2019 Arkansas Code
Title 20 - Public Health and Welfare
Subtitle 1 - General Provisions
Chapter 3 - Achieving a Better Life Experience Program Act
§ 20-3-111. Funds Exempt From Tax
(a) Except as otherwise indicated in this chapter, interest, dividends, and capital gains from funds invested in the Achieving a Better Life Experience Program are exempt from Arkansas income taxes.
(b)
(1) A qualified distribution from a disability savings account established under the Achieving a Better Life Experience Program is exempt from Arkansas income tax with respect to the designated beneficiary's income.
(2)
(A) Nonqualified distributions from a disability savings account established under the Achieving a Better Life Experience Program are subject to Arkansas income tax.
(B) The nonqualified distribution is taxable to the party, account owner, or designated beneficiary who actually makes the withdrawal.
(c) Earnings on a contribution that are included in a refund are subject to Arkansas income tax if an account owner receives a refund of contributions to a disability savings account established under the Achieving a Better Life Experience Program because of either:
(1) The death or disability of the designated beneficiary; or
(2) A scholarship, allowance, or payment described in 26 U.S.C. § 135(d)(1)(B) or (d)(1)(C), as in effect on January 1, 2014, received by the designated beneficiary.
(d)
(1) Contributions to a disability savings account established under this chapter may be deducted from the taxpayer's adjusted gross income for the purpose of calculating Arkansas income tax under § 26-51-403(b).
(2) Deductible contributions under this subsection shall not exceed five thousand dollars ($5,000) per taxpayer in a tax year.
(3) A contribution that has been deducted from a taxpayer's income for a prior tax year under this subsection is subject to recapture if the taxpayer:
(A) Takes a subsequent nonqualified distribution from the account; or
(B) Rolls the account over to a tax-deferred savings program established by another state or institution under 26 U.S.C. § 529A.
(4) A contribution that is subject to recapture under this subsection shall be recaptured by adding the amount previously deducted, not to exceed the amount of the nonqualified distribution, to the taxpayer's adjusted gross income for the tax year in which the nonqualified distribution occurred.
