Common use of Education Tax Credits Clause in Contracts

Education Tax Credits. Use of Education Tax Credits by qualify- ing Account Owners and designated beneficiaries will not affect participa- tion in or receipt of benefits from a 529 Plan Account, so long as any distribu- tion from the 529 Plan Account is not used for the same expense for which the credit was claimed. Federal Gift and Estate Taxes Contributions (including certain rollover contributions but excluding contributions from a UGMA/UTMA account and certain trusts) to a Section 529 savings plan generally are consid- ered completed gifts to the designated beneficiary but qualify for the $14,000 annual gift and generation-skipping transfer tax exclusions. In cases where contributions to a Section 529 sav- ings plan exceed $15,000 annually, a contributor may elect on his or her gift tax return to treat the contribution as if it were made ratably over a five-year period. For example, a contributor who makes a $75,000 contribution in one year, and makes no other gifts to the designated beneficiary during the rest of that year or the next four years would not incur a gift or generation- skipping transfer tax. If contributions during such five-year period exceed $75,000, such excess contributions will be treated as a gift in the calendar year of the contribution. In the case of a contributor electing to split gifts with his or her spouse on his or her gift tax return, the available annual exclusion is $30,000 per designated beneficiary and the amount that may be prorated over five years is $150,000. Generally, if the Account Owner were to die while assets remain in a Section 529 savings Plan Account, the value of PLAN DESCRIPTION AND PARTICIPATION AGREEMENT the account would not be included in the Account Owner’s estate for tax pur- poses. However, if an Account Owner who has elected to treat a contribution ratably over a five-year period dies before the end of the five-year period, the portion of the contribution allocable to the years remaining in the five-year period (beginning with the year after the Account Owner’s death) would be included in the Account Owner’s estate for federal estate tax purposes. If the designated beneficiary for a Section 529 savings Plan Account is changed or amounts in an account are rolled over, resulting in a new desig- nated beneficiary who is a Member of the Family of the current designated beneficiary and in the same generation as the current designated beneficiary, such change or rollover will not be subject to gift tax or generation- skipping transfer tax. If the new designated beneficiary is of a lower generation than the current desig- nated beneficiary or is not a Member of the Family of the current designated beneficiary, such change or rollover will be treated as a gift from the current designated beneficiary to the new designated beneficiary for federal gift tax purposes, and will be subject to generation-skipping transfer tax pur- poses if the new designated beneficiary is two or more generations lower than the current designated beneficiary. Under the Proposed Regulations, these taxes are imposed on the current desig- nated beneficiary. Under the proposed regulations described in the advance notice of proposed rulemaking, the Account Owner would be liable for any such taxes. In each case, the gift and generation-skipping transfer tax an- nual exclusions transfer, and even the five-year averaging election discussed above may be applied to any such deemed transfer. The gross estate of a designated beneficiary of a Section 529 savings plan includes the value of the Section 529 savings Plan Account. Estate, gift, and generation-skipping tax issues arising in conjunction with 529 plans are complex. You should consult with your tax adviser regarding your specific situation. State Taxes and Other Consider- ations Prospective Account Owners should consider many factors before decid- ing to invest in the Plan, including the Plan’s investment options and perfor- xxxxx history, the Plan’s flexibility and features, the reputation and expertise of the Plan’s investment manager, the Plan’s contribution limits, the Plan’s fees and expenses, and federal tax benefits associated with an investment in the Plan. Nevada does not impose an income tax on individuals. Nevada residents should consult a qualified tax adviser regarding the application of Nevada tax rules and other states’ tax rules to their particular circumstances. In many states, the state and local income tax treatment of contributions, earnings, and distributions follows their treatment for federal income tax pur- poses, but in some states tax treatment differs. Account Owner should look to the state where Account Owner pays income tax to determine whether a rollover to an ABLE account would be subject to state income tax. You should consider before invest- ing, the following: Depending upon the laws of your home state or the home state of the designated beneficiary, favorable state tax treatment or other benefits offered by such home state for investing in 529 college savings plans such as financial aid, scholarship funds, and protection from creditors may be available only if you invest in the home state’s college savings plan. Since different states have different tax provisions, this Plan Description contains limited information about the state tax consequences of invest- ing in the Plan. Therefore, you should consult with your financial, tax, or legal adviser to learn more about how state-based benefits (including any limitations) would apply to your specific circumstances. You also may wish to contact your home state’s 529 plan(s), or any other 529 plan, to learn more about those plans’ fea- tures, benefits, and limitations. Keep in mind that any state-based benefit offered with respect to a particular 529 college savings plan should be one of many appropriately weighted factors to be considered in making an investment decision.

