WEST virginia legislature
2020 regular session
Introduced
House Bill 4922
[Introduced February 11,
2020; Referred to the Committee on Finance]
A BILL to amend the Code
of West Virginia, 1931, as amended, by adding thereto a new article, designated
§31-18F-1, §31-18F-2, §31-18F-3, §31-18F-4,
§31-18F-5, §31-18F-6, §31-18F-7, §31-18F-8, §31-18F-9, and §31-18F-10, all
relating to creating the “First Time Home Buyer Savings Account Act”; providing
definitions; creating first time home buyer savings account; providing for
subtractions from federal taxable income; providing limits applicable to
subtraction from federal taxable income; penalties for withdrawal of funds;
requiring financial institution to provide account holder information
certificate; requiring Tax Commissioner to propose rules to implement this act;
and .stating years to which this act applies.
Be it enacted by the
Legislature of West Virginia:
ARTICLE 18F.
FIRST-TIME HOME BUYER SAVINGS ACCOUNT ACT.
§31-18F-1.
Legislative findings.
The Legislature finds
that saving for a down payment and closing costs for the purchase of a first
home is challenging in the present economy. The first-time home buyer savings
account program will provide opportunities for West Virginia residents to save
funds for first-time home ownership and will provide West Virginias with
meaningful incentives to save for the purchase of a first home.
§31-18F-2.
Definitions.
“Account holder” means a
first-time home buyer who establishes a first-time home buyer savings account.
“Allowable closing
costs” means disbursements listed in a settlement statement for the purchase of
a single-family residence by an account holder.
“Eligible costs” means
the down payment and allowable closing costs for the purchase of a single-family
residence by an account holder.
“Financial institution”
means a bank, a trust company, a commercial bank, a national bank, a savings
bank, a savings and loan, a thrift institution, a credit union, an insurance
company, a mutual fund, an investment firm or a similar entity authorized to do
business in this state.
“First-time home buyer”
means an individual who is a resident of this state and has not owned or
purchased, either individually or jointly, a single-family residence during a
period of three years prior to the date of the purchase of a single-family
residence.
“First-time home buyer
savings account” or “account” means an account with a financial institution
that an account holder designates as a first-time home buyer savings account on
the account holder’s West Virginia income tax return for the purpose of paying
or reimbursing eligible costs for the purchase of a single family residence in
this state by the account holder.
(7) “Resident of this
state” means an individual who is domiciled in this state for more than six
months of the calendar.
(8) “Settlement
statement” means the statement of receipts and disbursements for a transaction
related to real estate, including a statement prescribed under the Real Estate
Settlement Procedures Act of 1974, 12 U.S.C. 2601 et seq., and
regulations thereunder.
(9) “Single-family
residence” means a residence intended for occupation by a single-family unit
that is owned and occupied by an account holder as the account holder’s
principal residence. “Single family residence” includes a manufactured home,
residential trailer, mobile home, or condominium unit.
(10) “Taxable income”
has the meaning given that term in §11-21-11 of this code.
§31-18F-3. Creation
of first-time home buyer savings account.
(1) An individual may
create a first-time home buyer savings account with a financial institution to
be used to pay or reimburse the account holder’s eligible costs related to the
purchase of a single family residence.
(2) An individual may
jointly own a first-time home buyer savings account with another person if the
joint account holders are both first-time home buyers and file a joint income
tax return.
(3) An individual may
not be the account holder of more than one first-time home buyer savings
account.
(4) Only cash and
marketable securities may be contributed to a first-time home buyer savings
account. Subject to the limitations of this article, persons other than the
account holder may contribute funds to a first-time home buyer savings account.
There is no limitation on the amount of contributions that may be made to or
retained in a first-time home buyer savings account.
(5) The account holder
may not use funds held in a first-time home buyer savings account to pay
expenses of administering the account, except that the financial institution
that administers the account may deduct a service fee from the account.
(6) An account holder
may withdraw all or part of the funds from a first-time home buyer savings
account and deposit the funds in a new first-time home buyer savings account
held by a different financial institution or the same financial institution.
§31-18F-4. Subtractions
from federal taxable income.
(a) Subject to this
article, and in addition to the other modifications to federal taxable income
contained in §21-21-1 et seq. of this code, there shall be subtracted
from federal taxable income the amount of funds contributed to an account
holder’s first-time home buyer savings account established under this article
during the tax year, not to exceed $5,000 for an account holder who files an
individual income tax return or $10,000 for joint account holders who file a
joint income tax return.
(b)(1) Funds contributed
to a first-time home buyer savings account and earnings, including interest
and other income, on the principal in the account during the tax year are
exempt from taxation until withdrawn by the taxpayer, subject to subsection (3)
of this section.
(2) Moneys withdrawn by
the account holder from a first-time home buyer savings account to pay or
reimburse that account holder’s eligible costs related to purchase of a single-family
residence are exempt from taxation under §21-21-1 et seq. of this code.
A withdrawal by an account holder for a purpose other than paying or
reimbursing eligible costs related to the purchase of a single-family residence
is taxable under §21-21-1 et seq. of this code.
(c) An account holder
may claim the subtraction and exemption under subsections (1) and (2) of this
section:
(1) For a period not to
exceed 10 years;
(2) For an aggregate
total amount of principal and earnings not to exceed $50,000 during the 10-year
period; and
(3) Only if the
principal and earnings of the account remain in the account until a withdrawal
is made for eligible costs related to the purchase of a single-family residence
by the account holder except as provided in section 3 (6) of this 2018 Act.
