N.H. bill would remove statute saying education freedom account payments are not taxable; lawmakers hear tax experts

Rep. David Luno opened the public hearing on House Bill 402, saying the bill would remove a sentence in state law that currently reads, "Funds deposited in an EFA shall not constitute taxable income to the parent or the EFA student." He said the change would avoid providing misleading guidance to families about possible federal tax liabilities.

Nut graf: Supporters and opponents told the House Ways and Means Committee that federal tax treatment of scholarship-style payments depends on how funds are used. Tax preparers argued the common practice and Internal Revenue Service guidance generally exclude qualified tuition payments from taxable income; a tax attorney said many other EFA expenditures could be taxable and that putting an absolute statement about taxability into state law is potentially misleading.

David Luno, who identified himself as the sponsor, said the state should not assert federal tax consequences for EFA…