Sec. 2. (a) Accounts and all earnings or interest on accounts are exempt from taxation in Indiana to the extent that those accounts, earnings, and interest are exempt from federal taxation under the Internal Revenue Code, subject to any penalties that are established for education savings programs under this article.
(b) Distributions under IC 6-3-2-19 from an account used to pay qualified higher education expenses are exempt from the adjusted gross income tax imposed by IC 6-3-1 through IC 6-3-7.