                                 CODE OF VIRGINIA

WITHDRAWAL OF FUNDS FROM ACCOUNT FOR PURPOSES OTHER THAN ELIGIBLE COSTS FOR
FIRST-TIME HOME PURCHASE (§ 36-174)

If moneys or funds are withdrawn from an account for any purpose other than the
payment of eligible costs by or on behalf of a qualified beneficiary, there
shall be imposed a penalty calculated using the Form 1099 showing the amount of
income exempted from state income tax, and a five percent penalty shall be
assessed on the amount of exempted income. The penalty shall be paid to the
Department of Taxation. In addition, as provided under subdivision 25 of §
58.1-322.02, the account holder shall also be subject to recapture of income
that was subtracted pursuant to that subdivision.
		Such five percent penalty shall not apply to, and there shall be no recapture
of income with regard to, the extent of moneys or funds withdrawn that were (i)
withdrawn by reason of the qualified beneficiary&#8217;s death or disability;
(ii) a disbursement of assets of the account pursuant to a filing for protection
under the United States Bankruptcy Code, 11 U.S.C. §§ 101 through 1330; or
(iii) transferred from an account established pursuant to this chapter into
another account established pursuant to this chapter for the benefit of another
qualified beneficiary.

HISTORY: 2014, c. 729, § 55-558; 2017, c. 444; 2019, c. 712.