Bill Text: IA SF414 | 2015-2016 | 86th General Assembly | Introduced
Bill Title: A bill for an act providing for the creation of first-time homebuyer savings accounts in Iowa, including related individual income tax exemptions, making penalties applicable, and including effective date and applicability provisions. (Formerly SSB 1170.)
Sponsorship: Committee Bill
Status: (Introduced - Dead) 2015-04-01 - Fiscal note. SCS. [SF414 Detail]
Download: Iowa-2015-SF414-Introduced.html
Senate File 414 - Introduced SENATE FILE BY COMMITTEE ON STATE GOVERNMENT (SUCCESSOR TO SSB 1170) A BILL FOR 1 An Act providing for the creation 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 2200SV (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. "Business day" means a day other than a Saturday, Sunday, 1 15 or federal holiday. 1 16 3. "Eligible costs" means the down payment and allowable 1 17 closing costs for the purchase of a principal residence in Iowa 1 18 which principal residence is purchased after the establishment 1 19 of the first=time homebuyer savings account. 1 20 4. "First=time homebuyer" means an individual who has never 1 21 owned or purchased under contract for deed, either individually 1 22 or jointly, a single=family, owner=occupied residence, 1 23 including but not limited to a manufactured or mobile home that 1 24 is assessed and taxed as real estate or taxed under chapter 1 25 435 or taxed under other similar law of another state, or a 1 26 condominium unit. 1 27 5. "First=time homebuyer savings account" means an account 1 28 established with a state or federally chartered bank, savings 1 29 and loan association, credit union, or trust company in this 1 30 state to finance the purchase of a principal residence in this 1 31 state. 1 32 6. "Principal residence" means a single=family, 1 33 owner=occupied residence in the state that will be the 1 34 principal place of residence of the account holder, whether 1 35 owned or purchased under contract for deed by the account 2 1 holder, individually or jointly. "Principal residence" includes 2 2 but is not limited to a manufactured home or mobile home that 2 3 is assessed and taxed as real estate or taxed under chapter 2 4 435, and a condominium unit. 2 5 7. "Resident" means the same as defined in section 422.4. 2 6 Sec. 3. NEW SECTION. 12I.3 First=time homebuyer savings 2 7 account. 2 8 1. Establishment. 2 9 a. A first=time homebuyer who is a resident of this 2 10 state may establish, either individually or jointly with 2 11 the resident's spouse who is also a first=time homebuyer, a 2 12 first=time homebuyer savings account to finance the purchase 2 13 of a principal residence. Married taxpayers electing to file 2 14 separate tax returns or separately on a combined tax return 2 15 shall not establish or maintain a joint first=time homebuyer 2 16 savings account. 2 17 b. The account holder who establishes the first=time 2 18 homebuyer savings account, individually or jointly, is the 2 19 owner and administrator of the account. 2 20 c. A first=time homebuyer savings account shall be an 2 21 interest=bearing savings account. 2 22 d. A financial institution shall not be responsible for 2 23 the use or application of funds within a first=time homebuyer 2 24 savings account solely because the account is held at that 2 25 financial institution. 2 26 2. Use and administration by account holder. 2 27 a. The account holder shall use the money in the first=time 2 28 homebuyer savings account for eligible costs related to the 2 29 purchase of a principal residence within ten years following 2 30 the year in which the account is first established. 2 31 b. An account holder shall not contribute to a first=time 2 32 homebuyer savings account for a period exceeding ten years. 2 33 c. There is no limitation on the amount of contributions 2 34 that may be made to or retained in a first=time homebuyer 2 35 savings account. 3 1 d. The account holder shall not use funds held in a 3 2 first=time homebuyer savings account to pay expenses, if any, 3 3 of administering the account, other than to the financial 3 4 institution where the account is held for expenses or costs 3 5 related to maintaining the account. 3 6 e. Documentation regarding the segregation of funds in 3 7 a first=time homebuyer savings account from other funds and 3 8 documentation regarding eligible costs for the purchase of a 3 9 principal residence shall be maintained by the account holder. 3 10 The burden of proving that a withdrawal from a first=time 3 11 homebuyer savings account was made for eligible costs is upon 3 12 the account holder. 3 13 f. Within thirty days of being furnished proof of death 3 14 of the account holder, the financial institution where 3 15 the first=time homebuyer savings account is held shall 3 16 distribute any amount remaining in the first=time homebuyer 3 17 savings account to the estate of the account holder or to a 3 18 transfer on death or pay on death beneficiary of the account 3 19 properly designated by the account holder with the financial 3 20 institution. A financial institution shall not be held liable 3 21 by an account holder, the director of revenue, or the treasurer 3 22 of state for the payment of tax or for any other claim relating 3 23 to distributions or withdrawals from a first=time homebuyer 3 24 savings account pursuant to this section. 