Bill Text: IA HF368 | 2015-2016 | 86th General Assembly | Introduced
Bill Title: A bill for an act relating to the establishment of first-time homebuyer savings accounts in Iowa, including related individual income tax exemptions, making penalties applicable, and including effective date and applicability provisions.
Spectrum: Partisan Bill (Democrat 9-0)
Status: (Introduced - Dead) 2015-05-06 - Withdrawn. H.J. 1017. [HF368 Detail]
Download: Iowa-2015-HF368-Introduced.html
House File 368 - Introduced HOUSE FILE BY STECKMAN, McCONKEY, HALL, KELLEY, STAED, KRESSIG, DAWSON, T. TAYLOR, and JACOBY A BILL FOR 1 An Act relating to the establishment of first=time homebuyer 2 savings accounts in Iowa, including related individual 3 income tax exemptions, making penalties applicable, and 4 including effective date and applicability provisions. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: TLSB 2398YH (2) 86 mm/sc PAG LIN 1 1 Section 1. NEW SECTION. 12I.1 Short title. 1 2 This chapter may be cited as the "Iowa First=time Homebuyer 1 3 Savings Account Act". 1 4 Sec. 2. NEW SECTION. 12I.2 Definitions. 1 5 As used in this chapter, unless the context otherwise 1 6 requires: 1 7 1. "Account holder" means a first=time homebuyer who is a 1 8 resident of this state and who establishes, either individually 1 9 or jointly with the resident's spouse who is also a first=time 1 10 homebuyer, a first=time homebuyer savings account. A person 1 11 ceases to be an account holder following the purchase of a 1 12 principal residence after the establishment of a first=time 1 13 homebuyer savings account. 1 14 2. "Eligible costs" means the down payment and allowable 1 15 closing costs for the purchase of a principal residence in Iowa 1 16 which principal residence is purchased after the establishment 1 17 of the first=time homebuyer savings account. 1 18 3. "First=time homebuyer" means an individual who has never 1 19 owned or purchased under contract for deed, either individually 1 20 or jointly, a single=family, owner=occupied residence, 1 21 including but not limited to a manufactured or mobile home that 1 22 is assessed and taxed as real estate or taxed under chapter 1 23 435 or taxed under other similar law of another state, or a 1 24 condominium unit. 1 25 4. "First=time homebuyer savings account" means an account 1 26 established with a state or federally chartered bank, savings 1 27 and loan association, credit union, or trust company in this 1 28 state to finance the purchase of a principal residence in this 1 29 state. 1 30 5. "Principal residence" means a single=family, 1 31 owner=occupied residence in the state that will be the 1 32 principal place of residence of the account holder, whether 1 33 owned or purchased under contract for deed by the account 1 34 holder, individually or jointly. "Principal residence" includes 1 35 but is not limited to a manufactured home or mobile home that 2 1 is assessed and taxed as real estate or taxed under chapter 2 2 435, and a condominium unit. 2 3 6. "Resident" means the same as defined in section 422.4. 2 4 Sec. 3. NEW SECTION. 12I.3 First=time homebuyer savings 2 5 account. 2 6 1. Establishment. 2 7 a. A first=time homebuyer who is a resident of this 2 8 state may establish, either individually or jointly with 2 9 the resident's spouse who is also a first=time homebuyer, a 2 10 first=time homebuyer savings account to finance the purchase 2 11 of a principal residence. Married taxpayers electing to file 2 12 separate tax returns or separately on a combined tax return 2 13 shall not establish or maintain a joint first=time homebuyer 2 14 savings account. 2 15 b. The account holder who establishes the first=time 2 16 homebuyer savings account, individually or jointly, is the 2 17 owner and administrator of the account. 2 18 c. A first=time homebuyer savings account shall be an 2 19 interest=bearing savings account. 2 20 d. A financial institution shall not be responsible for 2 21 the use or application of funds within a first=time homebuyer 2 22 savings account solely because the account is held at that 2 23 financial institution. 2 24 2. Use and administration by account holder. 2 25 a. The account holder shall use the money in the first=time 2 26 homebuyer savings account for eligible costs related to the 2 27 purchase of a principal residence within ten years following 2 28 the year in which the account is first established. 2 29 b. An account holder shall not contribute to a first=time 2 30 homebuyer savings account for a period exceeding ten years. 2 31 c. There is no limitation on the amount of contributions 2 32 that may be made to or retained in a first=time homebuyer 2 33 savings account. 2 34 d. The account holder shall not use funds held in a 2 35 first=time homebuyer savings account to pay expenses, if any, 3 1 of administering the account, except that a service fee may be 3 2 charged to the account by the financial institution where the 3 3 account is held. 3 4 e. Documentation regarding the segregation of funds in 3 5 a first=time homebuyer savings account from other funds and 3 6 documentation regarding eligible costs for the purchase of a 3 7 principal residence shall be maintained by the account holder. 