Question about timing when taking a 529 Distribution for scholarship

[BelknapPoint]

I understand that you need to withdraw 529 funds during the calendar year they are used to pay for qualified higher education expenses. In the case of an unqualified distribution not subject to penalty (i.e. scholarship reimbursement), does the same rule about calendar year usage apply?

Not that I am aware of. There is no statute or IRS rule or regulation that I am aware of, and no IRS publication that I have read, that requires a non-qualified 529 distribution to be taken in the same year that a scholarship is received in order to benefit from a waiver of the 10% additional tax. I have also never heard of the IRS denying a waiver of the 10% additional tax because the scholarship and non-qualifying distribution did not match up in the same year.