Bill Text: NY S09201 | 2021-2022 | General Assembly | Introduced
Bill Title: Establishes the New York state first home savings program to authorize first time home buyers to establish savings accounts to buy their first home.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2022-05-12 - REFERRED TO HOUSING, CONSTRUCTION AND COMMUNITY DEVELOPMENT [S09201 Detail]
Download: New_York-2021-S09201-Introduced.html
STATE OF NEW YORK ________________________________________________________________________ 9201 IN SENATE May 12, 2022 ___________ Introduced by Sen. COONEY -- read twice and ordered printed, and when printed to be committed to the Committee on Housing, Construction and Community Development AN ACT to amend the private housing finance law, in relation to estab- lishing the New York state first home savings program, which author- izes first time home buyers to establish savings accounts to purchase a home; and to amend the tax law, in relation to establishing a personal income tax deduction for deposits into such accounts The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. The private housing finance law is amended by adding a new 2 article 28 to read as follows: 3 ARTICLE XXVIII 4 NEW YORK STATE FIRST HOME 5 SAVINGS PROGRAM 6 Section 1250. Program established. 7 1251. Purposes. 8 1252. Definitions. 9 1253. Functions of the comptroller. 10 1254. Powers of the comptroller. 11 1255. Program requirements; first home savings account. 12 1256. Program limitations; first home savings account. 13 § 1250. Program established. There is hereby established a first home 14 savings program and such program shall be known and may be cited as the 15 "New York state first home savings program". 16 § 1251. Purposes. The purposes of the program shall be to authorize 17 the establishment of first home savings accounts and to provide guide- 18 lines for the maintenance of such accounts to: 19 1. enable residents of this state to benefit from the tax incentive 20 provided for qualified state first home savings accounts under section 21 six hundred twelve of the tax law; and 22 2. incentivize residents to save for the purchase of a first home 23 within the state. EXPLANATION--Matter in italics (underscored) is new; matter in brackets [] is old law to be omitted. LBD15832-01-2S. 9201 2 1 § 1252. Definitions. As used in this article, the following terms 2 shall have the following meanings: 3 1. "Account" or "first home savings account" shall mean an individual 4 savings account established in accordance with the provisions of this 5 article for the exclusive benefit of the account owner or designated 6 beneficiary that is the first time buyer of a home, townhome, condomin- 7 ium or unit in a cooperative housing corporation. 8 2. "Account owner" shall mean a taxpayer who enters into a first home 9 savings agreement pursuant to the provisions of this article, including 10 a person who enters into such an agreement as a fiduciary or agent on 11 behalf of a trust, estate, partnership, association, company or corpo- 12 ration. 13 3. "Designated beneficiary" shall mean, with respect to an account or 14 accounts, the designated individual or individuals whose first home 15 purchase expenses are expected to be paid from the account or accounts. 16 4. "Financial organization" shall mean an organization authorized to 17 do business in the state, and (a) which is an authorized fiduciary to 18 act as a trustee pursuant to the provisions of an act of congress enti- 19 tled "Employee Retirement Income Security Act of 1974", as such 20 provisions may be amended from time to time, or an insurance company; 21 and (b)(i) is licensed or chartered by the department of financial 22 services, (ii) is chartered by an agency of the federal government, 23 (iii) is subject to the jurisdiction and regulation of the securities 24 and exchange commission of the federal government, (iv) is any other 25 entity otherwise authorized to act in this state as a trustee pursuant 26 to the provisions of an act of congress entitled "Employee Retirement 27 Income Security Act of 1974", as such provisions may be amended from 28 time to time, (v) or any banking organization as defined in subdivision 29 eleven of section two of the banking law, national banking association, 30 state chartered credit union, federal mutual savings bank, federal 31 savings and loan association or federal credit union. 