3 8 The burden of proving that a withdrawal from a first=time 3 9 homebuyer savings account was made for eligible costs is upon 3 10 the account holder. 3 11 f. Within thirty days of being furnished proof of death 3 12 of the account holder, the financial institution where 3 13 the first=time homebuyer savings account is held shall 3 14 distribute any amount remaining in the first=time homebuyer 3 15 savings account to the estate of the account holder or to a 3 16 transfer on death or pay on death beneficiary of the account 3 17 properly designated by the account holder with the financial 3 18 institution. 3 19 g. The account holder shall file reports with the department 3 20 of revenue as reasonably required by the department of revenue. 3 21 h. The account holder is required to remit the withdrawal 3 22 penalty in section 422.7, subsection 57, paragraph "c", if 3 23 assessed, to the department of revenue in the same manner as 3 24 provided in section 422.16, subsection 2. 3 25 3. Penalties. A person who knowingly prepares or causes to 3 26 be prepared a false claim, statement, or billing to justify the 3 27 withdrawal of money from a first=time homebuyer savings account 3 28 is guilty of a serious misdemeanor for each violation. 3 29 Sec. 4. NEW SECTION. 12I.4 Tax considerations. 3 30 The state income tax treatment of a first=time homebuyer 3 31 savings account shall be as provided in section 422.7, 3 32 subsection 57. 3 33 Sec. 5. NEW SECTION. 12I.5 Rules. 3 34 The director of revenue and the treasurer of state shall each 3 35 adopt rules to jointly implement and administer this chapter. 4 1 Sec. 6. Section 422.7, Code 2015, is amended by adding the 4 2 following new subsection: 4 3 NEW SUBSECTION. 57. a. Subtract the amount of 4 4 contributions made by an account holder to the account holder's 4 5 first=time homebuyer savings account during the tax year, not 4 6 to exceed three thousand dollars per individual per tax year, 4 7 or six thousand dollars per tax year for a married couple who 4 8 have a joint first=time homebuyer savings account and file a 4 9 joint return. An amount of contributions made during a tax 4 10 year in excess of three thousand dollars, or six thousand 4 11 dollars, as applicable, may be subtracted by an account holder 4 12 in a subsequent tax year, provided the total exemption under 4 13 this paragraph for the subsequent tax year does not exceed 4 14 three thousand dollars, or six thousand dollars, as applicable. 4 15 This paragraph shall not apply to an account holder more 4 16 than ten years after the account holder first establishes a 4 17 first=time homebuyer savings account. 4 18 b. Subtract, to the extent included, income from interest 4 19 and earnings received from an account holder's first=time 4 20 homebuyer savings account. This paragraph "b" shall not apply 4 21 to any interest and earnings received by an account holder more 4 22 than ten years after the account holder first establishes a 4 23 first=time homebuyer savings account. 4 24 c. (1) Add, to the extent previously subtracted under 4 25 paragraph "a", the amount resulting from a withdrawal made from 4 26 a first=time homebuyer savings account for purposes other than 4 27 the payment of eligible costs of the account holder. Such 4 28 withdrawal shall also be assessed a penalty in an amount equal 4 29 to ten percent of the amount of the withdrawal that represents 4 30 interest and earnings in the first=time homebuyer savings 4 31 account. The penalty shall not apply to withdrawals made on 4 32 account of the death of the account holder or for the purpose 4 33 of paying the eligible costs of the account holder. 4 34 (2) For purposes of this paragraph "c", any amount remaining 4 35 in a first=time homebuyer savings account of an account holder 5 1 on the day after the purchase of a principal residence or the 5 2 last business day of the tenth calendar year following the 5 3 calendar year in which the account holder first establishes a 5 4 first=time homebuyer savings account, whichever occurs first, 5 5 shall be considered a withdrawal under subparagraph (1). 5 6 (3) For purposes of this paragraph "c", the following shall 5 7 not be considered a withdrawal under subparagraph (1): 5 8 (a) Any amount transferred between different first=time 5 9 homebuyer savings accounts of the same account holder by a 5 10 person other than the account holder. 5 11 (b) Any amounts withdrawn or otherwise transferred from a 5 12 first=time homebuyer savings account pursuant to an order in 5 13 bankruptcy. 5 14 d. For purposes of this subsection, "account holder", 5 15 "eligible costs", and "first=time homebuyer savings account" all 5 16 mean the same as defined in section 12I.2. 5 17 Sec. 7. EFFECTIVE DATE. This Act takes effect January 1, 5 18 2016. 5 19 Sec. 8. APPLICABILITY. This Act applies to tax years 5 20 beginning on or after January 1, 2016. 5 21 EXPLANATION 5 22 The inclusion of this explanation does not constitute agreement with 5 23 the explanation's substance by the members of the general assembly. 