Bill Text: IA SF505 | 2017-2018 | 87th General Assembly | Enrolled
Bill Title: A bill for an act providing for the establishment of first-time homebuyer savings accounts in Iowa, including related individual income tax exemptions, and including applicability provisions. (Formerly SSB 1056 and SF 425.) Effective 7-1-17.
Spectrum: Committee Bill
Status: (Passed) 2017-05-09 - Signed by Governor. S.J. 1137. [SF505 Detail]
Download: Iowa-2017-SF505-Enrolled.html
Senate File 505 - Enrolled
SENATE FILE
BY COMMITTEE ON WAYS AND
MEANS
(SUCCESSOR TO SF 425)
(SUCCESSOR TO SSB
1056)
(COMPANION TO HF 622
BY COMMITTEE ON WAYS
AND MEANS)
\5
A BILL FOR
\1
Senate File 505
AN ACT
PROVIDING FOR THE ESTABLISHMENT OF FIRST=TIME HOMEBUYER
SAVINGS ACCOUNTS IN IOWA, INCLUDING RELATED INDIVIDUAL
INCOME TAX EXEMPTIONS, AND INCLUDING APPLICABILITY
PROVISIONS.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
Section 1. Section 422.7, Code 2017, is amended by adding
the following new subsection:
NEW SUBSECTION. 41. a. Subject to the restrictions in
paragraph "b", subtract the sum of the following amounts:
(1) The amount of contributions made by an account holder
during the tax year to the account holder's first=time
homebuyer savings accounts, not to exceed the following annual
limit:
(a) (i) For married taxpayers who file a joint return and
maintain a joint first=time homebuyer savings account, four
thousand dollars.
(ii) For any other account holder, two thousand dollars.
(b) For the tax year beginning in the 2018 calendar year
and for each subsequent tax year, the director shall multiply
each dollar amount set forth in subparagraph subdivisions (i)
and (ii) by the latest cumulative inflation factor, shall
round off the resulting product to the nearest one dollar,
and shall incorporate the result into the income tax forms
and instructions for each tax year. For purposes of this
subparagraph division, "cumulative inflation factor" means the
product of the annual inflation factor for the 2018 calendar
year and all annual inflation factors for subsequent calendar
years as determined by section 422.4, subsection 1, paragraph
"a". The cumulative inflation factor applies to all tax years
beginning on or after January 1 of the calendar year for
which the latest annual inflation factor has been determined.
Notwithstanding any other provision, the annual inflation
factor for the 2018 calendar year is one hundred percent.
(2) To the extent included, income from interest received
from the account holder's first=time homebuyer savings
accounts.
b. (1) The subtraction in paragraph "a" shall not exceed
the following aggregate lifetime limit:
(a) For married taxpayers who file a joint return and
maintain a joint first=time homebuyer savings account, an
amount equal to the product of the deductible amount determined
for the year in paragraph "a", subparagraph (1), subparagraph
division (a), subparagraph subdivision (i), multiplied by ten.
(b) For any other account holder, an amount equal to the
product of the deductible amount determined for the year in
paragraph "a", subparagraph (1), subparagraph division (a),
subparagraph subdivision (ii), multiplied by ten.
(2) The subtraction in paragraph "a" shall not be allowed to
an account holder upon one of the following dates, whichever
occurs first:
(a) January 1 of the tenth calendar year after the calendar
year during which the account holder first opened a first=time
homebuyer savings account.
(b) The date on which funds within an account holder's
first=time homebuyer savings account are withdrawn for purposes
other than the payment or reimbursement of the designated
beneficiary's eligible home costs in connection with a
qualified home purchase. Any amount transferred between
different first=time homebuyer savings accounts of the same
account holder by a person other than the account holder
shall not be considered a withdrawal for purposes of this
subparagraph division (b).
c. (1) Add, to the extent previously deducted under
paragraph "a", subparagraph (1), the amount withdrawn during
the tax year from an account holder's first=time homebuyer
savings account for purposes other than the payment or
reimbursement of the designated beneficiary's eligible home
costs in connection with a qualified home purchase.
(2) For purposes of this paragraph "c", any amount remaining
in an account holder's first=time homebuyer savings account
on January 1 of the tenth calendar year after the calendar
year during which the account holder first opened a first=time
homebuyer savings account shall be considered immediately
withdrawn under subparagraph (1).