32 5. "First time home buyer" shall mean an individual or individuals, 33 neither of whom has or had an ownership interest in a principal resi- 34 dence at any time, including residences owned in the United States or 35 abroad. No such person shall own any other home including vacation or 36 investment residences, including residences owned in the United States 37 or abroad, except as otherwise provided in this subdivision. If either 38 the individual or individuals are not first time home buyers, neither 39 the individual or individuals shall be considered a first time home 40 buyer. If an individual's only potentially disqualifying present owner- 41 ship interest is ownership of a mobile or manufactured home, the indi- 42 vidual shall be considered a first time home buyer and shall be eligible 43 for a first home account deduction. For the purposes of this article a 44 "mobile or manufactured home" shall mean a structure that is valued as 45 personal property and not real property. If, due to his or her ownership 46 of a mobile or manufactured home, the individual has claimed a real 47 estate tax or home mortgage deduction on his or her personal income tax 48 returns, such individual shall not be considered a first time home buyer 49 regardless of whether the mobile of manufactured home was considered 50 personal or real property. 51 6. "Ownership interest" shall mean a fee simple interest, a joint 52 tenancy, a tenancy in common, a tenancy by the entirety, the interest of 53 a tenant-share holder in a cooperative, a life estate or a land 54 contract. Interests which do not constitute ownership interests include 55 the following: (a) remainder interests, (b) a lease with or without an 56 option to purchase, (c) a mere expectancy to inherit an interest in aS. 9201 3 1 residence, (d) the interest that a purchaser of a residence acquires on 2 the execution of a purchase contract and (e) an interest in real estate 3 other than a residence. 4 7. "Program" shall mean the New York first home savings program estab- 5 lished pursuant to this article. 6 8. "Qualified first home purchase expenses" shall mean monies applied 7 for the purchase or construction of a house, townhouse, condominium or 8 unit in a cooperative housing corporation within the state to be used as 9 a primary residence of the account owner or designated beneficiary for a 10 period of not less than two years after purchase. 11 9. "Qualified residential housing" shall mean a house, townhouse, 12 condominium or unit in a cooperative housing corporation within the 13 state. 14 10. "Qualified withdrawal" shall mean a withdrawal from an account to 15 pay the qualified first home purchase expense of the account owner or 16 designated beneficiary of the account. 17 11. "Nonqualified withdrawal" shall mean a withdrawal from an account 18 but shall not include: 19 (a) a qualified withdrawal; 20 (b) a withdrawal made as the result of death; 21 (c) an unforeseeable emergency; or 22 (d) need based upon qualifying for military service in the armed forc- 23 es of the United States as determined by rules an regulations promulgat- 24 ed by the comptroller. 25 12. "Comptroller" shall mean the state comptroller. 26 13. "Management contract" shall mean the contract executed by the 27 comptroller and a financial organization selected to act as a depository 28 and manager of the program. 29 14. "First home savings agreement" shall mean an agreement between the 30 comptroller or a financial organization and the account owner. 31 15. "Program manager" shall mean a financial organization selected by 32 the comptroller to act as a depository and manager of the program. 33 16. "Commissioner" shall mean the commissioner of taxation and 34 finance. 35 § 1253. Functions of the comptroller. 1. The comptroller shall imple- 36 ment the program under the terms and conditions established by this 37 article and a memorandum of understanding with the commissioner relating 38 to any terms or conditions not otherwise expressly provided for in this 39 article. 40 2. In furtherance of such implementation the comptroller shall: 41 (a) develop and implement the program in a manner consistent with the 42 provisions of this article through rules and regulations established in 43 accordance with the state administrative procedure act; 44 (b) engage the services of consultants on a contract basis for render- 45 ing professional and technical assistance and advice; 46 (c) seek rulings and other guidance from the United States Department 47 of Treasury and the Internal Revenue Service relating to the program; 48 (d) make changes to the program required for the participants in the 49 program to obtain the state income tax benefits or treatment provided by 50 this article; 51 (e) charge, impose and collect administrative fees and service charges 52 in connection with any agreement, contract or transaction relating to 53 the program; 54 (f) develop marketing plans and promotion materials; 55 (g) establish the methods by which the funds held in such accounts be 56 dispersed;S. 9201 4 1 (h) establish the method by which funds shall be allocated to pay for 2 administrative costs; and 3 (i) do all things necessary and proper to carry out the purposes of 4 this article. 5 § 1254. Powers of the comptroller. 1. The comptroller may implement 6 the program through use of financial organizations as account deposito- 7 ries and managers. Under the program, an account owner may establish 8 accounts directly with an account depository. 