.

2(4) For purposes of this subsection:

3(i) The term "designated beneficiary" shall have the same
4meaning as provided in section 529(e)(1) of the Internal Revenue
5Code of 1986.

6(ii) The term "qualified tuition program" shall have the
7same meaning as provided in section 529(b)(1) of the Internal
8Revenue Code of 1986.

9Section 3. The addition of section 2111(u) of the act shall
10apply to the estates of decedents dying on or after the
11effective date of this section.

12Section 4. This act shall take effect as follows:

13(1) The following provisions shall take effect in 60
14days:

15(i) The addition of section 2111(u) of the act.

16(ii) Section 3 of this act.

17(2) The remainder of this act shall take effect
18immediately.