(a) Except as otherwise indicated in this chapter, interest, dividends, and capital gains from funds invested in the Achieving a Better Life Experience Program are exempt from Arkansas income taxes.
(b)
(1) A qualified distribution from a disability savings account established under the program is exempt from Arkansas income tax with respect to the designated beneficiary's income.
(2)
(A) Nonqualified distributions from a disability savings account established under the program are subject to Arkansas income tax.
(B) The nonqualified distribution is taxable to the party, account owner, or designated beneficiary who actually makes the withdrawal.
(c) Earnings on a contribution that are included in a refund are subject to Arkansas income tax if an account owner receives a refund of contributions to a disability savings account established under the program because of either:
(1) The death or disability of the designated beneficiary; or
(2) A scholarship, allowance, or payment described in 26 U.S.C. § 135(d)(1)(B) or (d)(1)(C) as in effect on January 1, 2014, received by the designated beneficiary.
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