9 2. The comptroller may solicit proposals from financial organizations 10 to act as depositories and managers of the program. Financial organiza- 11 tions submitting proposals shall describe the investment instrument 12 which will be held in accounts. The comptroller shall select as program 13 depositories and managers the financial organization, from among the 14 bidding financial organizations that demonstrates the most advantageous 15 combination, both to potential program participants and this state, of 16 the following factors: 17 (a) financial stability and integrity of the financial organization; 18 (b) the safety of the investment instrument being offered; 19 (c) the ability of the investment instrument to track increasing costs 20 of residential housing; 21 (d) the ability of the financial organization to satisfy recordkeeping 22 and reporting requirements; 23 (e) the financial organization's plan for promoting the program and 24 the investment it is willing to make to promote the program; 25 (f) the fees, if any, proposed to be charged to persons for opening 26 accounts; 27 (g) the minimum initial deposit and minimum contributions that the 28 financial organization will require; 29 (h) the ability of banking organizations to accept electronic with- 30 drawals, including payroll deduction plans; and 31 (i) other benefits to the state or its residents included in the 32 proposal, including fees payable to the state to cover expenses of oper- 33 ation of the program. 34 3. The comptroller may enter into a contract with a financial organ- 35 ization. Such financial organization management may provide one or more 36 types of investment instrument. 37 4. The comptroller may select more than one financial organization for 38 the program. 39 5. A management contract shall include, at a minimum, terms requiring 40 the financial organization to: 41 (a) take any action required to keep the program in compliance with 42 requirements of section twelve hundred fifty-five of this article and 43 any actions not contrary to its contract to manage the program to quali- 44 fy as a "first home savings account" under paragraph forty-seven of 45 subsection (c) of section six hundred twelve of the tax law; 46 (b) keep adequate records of each account, keep each account segre- 47 gated from each other account, and provide the comptroller with the 48 information necessary to prepare the statements required by section 49 twelve hundred fifty-five of this article; 50 (c) compile and total information contained in statements required to 51 be prepared under section twelve hundred fifty-five of this article and 52 provide such compilations to the comptroller; 53 (d) if there is more than one program manager, provide the comptroller 54 with such information necessary to determine compliance with section 55 twelve hundred fifty-five of this article;S. 9201 5 1 (e) provide the comptroller or his designee access to the books and 2 records of the program manager to the extent needed to determine compli- 3 ance with the contract; 4 (f) hold all accounts for the benefit of the account owner; 5 (g) be audited at least annually by a firm of certified public 6 accountants selected by the program manager and that the results of such 7 audit be provided to the comptroller; 8 (h) provide the comptroller with copies of all regulatory filings and 9 reports made by it during the term of the management contract or while 10 it is holding any accounts, other than confidential filings or reports 11 that will not become part of the program. The program manager shall make 12 available for review by the comptroller the results of any periodic 13 examination of such manager by any state or federal banking, insurance 14 or securities commission, except to the extent that such report or 15 reports may not be disclosed under applicable law or the rules of such 16 commission; and 17 (i) ensure that any description of the program, whether in writing or 18 through the use of any media, is consistent with the marketing plan as 19 developed pursuant to the provisions of section twelve hundred fifty- 20 three of this article. 21 6. The comptroller may provide that an audit shall be conducted of the 22 operations and financial position of the program depository and manager 23 at any time if the comptroller has any reason to be concerned about the 24 financial position, the recordkeeping practices, or the status of 25 accounts of such program depository and manager. 26 7. During the term of any contract with a program manager, the comp- 27 troller shall conduct an examination of such manager and its handling of 28 accounts. Such examination shall be conducted at least biennially if 29 such manager is not otherwise subject to periodic examination by the 30 superintendent of financial services, the federal deposit insurance 31 corporation or other similar entity. 