15-1871. Definitions

In this article, unless the context otherwise requires:

1. "Account" means an individual trust account in the fund that is established as prescribed in this article.

2. "Account owner" means the person who enters into a tuition savings agreement pursuant to this article, who is an account owner within the meaning of section 529 of the internal revenue code and who is designated at the time an account is opened as having the right to withdraw monies from the account before the account is disbursed to or for the benefit of the designated beneficiary.

3. "Board" means the state board of investment.

4. "Designated beneficiary" means a person who qualifies as a designated beneficiary under section 529 of the internal revenue code and, except as provided in section 15-1875, subsections P and Q, with respect to an account, who is designated at the time the account is opened as the person whose qualified higher education expenses are expected to be paid from the account or, if this designated beneficiary is replaced in accordance with section 15-1875, subsections D, E and F, the replacement beneficiary.

5. "Eligible educational institution" means an institution of higher education that qualifies under section 529 of the internal revenue code as an eligible educational institution.

6. "Financial institution" means the state treasurer's office or any bank, commercial bank, national bank, savings bank, savings and loan association, credit union, insurance company, brokerage firm or other similar entity that is authorized to do business in this state.

7. "Fund" means AZ529, Arizona's education savings plan trust fund that constitutes a public instrumentality of this state and that is established by section 15-1873.

8. "Member of the family" has the same meaning prescribed in section 529 of the internal revenue code.

9. "Nonqualified withdrawal" means a withdrawal from an account other than one of the following:

(a) A qualified withdrawal.

(b) A withdrawal made as the result of the death or disability of the designated beneficiary of an account.

(c) A withdrawal that is made on the account of a scholarship, or the allowance or payment described in section 135(d)(1)(B) or (C) of the internal revenue code, and that is received by the designated beneficiary, but only to the extent of the amount of this scholarship, allowance or payment.

(d) A rollover or change of designated beneficiary.

10. "Person" means an individual, an individual's legal representative or any other legal entity authorized to establish a savings account under section 529 of the internal revenue code and the corresponding regulations.

11. "Plan" means AZ529, Arizona's education savings plan that is established under this article and that constitutes a qualified tuition program as defined in section 529 of the internal revenue code.

12. "Qualified higher education expenses" has the same meaning prescribed in section 529 of the internal revenue code, as modified by 26 United States Code section 529(c)(7) and (9).

13. "Qualified withdrawal" means a withdrawal from an account to pay any qualified higher education expenses of the designated beneficiary of the account, but only if the withdrawal is made in accordance with this article, subject to the following limitations:

(a) Not more than $20,000 in the aggregate for expenses incurred for the designated beneficiary to enroll in or attend an elementary or secondary public, private or religious school pursuant to section 529 of the internal revenue code.

(b) Not more than $10,000 for amounts paid as principal or interest on any qualified education loan as defined in section 221(d) of the internal revenue code of the designated beneficiary or a brother, sister, stepbrother or stepsister of the designated beneficiary, reduced by the amount of withdrawals so treated for all prior taxable years.

14. "Section 529 of the internal revenue code" means section 529 of the internal revenue code of 1986, as amended, and the final regulations issued pursuant to that section.

15. "Treasurer" means the state treasurer.

16. "Trust interest" means an account owner's interest in the fund created by a tuition savings agreement for the benefit of a designated beneficiary.

17. "Tuition savings agreement" means an agreement between the board, as trustee of the fund, and an account owner that creates an interest in the fund and that provides for participation in the plan.