Education Tax Credits. Use of Education Tax Credits by qualify- ing qualifying Account Owners and designated beneficiaries will not affect participa- tion participation in or receipt of benefits from a 529 Plan an Account, so long as any distribu- tion withdrawal from the 529 Plan Account is not used for the same expense for which the credit was claimed. claimed.‌ Federal Gift and Estate Taxes Contributions (including certain rollover contributions but excluding contributions from a UGMA/UTMA account and certain trusts) to a Section 529 savings plan generally are consid- ered considered completed gifts to the designated beneficiary but qualify for the $14,000 15,000 annual gift and generation-skipping transfer tax exclusions. In cases where contributions to a Section 529 sav- ings plan exceed $15,000 annuallyannually (for 2021), a contributor may elect on his or her gift tax return to treat the contribution as if it were made ratably over a five-year period. For example, a contributor who makes a $75,000 (for 2021) contribution in one year, and makes no other gifts to the designated beneficiary during the rest of that year or the next four years would not incur a gift or generation- generation-skipping transfer tax. If contributions during such five-year period exceed $75,000, such excess contributions will be treated as a gift in the calendar year of the contribution. In the case of a contributor electing to split gifts with his or her spouse on his or her gift tax return, the available annual exclusion is $30,000 (for 2021) per designated beneficiary and the amount that may be prorated over five years is $150,000150,000 (for 2021). Generally, if the Account Owner were to die while assets remain in a Section 529 savings Plan an Account, the value of PLAN DESCRIPTION AND PARTICIPATION AGREEMENT the account would not be included in the Account Owner’s estate for tax pur- posespurposes. However, if an Account Owner who has elected to treat a contribution ratably over a five-year period dies before the end of the five-year period, the portion of the contribution allocable to the years remaining in the five-year period (beginning with the year after the Account Owner’s death) would be included in the Account Owner’s estate for federal estate tax purposes. If the designated beneficiary for a Section 529 savings Plan an Account is changed or amounts in an account are rolled over, resulting in a new desig- nated designated beneficiary who is a Member of the Family of the current designated beneficiary and in the same generation as the current designated beneficiary, such change or rollover will not be subject to gift tax or generation- generation-skipping transfer tax. If the new designated beneficiary is of a lower generation than the current desig- nated designated beneficiary or is not a Member of the Family of the current designated beneficiary, such change or rollover will be treated as a gift from the current designated beneficiary to the new designated beneficiary for federal gift tax purposes, and will be subject to generation-skipping transfer tax pur- poses purposes if the new designated beneficiary is two or more generations lower than the current designated beneficiary. Under the Proposed Regulations, these taxes are imposed on the current desig- nated designated beneficiary. Under the proposed regulations described in the advance notice of proposed rulemaking, the Account Owner would be liable for any such taxes. In each case, the gift and generation-skipping transfer tax an- nual annual exclusions transfer, and even the five-year averaging election discussed above may be applied to any such deemed transfer. The gross estate of a designated beneficiary of a Section 529 savings plan includes the value of the Section 529 savings Plan Account. Estate, gift, and generation-skipping tax issues arising in conjunction with 529 plans are complex. You should consult with your tax adviser regarding your specific situation. State Taxes and Other Consider- ations Considerations‌ Prospective Account Owners should consider many factors before decid- ing deciding to invest in the Plan, including the Plan’s investment options and perfor- xxxxx performance history, the Plan’s flexibility and features, the reputation and expertise of the Plan’s investment manager, the Plan’s contribution limits, the Plan’s fees and expenses, and federal tax benefits associated with an investment in the Plan. Nevada does not impose an income tax on individuals. Thus, there are no Nevada income tax consequences to either contributors to or recipients of money withdrawn from the Plan. Nevada residents should consult a qualified tax adviser regarding the application of Nevada tax rules and other states’ tax rules to their particular circumstances. In many states, the state and local income