32 8. (a) If selection of a financial organization as a program manager 33 or depository is not renewed, after the end of its term: 34 (i) accounts previously established and held in investment instruments 35 at such financial organization may be terminated; 36 (ii) additional contributions may be made to such accounts; 37 (iii) no new accounts may be placed with such financial organization; 38 and 39 (iv) existing accounts held by such depository shall remain subject to 40 all oversight and reporting requirements established by the comptroller. 41 (b) If the comptroller terminates a financial organization as a 42 program manager or depository, he or she shall take custody of accounts 43 held by such financial organization and shall seek to promptly transfer 44 such accounts to another financial organization that is selected as a 45 program manager or depository and into investment instruments as similar 46 to the original instruments as possible. 47 9. The comptroller may enter into such contracts as it deems necessary 48 and proper for the implementation of the program. 49 § 1255. Program requirements; first home savings account. 1. First 50 home savings accounts established pursuant to the provisions of this 51 article shall be governed by the provisions of this section. 52 2. A first home savings account may be opened by any person who 53 desires to save money for the payment of the qualified first home 54 purchase expenses of the account owner or designated beneficiary. An 55 account owner may designate another person as successor owner of the 56 account in the event of the death of the original account owner. SuchS. 9201 6 1 person who opens an account or any successor owner shall be considered 2 the account owner. 3 (a) An application for such account shall be in the form prescribed by 4 the program and contain the following: 5 (i) the name, address and social security number or employer identifi- 6 cation number of the account owner; 7 (ii) the designation of a designated beneficiary; 8 (iii) the name, address, and social security number of the designated 9 beneficiary; and 10 (iv) such other information as the program may require. 11 (b) The comptroller and the corporation may establish a nominal fee 12 for such application. 13 3. Any person, including the account owner, may make contributions to 14 the account after the account is opened. 15 4. Contributions to accounts may be made only in cash. 16 5. An account owner may withdraw all or part of the balance from an 17 account as authorized under rules governing the program. Such rules 18 shall include provisions that will generally enable the determination as 19 to whether a withdrawal is a nonqualified withdrawal or a qualified 20 withdrawal. 21 6. (a) An account owner may change the designated beneficiary of an 22 account in accordance with procedures established by the memorandum of 23 understating pursuant to the provisions of section twelve hundred 24 fifty-three of this article. 25 (b) An account owner may transfer all or a portion of an account to 26 another first home savings account. 27 (c) Changes in designated beneficiaries and transfers under this 28 subdivision shall not be permitted to the extent that they would cause 29 all accounts for the same beneficiary to exceed the permitted aggregate 30 maximum account balance. 31 7. The program shall provide separate accounting for each designated 32 beneficiary. 33 8. No account owner or designated beneficiary of any account shall be 34 permitted to direct the investment of any contributions to an account or 35 the earnings thereon more than two times in any calendar year. 36 9. Neither an account owner nor a designated beneficiary may use an 37 interest in an account as security for a loan. Any pledge of an interest 38 in an account shall be of no force and effect. 39 10. The comptroller shall promulgate rules or regulations to prevent 40 contributions on behalf of a designated beneficiary in excess of an 41 amount that would cause the aggregate account balance for all accounts 42 for a designated beneficiary to exceed a maximum account balance, as 43 established from time to time by the comptroller. 44 11. Contributions to a first home savings account shall be limited to 45 one hundred thousand dollars per account. This amount shall not take 46 into consideration any gain or loss to the principal investment into the 47 account. 48 12. In the event that an individual makes a "nonqualified withdrawal" 49 of monies from the first home savings account such individual shall have 50 the entire account taxed, including any interest, as though it was 51 income at the account owner's federal tax rate in the tax years the 52 monies were withdrawn, and incur an additional ten percent state penalty 53 on the amount of earnings. In the event account owners or designated 54 beneficiary does not use the qualified residential housing as a primary 55 residence for a period of not less than two years after the purchase of 56 such housing, the account owner shall have the entire account taxed,S. 9201 7 1 including any interest, as though it was ordinary income at the account 2 owner's federal tax rate in the tax years the monies were withdrawn and 3 incur an additional ten percent state penalty on the amount of earnings. 