(3) For purposes of this paragraph "c", the transfer of
amounts between different first=time homebuyer accounts of the
same account holder by a person other than the account holder
shall not cause such transfer to be considered a withdrawal
under subparagraph (1).
d. For any amount considered a withdrawal required to be
added to net income pursuant to paragraph "c", the account
holder shall be assessed a penalty equal to ten percent of
the amount of the withdrawal. The penalty shall not apply
to withdrawals made by reason of the death of the account
holder, or to withdrawals made pursuant to a garnishment,
levy, or other order, including but not limited to an order in
bankruptcy following a filing for protection under the federal
bankruptcy code, 11 U.S.C. {101 et seq.
e. For purposes of this subsection, "account holder",
"designated beneficiary", "eligible home costs", "first=time
homebuyer savings account", and "qualified home purchase" mean
the same as defined in section 541B.2.
Sec. 2. Section 422.9, subsection 2, Code 2017, is amended
by adding the following new paragraph:
NEW PARAGRAPH. k. Subtract interest, taxes, and other
miscellaneous expenses deductible for federal income tax
purposes to the extent such amounts are eligible home costs
in connection with a qualified home purchase that were paid
or reimbursed from funds in a first=time homebuyer savings
account. For purposes of this paragraph, "eligible home costs",
"first=time homebuyer savings account", and "qualified home
purchase" mean the same as defined in section 541B.2.
Sec. 3. NEW SECTION. 541B.1 Short title.
This chapter may be cited as the "Iowa First=Time Homebuyer
Savings Account Act".
Sec. 4. NEW SECTION. 541B.2 Definitions.
As used in this chapter, unless the context otherwise
requires:
1. "Account holder" means an individual who establishes,
either individually or jointly with the individual's spouse,
a first=time homebuyer savings account pursuant to section
541B.3.
2. "Department" means the department of revenue.
3. "Designated beneficiary" means an individual meeting the
requirements of section 541B.3, subsection 2, and designated
by an account holder as beneficiary of the account holder's
first=time homebuyer savings account pursuant to section
541B.3, subsection 2.
4. a. "Eligible home costs" means the following:
(1) The down payment for the purchase of a single=family
residence in Iowa by a designated beneficiary.
(2) A cost, fee, tax, or payment incurred by, or charged
or assigned to, a designated beneficiary for the purchase of a
single=family residence in Iowa, and listed on the statement
of receipts and disbursements for the sale, including any
statement prescribed by 12 C.F.R. {1026.38, as amended.
b. "Eligible home costs" includes any United States veterans
administration funding fee incurred by, or charged or assigned
to, a designated beneficiary in connection with a veterans
administration home loan guaranty program.
5. "Financial institution" means a state or federally
chartered bank, savings and loan association, credit union, or
trust company in this state.
6. "First=time homebuyer" means an individual who is a
resident of Iowa and who does not own, either individually or
jointly, a single=family or multifamily residence, and who
has not owned or purchased, either individually or jointly, a
single=family or multifamily residence for a period of three
years prior to all of the following:
a. The date on which the individual is named as a designated
beneficiary of a first=time homebuyer savings account.
b. The date of the qualified home purchase for which the
eligible home costs are paid or reimbursed from a first=time
homebuyer savings account.
7. "First=time homebuyer savings account" means an account
that meets the requirements of sections 541B.3 and 541B.4 and
that was established for the purpose of paying or reimbursing a
designated beneficiary's eligible home costs in connection with
a qualified home purchase.
8. "Individual" means a natural person.
9. "Qualified home purchase" means, with respect to a
first=time homebuyer savings account, the purchase of a
single=family residence in Iowa by the account's designated
beneficiary ninety or more days after the date the account
holder first opened a first=time homebuyer savings account.
10. "Resident" means the same as defined in section 422.4.
11. "Single=family residence" means a single=family
residence owned and occupied by a designated beneficiary as the
designated beneficiary's principal residence, including but not
limited to a manufactured home, mobile home, condominium unit,
or cooperative.
Sec. 5. NEW SECTION. 541B.3 First=time homebuyer savings
account.
1. Establishment of account.
a. Beginning January 1, 2018, an individual may open an
interest=bearing savings account with a financial institution
and designate the entire account as a first=time homebuyer
savings account for the purpose of paying or reimbursing a
designated beneficiary's eligible home costs in connection with
a qualified home purchase. The first=time homebuyer savings
account designation shall be made no later than April 30 of the
year following the tax year during which the account is opened,
on forms provided by the department.
b. A married couple electing to file a joint Iowa individual
income tax return may establish a joint first=time homebuyer
savings account. Married taxpayers electing to file separate
tax returns or separately on a combined tax return for Iowa tax
purposes shall not establish or maintain a joint first=time
homebuyer savings account.
c. An individual may establish more than one first=time
homebuyer savings account, provided each account has a
different designated beneficiary.