tax treatment of contributions, earnings, and distributions withdrawals follows their treatment for federal income tax pur- posespurposes, but in some states tax treatment differs. Account Owner should look It is possible that a contributor to the Plan may be entitled to a deduction in computing the income tax imposed by a state where he or she lives or pays taxes. Likewise, it is possible that a recipient of money withdrawn from the Plan may be subject to income tax on those withdrawals by the state where Account Owner he or she lives or pays income tax to determine whether a rollover to taxes including in connection with such state’s treatment of K-12 tuition expenses. It is also possible that amounts rolled over into the Plan from another state’s 529 plan or amounts rolled over from the Plan into an ABLE account would Account, may be subject to a state income taxtax imposed on the rollover amount. You should consult with your tax advisor regarding the state tax consequences of participating in the Plan and your individual situation. You should consider before invest- inginvesting, the following: Depending upon the laws of your home state or the home state of the designated beneficiary, favorable state tax treatment or other benefits offered by such home state for investing in 529 college savings plans such as financial aid, scholarship funds, and protection from creditors may be available only if you invest in the home state’s college education savings plan. Since different states have different tax provisions, this Plan Description contains limited information about the state tax consequences of invest- ing investing in the Plan. Therefore, you should consult with your financial, tax, or legal adviser to learn more about how state-based benefits (including any limitations) would apply to your specific circumstances. You also may wish to contact your home state’s 529 plan(s), or any other 529 plan, to learn more about those plans’ fea- turesfeatures, benefits, and limitations. Keep in mind that any state-based benefit offered with respect to a particular 529 college savings plan should be one of many appropriately weighted factors to be considered in making an investment decision.

Education Tax Credits. Use of Education Tax Credits by qualify- ing Account Owners and designated beneficiaries will not affect participa- tion participation in or receipt of benefits from a 529 Plan Accountan Ac- count, so long as any distribu- tion distribution from the 529 Plan Account is not used for the same expense ex- pense for which the credit was claimed. Federal Gift and Estate Taxes Contributions (including certain rollover contributions but excluding contributions from a UGMA/UTMA account ac- count and certain trusts) to a Section 529 savings plan generally are consid- ered considered completed gifts to the designated beneficiary but qualify for the $14,000 15,000 annual gift and generation-skipping transfer tax exclusionsexclu- sions. In cases where contributions to a Section 529 sav- ings plan exceed $15,000 annuallyannually (for 2020), a contributor may elect on his or her gift tax return to treat the contribution as if it were made ratably over a five-year period. For example, a contributor who makes a $75,000 (for 2020) contribution in one year, and makes no other gifts to the designated beneficiary during the rest of that year or the next four years would not incur a gift or generation- generation-skipping transfer tax. If contributions during such five-five- year period exceed $75,000, such excess ex- cess contributions will be treated as a gift in the calendar year of the contributioncontri- bution. In the case of a contributor electing to split gifts with his or her spouse on his or her gift tax return, the available annual exclusion is $30,000 (for 2020) per designated beneficiary and the amount that may be prorated over five years is $150,000150,000 (for 2020). Generally, if the Account Owner were to die while assets remain in a Section 529 savings Plan Accountan Ac- count, the value of PLAN DESCRIPTION AND PARTICIPATION AGREEMENT the account would not be included in the Account OwnerOwn- er’s estate for tax pur- posespurposes. However, if an Account Owner who has elected to treat a contribution ratably over a five-five- year period dies before the end of the five-year period, the portion of the contribution allocable to the years remaining re- maining in the five-year period (beginning begin- ning with the year after the Account Owner’s death) would be included in the Account Owner’s estate for federal estate tax purposes. If the designated beneficiary for a Section 529 savings Plan Account an Ac- count is changed or amounts in an account ac- count are rolled over, resulting in a new desig- nated designated beneficiary who is a Member of the Family of the