4 For purposes of this article, the two year period shall begin at the 5 time title is transferred to the first time home buyer. The penalty 6 shall be in addition to any taxes due pursuant to a non-qualified with- 7 drawal from a first home savings account. 8 13. Penalties may be waived by the commissioner if the individual can 9 show proof that the reason the individual did not use the qualified 10 residential housing as a primary residence for a period of two years or 11 more after the purchase or construction was due to either: 12 (a) an employment relocation outside the state and such relocation 13 required the individual to become a resident of another state; 14 (b) an unforeseeable emergency; 15 (c) an absence due to qualifying military service; or 16 (d) death. 17 For purposes of this subdivision, an "unforeseeable emergency" shall 18 mean a severe financial hardship resulting from illness, accident or 19 property loss to the account owner, or his or her dependents resulting 20 in circumstances beyond their control. The circumstances that constitute 21 an unforeseeable financial emergency will depend on the facts of each 22 case, however, withdrawal of account funds may not be made, without 23 penalty, to the extent that such hardship is or may be relieved by 24 either: 25 (i) reimbursement or compensation by insurance or otherwise; or 26 (ii) liquidation of the individual's assets to the extent the liqui- 27 dation of such assets would not itself cause severe financial hardship. 28 14. The commissioner and the comptroller are directed to promulgate 29 all rules and regulations necessary to implement the provisions of this 30 subsection and are hereby directed to establish, supervise and regulate 31 first home savings accounts authorized to be created by this section. 32 15. (a) If there is any distribution from a first home savings account 33 to any individual or for the benefit of any individual during a calendar 34 year, such distribution shall be reported to the Internal Revenue 35 Service and the account owner, the designated beneficiary, or the 36 distributee to the extent required by federal law or regulation. 37 (b) Statements shall be provided to each account owner at least once 38 each year within sixty days after the end of the twelve month period to 39 which they relate. The statement shall identify the contributions made 40 during a preceding twelve month period, the total contributions made to 41 the account through the end of the period, the value of the account at 42 the end of such period, distributions made during such period and any 43 other information that the comptroller shall require to be reported to 44 the account owner. 45 (c) Statements and information relating to accounts shall be prepared 46 and filed to the extent required by federal and state tax laws. 47 16. An annual fee may be imposed upon the account owner for the main- 48 tenance of the account. 49 17. The program shall disclose the following information in writing to 50 each account owner of a first home savings account: 51 (a) the terms and conditions for establishing a first home savings 52 account; 53 (b) any restrictions on the substitution of beneficiaries; 54 (c) the person or entity entitled to terminate the first home savings 55 agreement;S. 9201 8 1 (d) the period of time during which a beneficiary may receive benefits 2 under the first home savings agreement; 3 (e) the terms and conditions under which money may be wholly or 4 partially withdrawn from the program, including, but not limited to, any 5 reasonable charges and fees that may be imposed for withdrawal; 6 (f) the probable tax consequences associated with contributions to and 7 distributions from accounts; and 8 (g) all other rights and obligations pursuant to first home savings 9 agreements, and any other terms, conditions, and provisions deemed 10 necessary and appropriate by the terms of the memorandum of understand- 11 ing entered into pursuant to section twelve hundred fifty-three of this 12 article. 13 18. First home savings agreements shall be subject to section four- 14 teen-c of the banking law and the "truth-in-savings" regulations promul- 15 gated thereunder. 16 19. Nothing in this article or in any first home savings agreement 17 entered into pursuant to this article shall be construed as a guarantee 18 by the state that the account owner or designated beneficiary will qual- 19 ify for the purchase of a home. 20 20. To establish that an account owner or designated beneficiary is a 21 first time home buyer, the individual shall complete a form promulgated 22 by the comptroller certifying, under the penalties of perjury, that such 23 individual is a first time home buyer. 