3 25 g. The account holder shall file reports with the department 3 26 of revenue as reasonably required by the department of revenue. 3 27 h. The account holder is required to remit the withdrawal 3 28 penalty in section 422.7, subsection 57, paragraph "c", if 3 29 assessed, to the department of revenue in the same manner as 3 30 provided in section 422.16, subsection 2. 3 31 3. Penalties. A person who knowingly prepares or causes to 3 32 be prepared a false claim, statement, or billing to justify the 3 33 withdrawal of money from a first=time homebuyer savings account 3 34 is guilty of a serious misdemeanor for each violation. 3 35 Sec. 4. NEW SECTION. 12I.4 Tax considerations. 4 1 The state income tax treatment of a first=time homebuyer 4 2 savings account shall be as provided in section 422.7, 4 3 subsection 57. 4 4 Sec. 5. NEW SECTION. 12I.5 Rules. 4 5 The director of revenue shall adopt rules to implement and 4 6 administer this chapter. 4 7 Sec. 6. Section 422.7, Code 2015, is amended by adding the 4 8 following new subsection: 4 9 NEW SUBSECTION. 57. a. Subtract the amount of 4 10 contributions made by an account holder to the account holder's 4 11 first=time homebuyer savings account during the tax year, not 4 12 to exceed three thousand dollars per individual per tax year, 4 13 or six thousand dollars per tax year for a married couple who 4 14 have a joint first=time homebuyer savings account and file a 4 15 joint return. An amount of contributions made during a tax 4 16 year in excess of three thousand dollars, or six thousand 4 17 dollars, as applicable, may be subtracted by an account holder 4 18 in a subsequent tax year, provided the total exemption under 4 19 this paragraph for the subsequent tax year does not exceed 4 20 three thousand dollars, or six thousand dollars, as applicable. 4 21 This paragraph shall not apply to 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 b. Subtract, to the extent included, income from interest 4 25 and earnings received from an account holder's first=time 4 26 homebuyer savings account. This paragraph "b" shall not apply 4 27 to any interest and earnings received by an account holder more 4 28 than ten years after the account holder first establishes a 4 29 first=time homebuyer savings account. 4 30 c. (1) Add, to the extent previously subtracted under 4 31 paragraph "a", the amount resulting from a withdrawal made from 4 32 a first=time homebuyer savings account for purposes other than 4 33 the payment of eligible costs of the account holder. If the 4 34 withdrawal is made on a day other than the last business day 4 35 of the calendar year, such withdrawal shall also be assessed a 5 1 penalty in an amount equal to ten percent of the amount of the 5 2 withdrawal. The penalty shall not apply to withdrawals made on 5 3 account of the death of the account holder. 5 4 (2) For purposes of this paragraph "c", any amount remaining 5 5 in a first=time homebuyer savings account of an account holder 5 6 on the day after the purchase of a principal residence or the 5 7 last business day of the tenth calendar year following the 5 8 calendar year in which the account holder first establishes a 5 9 first=time homebuyer savings account, whichever occurs first, 5 10 shall be considered a withdrawal under subparagraph (1). 5 11 (3) For purposes of this paragraph "c", the following shall 5 12 not be considered a withdrawal under subparagraph (1): 5 13 (a) Any amount transferred between different first=time 5 14 homebuyer savings accounts of the same account holder by a 5 15 person other than the account holder. 5 16 (b) Any amounts withdrawn or otherwise transferred from a 5 17 first=time homebuyer savings account pursuant to an order in 5 18 bankruptcy. 5 19 d. For purposes of this subsection, "account holder", 5 20 "business day", "eligible costs", and "first=time homebuyer 5 21 savings account" all mean the same as defined in section 12I.2. 5 22 Sec. 7. EFFECTIVE DATE. This Act takes effect January 1, 5 23 2016. 5 24 Sec. 8. APPLICABILITY. This Act applies to tax years 5 25 beginning on or after January 1, 2016. 5 26 EXPLANATION 5 27 The inclusion of this explanation does not constitute agreement with 5 28 the explanation's substance by the members of the general assembly. 5 29 This bill allows first=time homebuyers who are residents 5 30 of Iowa to establish a first=time homebuyer savings account 5 31 (account) with a state or federally chartered bank, savings and 5 32 loan association, credit union, or trust company in this state 5 33 to finance the purchase of a principal residence in this state. 