5 24 This bill allows first=time homebuyers who are residents 5 25 of Iowa to establish a first=time homebuyer savings account 5 26 (account) with a state or federally chartered bank, savings and 5 27 loan association, credit union, or trust company in this state 5 28 to finance the purchase of a principal residence in this state. 5 29 "First=time homebuyer" and "principal residence" are defined in 5 30 the bill. The account is required to be an interest=bearing 5 31 savings account. The account may be established individually 5 32 or jointly with the resident's spouse. However, married 5 33 taxpayers electing to file separate tax returns or separately 5 34 on a combined tax return shall not establish or maintain a 5 35 joint account. 6 1 There is no limitation on the amount of contributions that 6 2 may be made to or retained in a first=time homebuyer savings 6 3 account. An account holder is required to use the funds in 6 4 an account for eligible costs related to the purchase of a 6 5 principal residence within 10 years following the year in which 6 6 the account is first established. 6 7 "Eligible costs" are defined in the bill and include the down 6 8 payment and allowable closing costs of a principal residence 6 9 that was purchased after the establishment of the account. If 6 10 the account holder withdraws funds for any purpose other than 6 11 the payment of eligible costs, the account holder is subject to 6 12 a penalty equal to 10 percent of the amount of the withdrawal 6 13 that represents interest and earnings in the account, unless 6 14 the withdrawal occurs because of the death of the account 6 15 holder. The penalty amounts are required to be remitted by the 6 16 account holder to the department of revenue in the same manner 6 17 as Code section 422.16(2), relating to the withholding of 6 18 income tax. A person ceases to be an account holder following 6 19 the purchase of a principal residence after the establishment 6 20 of an account. 6 21 Accounts are required to be administered by the account 6 22 holder. The bill prohibits the account holder from using 6 23 account funds to pay administrative expenses of the account, 6 24 but the bill does allow a financial institution where the 6 25 account is held to charge a service fee. Documentation 6 26 regarding the segregation of funds in the account from other 6 27 funds and documentation regarding eligible costs shall be 6 28 maintained by the account holder. The bill also requires the 6 29 account holder to file reports as required by the department of 6 30 revenue. Within 30 days of being furnished proof of death of 6 31 the account holder, the financial institution where the account 6 32 is held shall distribute the funds to the estate of the account 6 33 holder or to a transfer on death or pay on death beneficiary 6 34 properly designated by the account holder. 6 35 The bill provides for two individual income tax incentives 7 1 relating to first=time homebuyer savings accounts. First, 7 2 an account holder is allowed to subtract from the individual 7 3 income tax the amount of contributions made during the year 7 4 to the account holder's account, not to exceed $3,000 per 7 5 individual, or $6,000 for a married couple with a joint account 7 6 and filing a joint income tax return. If the account holder 7 7 contributes more than that amount, the excess may be subtracted 7 8 in a subsequent tax year provided the total exemption in any 7 9 one tax year does not exceed $3,000 or $6,000, as applicable. 7 10 Second, the bill exempts any interest or earnings received from 7 11 an account holder's account. Both the contribution exemption 7 12 and interest exemption only apply for the first 10 years after 7 13 the account holder establishes an account. 7 14 The bill requires an account holder to add to net income the 7 15 amount of withdrawal from an account that was made for purposes 7 16 other than eligible costs of the account holder to the extent 7 17 it was previously subtracted as a contribution. Any amount 7 18 remaining in an account on the day after an account holder 7 19 purchases a principal residence or on the last business day of 7 20 the 10th calendar year following the calendar year the account 7 21 holder first establishes an account, whichever occurs first, 7 22 shall be considered a withdrawal that must be added to net 7 23 income to the extent it was previously subtracted. However, 7 24 amounts transferred between different accounts of the same 7 25 account holder by a person other than the account holder or 7 26 amounts withdrawn pursuant to an order in bankruptcy shall not 7 27 be considered withdrawals that must be added to net income. 7 28 The bill makes it a serious misdemeanor to knowingly prepare 7 29 or cause to be prepared a false claim, statement, or billing 7 30 to justify the withdrawal of money from a first=time homebuyer 7 31 savings account. A serious misdemeanor is punishable by 7 32 confinement for no more than one year and a fine of at least 7 33 $315 but not more than $1,875. 7 34 The bill requires the director of revenue and the treasurer 7 35 of state to each adopt rules to jointly implement and 8 1 administer the bill. 8 2 The bill takes effect January 1, 2016, and applies to tax 8 3 years beginning on or after that date. LSB 2398YH (2) 86 mm/sc