24 21. An individual must not intend to use any portion of the real prop- 25 erty purchased using the first home savings account funds in a trade or 26 business, or as a vacation home or as an investment, except as an owner 27 occupied multiple dwelling with no more than two rental units. 28 22. Monies withdrawn from first home savings accounts and any interest 29 which has accrued shall not be considered as taxable income to the 30 account owner for state personal income taxation purposes, so long as 31 the monies are applied for the purchase or construction of a qualified 32 first home purchase by the account owner or designated beneficiary of 33 the account. 34 § 1256. Program limitations; first home savings account. 1. Nothing in 35 this article shall be construed to: 36 (a) give any designated beneficiary any rights or legal interest with 37 respect to an account unless the designated beneficiary is the account 38 owner; 39 (b) guarantee that the account owner or designated beneficiary will be 40 financially qualified to purchase a home; 41 (c) create state residency for an individual merely because the indi- 42 vidual is a designated beneficiary; or 43 (d) guarantee that amounts saved pursuant to the program will be 44 sufficient to cover the down payment or closing costs pursuant to the 45 purchase of a qualified first home. 46 2. (a) Nothing in this article shall create or be construed to create 47 any obligation of the comptroller, the state, or any agency or instru- 48 mentality of the state to guarantee for the benefit of the account owner 49 or designated beneficiary with respect to: 50 (i) the rate of interest or other return on any account; and 51 (ii) the payment of interest or other return on any account. 52 (b) The comptroller by rule or regulation shall provide that every 53 contract, application, deposit slip or other similar document that may 54 be used in connection with a contribution to an account clearly indicate 55 that the account is not insured by the state and neither the principal 56 deposited nor the investment return is guaranteed by the state.S. 9201 9 1 § 2. Subsection (b) of section 612 of the tax law is amended by adding 2 a new paragraph 44 to read as follows: 3 (44) (A) Excess distributions received during the taxable year by a 4 distributee of a first home savings account established under the New 5 York state first home savings program provided for under article twen- 6 ty-eight of the private housing finance law, to the extent such excess 7 distributions are deemed attributable to the deductible contributions 8 under paragraph forty-seven of subsection (c) of this section. 9 (B) (i) The term "excess distributions" means distributions which are 10 not: 11 (I) qualified withdrawals within the meaning of subdivision ten of 12 section twelve hundred fifty-two of the private housing finance law; 13 (II) withdrawals made as a result of the death or disability of the 14 designated beneficiary within the meaning of subdivision eleven of 15 section twelve hundred fifty-two of such law; or 16 (III) transfers described in paragraph (b) of subdivision six of 17 section twelve hundred fifty-five of such law. 18 (ii) Excess distributions shall be deemed attributable to deductible 19 contributions to the extent the amount of any such excess distribution, 20 when added to all previous excess distributions from the account, 21 exceeds the aggregate of all nondeductible contributions to the account. 22 § 3. Subsection (c) of section 612 of the tax law is amended by adding 23 two new paragraphs 47 and 48 to read as follows: 24 (47) Contributions made during the taxable year by an account owner to 25 a first home savings account established under the New York state first 26 home savings program provided for under article twenty-eight of the 27 private housing finance law, to the extent not deductible or eligible 28 for credit for federal income tax purposes, provided, however, the 29 exclusion provided for in this paragraph shall not exceed five thousand 30 dollars for an individual or head of household, and for married couples 31 who file joint tax returns, shall not exceed ten thousand dollars; 32 provided, further that such exclusion shall be available only to the 33 account owner and not to any other person. 34 (48) Distributions from a first home savings account established under 35 the New York state first home savings program provided for under article 36 twenty-eight of the private housing finance law, to the extent includi- 37 ble in gross income for federal income tax purposes. 38 § 4. This act shall take effect on the one hundred eightieth day after 39 it shall have become a law, and shall apply to taxable years commencing 40 on or after the first of January next succeeding the date on which it 41 shall have become a law; provided, however, that effective immediately, 42 the commissioner of taxation and finance and the comptroller are author- 43 ized to promulgate any rules or regulations necessary to implement the 44 provisions of this act on its effective date on or before such date.
