Treasury, IRS announce special relief for certain rollovers to or from Maryland Prepaid College Trust accounts

WASHINGTON — The Department of the Treasury and the Internal Revenue Service issued Notice 2024-23 announcing special relief for taxpayers impacted by recent system issues affecting the Maryland Prepaid College Trust as described in the notice.

Generally, federal tax law only allows one tax-free rollover in a 12-month period from one qualified tuition program to another for the benefit of the same beneficiary. The notice issued today provides that the 12-month limitation for taxpayers making such rollovers will not be asserted by the IRS provided the rollover in question meets the criteria described in Notice 2024-23.

Under the newly issued notice, a qualified tuition program distribution will be treated as a qualified rollover (as defined in the notice) if the following criteria are met:

• The taxpayer makes a rollover to or from the designated beneficiary’s Maryland Prepaid College Trust account before Jan. 1, 2025;
• The 12-month limitation described above would otherwise apply to the rollover to or from the Maryland Prepaid College Trust account; and
• The rollover was preceded by a qualified rollover from that same designated beneficiary’s Maryland Prepaid College Trust account after Dec. 31, 2021.

If a taxpayer eligible for the relief described in Notice 2024-23 receives a Form 1099-Q that includes a distribution that is treated as a qualified rollover under Notice 2024-23, then the amount corresponding to the qualified rollover is not includible in gross income, and the taxpayer is not required to report the amount on the taxpayer’s tax return.

Taxpayers eligible for relief under Notice 2024-23 are not required to file Form 5329, Additional Taxes on Qualified Plans (including IRAs) and Other Tax-Favored Accounts, for such a distribution and the 10% addition to tax does not apply.

More detailed information regarding section 529 of the Internal Revenue Code may be found on the IRS.gov webpage at Topic No. 313, Qualified Tuition Programs (QTPs).