5 34 "First=time homebuyer" and "principal residence" are defined in 5 35 the bill. The account is required to be an interest=bearing 6 1 savings account. The account may be established individually 6 2 or jointly with the resident's spouse. However, married 6 3 taxpayers electing to file separate tax returns or separately 6 4 on a combined tax return shall not establish or maintain a 6 5 joint account. 6 6 There is no limitation on the amount of contributions that 6 7 may be made to or retained in a first=time homebuyer savings 6 8 account. An account holder is required to use the funds in 6 9 an account for eligible costs related to the purchase of a 6 10 principal residence within 10 years following the year in which 6 11 the account is first established. 6 12 "Eligible costs" are defined in the bill and include the down 6 13 payment and allowable closing costs of a principal residence 6 14 that was purchased after the establishment of the account. If 6 15 the account holder withdraws funds for any purpose other than 6 16 the payment of eligible costs, the account holder is subject 6 17 to a penalty equal to 10 percent of the withdrawal, unless the 6 18 withdrawal occurs on the last business day of the calendar year 6 19 or was because of the death of the account holder. The penalty 6 20 amounts are required to be remitted by the account holder to 6 21 the department of revenue in the same manner as Code section 6 22 422.16(2), relating to the withholding of income tax. A person 6 23 ceases to be an account holder following the purchase of a 6 24 principal residence after the establishment of an account. 6 25 Accounts are required to be administered by the account 6 26 holder. The bill prohibits the account holder from using 6 27 account funds to pay administrative expenses of the account 6 28 other than to the financial institution where the account is 6 29 held for expenses or costs related to maintaining the account. 6 30 Documentation regarding the segregation of funds in the account 6 31 from other funds and documentation regarding eligible costs 6 32 shall be maintained by the account holder. The bill also 6 33 requires the account holder to file reports as required by the 6 34 department of revenue. Within 30 days of being furnished proof 6 35 of death of the account holder, the financial institution where 7 1 the account is held shall distribute the funds to the estate 7 2 of the account holder or to a transfer on death or pay on death 7 3 beneficiary properly designated by the account holder. The 7 4 bill provides that a financial institution shall not be held 7 5 liable to an account holder, the director of revenue, or the 7 6 treasurer of state for the payment of tax or any other claim 7 7 relating to distributions or withdrawals from an account. 7 8 The bill provides for two individual income tax incentives 7 9 relating to first=time homebuyer savings accounts. First, 7 10 an account holder is allowed to subtract from the individual 7 11 income tax the amount of contributions made during the year 7 12 to the account holder's account, not to exceed $3,000 per 7 13 individual, or $6,000 for a married couple with a joint account 7 14 and filing a joint income tax return. If the account holder 7 15 contributes more than that amount, the excess may be subtracted 7 16 in a subsequent tax year provided the total exemption in any 7 17 one tax year does not exceed $3,000 or $6,000, as applicable. 7 18 Second, the bill exempts any interest or earnings received from 7 19 an account holder's account. Both the contribution exemption 7 20 and interest exemption only apply for the first 10 years after 7 21 the account holder establishes an account. 7 22 The bill requires an account holder to add to net income the 7 23 amount of withdrawal from an account that was made for purposes 7 24 other than eligible costs of the account holder to the extent 7 25 it was previously subtracted as a contribution. Any amount 7 26 remaining in an account on the day after an account holder 7 27 purchases a principal residence or on the last business day of 7 28 the 10th calendar year following the calendar year the account 7 29 holder first establishes an account, whichever occurs first, 7 30 shall be considered a withdrawal that must be added to net 7 31 income to the extent it was previously subtracted. However, 7 32 amounts transferred between different accounts of the same 7 33 account holder by a person other than the account holder or 7 34 amounts withdrawn pursuant to an order in bankruptcy shall not 7 35 be considered withdrawals that must be added to net income. 8 1 The bill makes it a serious misdemeanor to knowingly prepare 8 2 or cause to be prepared a false claim, statement, or billing 8 3 to justify the withdrawal of money from a first=time homebuyer 8 4 savings account. A serious misdemeanor is punishable by 8 5 confinement for no more than one year and a fine of at least 8 6 $315 but not more than $1,875. 8 7 The bill requires the director of revenue to adopt rules to 8 8 implement and administer the bill. 8 9 The bill takes effect January 1, 2016, and applies to tax 8 10 years beginning on or after that date. LSB 2200SV (2) 86 mm/sc