(4) A person other than
the account holder who deposits funds in a first-time home buyer savings
account is not entitled to the subtraction and exemption provided for in this
section.
(5) Moneys in a
first-time home buyer savings account not expended on paying or reimbursing
eligible costs for the purchase of a single-family residence by December 31 of
the last year of the 10-year period described under this section shall
thereafter be included in the account holder’s taxable income.
§31-18F-5. Limits
applicable to subtraction from federal taxable income.
(a) The limits
applicable to a subtraction from federal taxable income and an exemption
allowed under this article are:
(1) Ten thousand dollars
if reported on a joint income tax return, or $5,000 for all others, if the
federal adjusted gross income of the taxpayer for the tax year is less than
$150,000 or, if reported on other than a joint return, less than $75,000.
(2) Eight thousand
dollars if reported on a joint income tax return, or $4,000 for all others, if
the federal adjusted gross income of the taxpayer for the tax year is $150,000
or more and less than $160,000 or, if reported on other than a joint return,
$75,000 or more and less than $80,000.
(3) Six thousand dollars
if reported on a joint income tax return, or $3,000 for all others, if the
federal adjusted gross income of the taxpayer for the tax year is $160,000 or
more and less than $170,000 or, if reported on other than a joint return,
$80,000 or more and less than $85,000.
(4) Four thousand
dollars if reported on a joint income tax return, or $2,000 for all others, if
the federal adjusted gross income of the taxpayer for the tax year is $170,000
or more and less than $180,000 or, if reported on other than a joint return,
$85,000 or more and less than $90,000.
(5) Two thousand dollars
if reported on a joint income tax return, or $1,000 for all others, if the
federal adjusted gross income of the taxpayer for the tax year is $180,000 or
more and less than $200,000 or, if reported on other than a joint return,
$90,000 or more and less than $100,000.
(b) If the federal
adjusted gross income of the taxpayer for the tax year is $200,000 or more if
reported on a joint income tax return, or $100,000 or more if reported on other
than a joint income tax return, the limit is zero and the taxpayer is not allowed
a subtraction from federal taxable income or an exemption under this article.
§31-18F-6. Withdrawal
of funds from a first-time home buyer savings account.
If an account holder
withdraws funds from a first-time home buyer savings account for a purpose
other than paying or reimbursing an account holder for eligible costs related
to the purchase of a single-family residence:
(1) The withdrawn funds
must be included in the account holder’s taxable income; and
(2) The account holder
shall pay a penalty to the Department of Revenue equal to 10 percent of the
amount withdrawn. The penalty does not apply to funds withdrawn from an account
that were:
(a) Withdrawn by reason
of the account holder’s death or disability;
(b) A disbursement of
assets of the account pursuant to a filing for protection under the United
States Bankruptcy Code, 11 U.S.C. 101 et seq.; or
(c) Transferred from an
account into another account established in accordance with this article.
§31-18F-7. Tax
Commissioner to create means for subtraction..
The Tax Commissioner
shall create a means for designating the subtraction to which an account holder
is entitled under this article in the individual state income tax return form
required to be filed under §21-21-1 et seq. of this code.
§31-18F-8. Financial
institution to provide account holder information certificate.
(1) On or before January
31 of each year, a financial institution at which an account holder has created
a first-time home buyer savings account shall provide to the account holder a
certificate containing the following information:
(a) The date when the
account was created;
(b) The name of the
account holder;
(c) The amount of funds
contributed to the account during the tax year;
(d) The amount of funds
withdrawn from the account during the tax year; and
(e) Any other
information as required by rules adopted by the Tax Commissioner.
(2) A financial
institution is not required to:
(a) Track the use of
moneys withdrawn from a first-time home buyer savings account; or
(b) Allocate funds in a
first-time home buyer savings account among joint account holders.
(3) A financial
institution is not responsible or liable for:
(a) Determining or
ensuring that an account satisfies the requirements to be a first-time home
buyer savings account;
(b) Determining or
ensuring that funds in a first-time home buyer savings account are used for
eligible costs; or
(c) Reporting or
remitting taxes or penalties related to the use of a first-time home buyer
savings account.
(4) Upon being furnished
proof of the death of the account holder and such other information required
by the contract governing the first-time home buyer savings account, a
financial institution shall distribute the principal and accumulated interest
or other income in the first-time home buyer savings account in accordance with
the terms of the contract governing the account.
§31-18F-9. Tax
Commissioner to propose rules.
The Tax Commissioner of
Revenue shall propose rules for legislative approval in accordance with the
provisions of §29A-3-1 et seq. of this code to implement and administer this
article.
§31-18F-10. Years
tax exemption applies.
(a) This article applies
to tax years beginning on or after January 1, 2020, and before January 1, 2026.
(b) Notwithstanding
subsection (a) of this section, funds contributed to a first-time home buyer
savings account established under this article before January 1, 2025, shall continue
to be exempt from taxation for the period and on the terms for which the
exemption was granted under this article.
NOTE: The purpose of this bill is
to create the “First Time Home Buyer Savings Account Act”.
Strike-throughs indicate language
that would be stricken from a heading or the present law, and underscoring
indicates new language that would be added.