Sec. 504. Economic Freedom Zone educational savings accounts
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Part VIII of subchapter F of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section: Except as provided in this section, an Economic Freedom Zone educational savings account shall be treated for purposes of this title in the same manner as a Coverdell education savings account. For purposes of this section— The term Economic Freedom Zone educational savings account means a trust created or organized in the United States exclusively for the purpose of paying the qualified education expenses (as defined in section 530(b)(2)) of an individual who is the designated beneficiary of the trust (and designated as an Economic Freedom Zone educational saving account at the time created or organized) and who is a qualified individual at the time such trust is established, but only if the written governing instrument creating the trust meets the following requirements:
No contribution will be accepted— unless it is in cash, after the date on which such beneficiary attains age 25, or except in the case of rollover contributions, if such contribution would result in aggregate contributions for the taxable year exceeding $10,000. No contribution shall be accepted at any time in which the designated beneficiary is not a qualified individual. The trust meets the requirements of subparagraphs (B), (C), (D), and
(E)of section 530(b)(1). The age limitations in subparagraphs (A)(ii), subparagraph
(E)of section 530(b)(1), and paragraphs
(5)and
(6)of section 530(d), shall not apply to any designated beneficiary with special needs (as determined under regulations prescribed by the Secretary). The term qualified individual means any individual whose principal residence (within the meaning of section 121) is located in an Economic Freedom Zone (as defined in section 1400V–6). There shall be allowed as a deduction under part VII of subchapter B of this chapter an amount equal to the aggregate amount of contributions made by the taxpayer to any Economic Freedom Zone educational savings account during the taxable year. The amount of the deduction allowed under paragraph
(1)for any taxpayer for any taxable year shall not exceed $40,000. No deduction shall be allowed under paragraph
(1)for any rollover contribution described in section 530(d)(5). In the case of an Economic Freedom Zone educational savings account, subsection
(c)of section 530 shall not apply. Notwithstanding paragraph
(6)of section 530(b), a change in the beneficiary of an Economic Freedom Zone education savings account shall be treated as a distribution unless the new beneficiary is a qualified individual. . The table of sections for part VIII of subchapter F of chapter 1 of such Code is amended by adding at the end the following new item: Sec. 530A. Economic Freedom Zone educational savings accounts. .