Under prior law, only states could establish 529 plans.  The Act expands eligible “qualified State tuition programs” to include those established by education institutions, which may also be private colleges and universities (after first receiving a favorable IRS ruling or determination and assets must be held in a trust).
	The Act makes a major enhancement by permitting tax-free distributions from qualified tuition plans, provided they are used to pay for qualified higher education expenses.  If distributions are used for other purposes, the Act imposes income taxes and the 10% tax penalty.
	As with Education IRAs, distributions from qualified tuition plans do not exclude taxpayers from claiming either a HOPE or Lifetime Learning credit as long as the distributions are not used for the same expenses for which a credit is claimed.
	Note: A taxpayer cannot claim a deduction for the amount of a distribution from a qualified tuition plan that is excludable from income.  However, a taxpayer may claim a deduction for the amount of a distribution from a qualified tuition plan that is not attributable to earnings.  For example, if a taxpayer uses a $100 distribution from a qualified tuition plan for tuition and the distribution represents $90 of contributions and $10 of earnings, the taxpayer would be entitled to claim a deduction for the $90 representing a return of contributions.