2. Designation of beneficiary.
a. The account holder shall designate one individual as
beneficiary of the first=time homebuyer savings account. The
designation shall be made on forms provided by the department
and no later than April 30 of the year following the tax year
during which the account is opened. The account holder may
change the designated beneficiary of the first=time homebuyer
savings account at any time.
b. The account holder and designated beneficiary of
a first=time homebuyer savings account may be the same
individual.
c. An individual may be the designated beneficiary of more
than one first=time homebuyer savings account.
d. The designated beneficiary of a first=time homebuyer
savings account must be a first=time homebuyer.
Sec. 6. NEW SECTION. 541B.4 Account administration ====
account holder responsibilities.
1. Account contributions. Contributions to a first=time
homebuyer savings account may be made by any person in the form
of cash. There is no limitation on the amount of contributions
that may be made to or retained in a first=time homebuyer
savings account.
2. Account expenses. The account holder shall not use funds
held in a first=time homebuyer savings account to pay expenses,
if any, of administering the account, except that all fees and
charges assessed by the financial institution may be deducted
from the account by the financial institution where the account
is held.
3. Required reports. The account holder shall submit the
following information to the department:
a. An annual report for the first=time homebuyer savings
account on forms furnished by the department. The report shall
be included with the Iowa income tax return of the account
holder.
b. A copy of the federal internal revenue service form
1099, or other similar federal internal revenue service income
reporting form, if any, issued for the first=time homebuyer
savings account to the account holder by the financial
institution where the account is held. The form shall be
included with the Iowa income tax return of the account holder.
c. Upon a withdrawal of funds from a first=time homebuyer
savings account, a transaction report on forms furnished by the
department.
4. Withdrawal of funds. The account holder may withdraw
funds from a first=time homebuyer savings account at any time.
Sec. 7. NEW SECTION. 541B.5 Financial institution
protections.
Nothing in this chapter shall be construed to require a
financial institution to do any of the following, or to be
responsible or liable for any of the following:
1. Designate or label within the financial institution's
account contracts, systems, or in any other manner, an account
as a first=time homebuyer savings account.
2. Ascertain or verify the purpose of a withdrawal of funds
from a first=time homebuyer savings account, or track the
destination or use of the withdrawn funds.
3. Allocate funds in a first=time homebuyer savings account
to a designated beneficiary or among joint account holders.
4. Report any information to the department or any other
governmental agency.
5. Determine or ensure that an account satisfies the
requirements to be a first=time homebuyer savings account.
6. Determine or ensure that funds withdrawn from a
first=time homebuyer savings account are used for the payment
or reimbursement of a designated beneficiary's eligible home
costs in connection with a qualified home purchase.
7. Report or remit taxes or penalties related to the
ownership or use of a first=time homebuyer savings account.
8. Include the name of a beneficiary in the title of a
first=time homebuyer savings account, or document the change of
any beneficiary to a first=time homebuyer savings account.
Sec. 8. NEW SECTION. 541B.6 Tax considerations.
The state income tax treatment of a first=time homebuyer
savings account shall be as provided in section 422.7,
subsection 41, and section 422.9, subsection 2, paragraph "k".
Sec. 9. NEW SECTION. 541B.7 Rules and forms.
1. The department shall adopt rules to implement and
administer this chapter.
2. The department shall create and make available forms
to be used in complying with this chapter, including but not
limited to the following:
a. A form for designating an account as a first=time
homebuyer savings account pursuant to section 541B.3,
subsection 1, paragraph "a".
b. A form for designating an individual as beneficiary of
a first=time homebuyer savings account pursuant to section
541B.3, subsection 2, paragraph "a".
c. A first=time homebuyer savings account annual report
as required in section 541B.4, subsection 3, paragraph "a".
The report shall require, at a minimum, a list of transactions
occurring on the account during the tax year, and shall
identify any supporting documentation to be included with the
report or maintained by the taxpayer.
d. A transaction report as required in section 541B.4,
subsection 3, paragraph "c", which report shall require, at a
minimum, information regarding the eligible home costs to which
any withdrawn funds were applied in connection with a qualified
home purchase, and information regarding the amount of funds
remaining, if any, in a first=time homebuyer savings account.
Sec. 10. APPLICABILITY. The following provision or
provisions of this Act apply to tax years beginning on or after
January 1, 2018:
1. The section of this Act enacting section 422.7,
subsection 41.
2. The section of this Act enacting section 422.9,
subsection 2, paragraph "k".
JACK WHITVER
LINDA UPMEYER
W. CHARLES SMITH
TERRY E. BRANSTA
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