current designated beneficiary and in the same generation as the current designated desig- nated beneficiary, such change or rollover will not be subject to gift tax or generation- generation-skipping transfer tax. If the new designated beneficiary is of a lower generation than the current desig- nated des- ignated beneficiary or is not a Member of the Family of the current designated beneficiary, such change or rollover will be treated as a gift from the current cur- rent designated beneficiary to the new designated beneficiary for federal gift tax purposes, and will be subject to generation-skipping transfer tax pur- poses if the new designated beneficiary benefici- ary is two or more generations lower than the current designated beneficiarybenefici- ary. Under the Proposed Regulations, these taxes are imposed on the current desig- nated designated beneficiary. Under the proposed pro- posed regulations described in the advance ad- xxxxx notice of proposed rulemaking, the Account Owner would be liable for any such taxes. In each case, the gift and generation-skipping transfer tax an- nual annual exclusions transfer, and even the five-year averaging election discussed dis- cussed above may be applied to any such deemed transfer. The gross estate of a designated beneficiary of a Section 529 savings plan includes the value of the Section 529 savings Plan AccountAc- count. Estate, gift, and generation-generation- skipping tax issues arising in conjunction with 529 plans are complexcom- plex. You should consult with your tax adviser regarding your specific situation. State Taxes and Other Consider- ations Considerations Prospective Account Owners should consider many factors before decid- ing deciding to invest in the Plan, including the Plan’s investment options and perfor- xxxxx performance PLAN DESCRIPTION AND PARTICIPATION AGREEMENT history, the Plan’s flexibility and features, the reputation and expertise of the Plan’s investment manager, the Plan’s contribution limits, the Plan’s fees and expenses, and federal tax benefits associated asso- ciated with an investment in the Plan. Nevada does not impose an income tax on individuals. Thus, there are no Nevada income tax consequences to either contributors to or recipients of money withdrawn from the Plan. Ne- xxxx residents should consult a qualified quali- fied tax adviser regarding the application of Nevada tax rules and other states’ tax rules to their particular circumstances. In many states, the state and local income tax treatment of contributions, earnings, and distributions distri- butions follows their treatment for federal fed- eral income tax pur- posespurposes, but in some states tax treatment differs. Account Owner should look It is possible that a contributor to the Plan may be entitled to a deduction in computing the income tax imposed by a state where he or she lives or pays taxes. Likewise, it is possible that a recipient of money withdrawn from the Plan may be subject to income tax on those withdrawals by the state where Account Owner he or she lives or pays income tax to determine whether a rollover to taxes in- cluding in connection with such state’s treatment of K-12 tuition expenses. It is also possible that amounts rolled over into the Plan from another state’s 529 plan or amounts rolled over from the Plan into an ABLE account would Account, may be subject to a state income taxtax imposed on the rollover amount. You should consult with your tax advisor regarding the state tax consequences of participating in the Plan and your individual situation. You should consider before invest- inginvesting, the following: Depending upon the laws of your home state or the home state of the designated beneficiary, favorable fa- vorable state tax treatment or other benefits offered by such home state for investing in 529 college savings plans such as financial fi- nancial aid, scholarship funds, and protection pro- tection from creditors may be available only if you invest in the home state’s college education savings plan. Since different states have different tax provisionspro- visions, this Plan Description contains limited information about the state tax consequences of invest- ing investing in the Plan. Therefore, you should consult with your financial, tax, or legal adviser to learn more about how state-based benefits (including any limitations) would apply to your specific circumstancescircum- stances. You also may wish to contact your home state’s 529 plan(s), or any other 529 plan, to learn more about those plans’ fea- turesfeatures, benefits, and limitationslim- itations. Keep in mind that any state-state- based benefit offered with respect to a particular 529 college savings plan should be one of many appropriately weighted factors to be considered in making an investment invest- ment decision.