SB 182 — AN ACT ESTABLISHING A FIRST-TIME HOMEBUYER SAVINGS ACCOUNT AND TAX DEDUCTION.

18255 income11 forsSB182 suchFile taxableNo. year is less than seventy-five thousand dollars, or as a head of household whose federal adjusted gross income for such taxable year is less than seventy-five thousand dollars, or for a husband and wife who file a return under the federal income tax as married individuals filing jointly whose federal adjusted gross income for such taxableyearislessthanonehundredthousanddollars,(I)forthetaxable year commencing January 1, 2019, fourteen per cent of any pension or annuity income, (II) for the taxable year commencing January 1, 2020, twenty-eight per cent of any pension or annuity income, (III) for the taxable year commencing January 1, 2021, forty-two per cent of any pension or annuity income, (IV) for the taxable year commencing January 1, 2022, fifty-six per cent of any pension or annuity income, (V) for thetaxableyearcommencing January 1,2023,seventypercent ofany pension or annuity income, (VI) for the taxable year commencing January 1, 2024, eighty-four per cent of any pension or annuity income, and (VII) for the taxable year commencing January 1, 2025, and each taxable year thereafter, any pension or annuity income;

55 married individual filing separately whose federal adjusted gross income for such taxable year is less than seventy-five thousand dollars, or as a head of household whose federal adjusted gross income for such taxable year is less than seventy-five thousand dollars, or for a husband and wife who file a return under the federal income tax as married individuals filing jointly whose federal adjusted gross income for such taxableyearislessthanonehundredthousanddollars,(I)forthetaxable year commencing January 1, 2019, fourteen per cent of any pension or annuity income, (II) for the taxable year commencing January 1, 2020, twenty-eight per cent of any pension or annuity income, (III) for the taxable year commencing January 1, 2021, forty-two per cent of any pension or annuity income, (IV) for the taxable year commencing January 1, 2022, fifty-six per cent of any pension or annuity income, (V) for thetaxableyearcommencing January 1,2023,seventypercent ofany pension or annuity income, (VI) for the taxable year commencing January 1, 2024, eighty-four per cent of any pension or annuity income, and (VII) for the taxable year commencing January 1, 2025, and each taxable year thereafter, any pension or annuity income;

LCOsSB182 {\\PRDFS1\SCOUSERS\FORZANOF\WS\2022SB-0012/ ofFile 16 R01-SB.docx } Substitute Bill No.

18255 (xxv)12 TosSB182 theFile extentNo. any portion of a deduction under Section 179 of the Internal Revenue Code was added to federal adjusted gross income pursuant to subparagraph (A)(xiv) of this subdivision in computing Connecticut adjusted gross income, twenty-five per cent of such disallowed portion of the deduction in each of the four succeeding taxable years;

55 (xxv) To the extent any portion of a deduction under Section 179 of the Internal Revenue Code was added to federal adjusted gross income pursuant to subparagraph (A)(xiv) of this subdivision in computing Connecticut adjusted gross income, twenty-five per cent of such disallowed portion of the deduction in each of the four succeeding taxable years;

[.] (xxvii) For an account holder, as defined in section 1 of this act, who files a return under the federal income tax as an unmarried individual, a married individual filing separately or a head of household whose federal adjusted gross income for the taxable year is less than one hundred thousand dollars or who files a return under the federal LCOincome {\\PRDFS1\SCOUSERS\FORZANOF\WS\2022SB-0013tax ofas 16married R01-SB.docxindividuals }filing Substitutejointly Billwhose federal adjusted sSB182 / File No.

18255 income13 taxsSB182 asFile marriedNo. individuals filing jointly whose federal adjusted gross income for the taxable year is less than two hundred thousand dollars:

55 gross income for the taxable year is less than two hundred thousand dollars:

and (III) To the extent properly includable in gross income for federal income tax purposes, for the taxable year commencing January 1, 2024, and each taxable year thereafter, an amount equal to the sum of all interest accrued on a first-time homebuyer savings account, established LCOpursuant {\\PRDFS1\SCOUSERS\FORZANOF\WS\2022SB-00114to ofsubsection(c)ofsection1ofthisact,duringthetaxableyear; 16 R01-SB.docx } Substitute Bill No.

182sSB182 pursuant/ toFile subsection(c)ofsection1ofthisact,duringthetaxableyear;No.

and55 (xxviii)14 ForsSB182 anFile accountNo. holder who is a qualified beneficiary of a first- time homebuyer savings account, as those terms are defined in section 1 of this act, and who files a return under the federal income tax as an unmarried individual, a married individual filing separately or a head of household whose federal adjusted gross income for the taxable year is less than one hundred thousand dollars or who files a return under the federal income tax as married individuals filing jointly whose federal adjusted gross income for the taxable year is less than two hundred thousand dollars, for taxable years commencing on or after January 1, 2024, an amount equal to any withdrawal from such account that is used to pay or reimburse such qualified beneficiary for eligible costs, as defined in section 1 of this act, incurred by the qualified beneficiary.

55 and (xxviii) For an account holder who is a qualified beneficiary of a first- time homebuyer savings account, as those terms are defined in section 1 of this act, and who files a return under the federal income tax as an unmarried individual, a married individual filing separately or a head of household whose federal adjusted gross income for the taxable year is less than one hundred thousand dollars or who files a return under the federal income tax as married individuals filing jointly whose federal adjusted gross income for the taxable year is less than two hundred thousand dollars, for taxable years commencing on or after January 1, 2024, an amount equal to any withdrawal from such account that is used to pay or reimburse such qualified beneficiary for eligible costs, as defined in section 1 of this act, incurred by the qualified beneficiary.

and, in LCOSection {\\PRDFS1\SCOUSERS\FORZANOF\WS\2022SB-0018153, of"(NEW)" 16was R01-SB.docxdeleted }for Substituteconsistency Billwith No.standard drafting conventions.

182sSB182 Section/ 3,File "(NEW)"No. was deleted for consistency with standard drafting conventions.

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-LCO sSB182 / File No.

55 16 sSB182 File No.

55 The following Fiscal Impact Statement and Bill Analysis are prepared for the benefit of the members of the General Assembly, solely for purposes of information, summarization and explanation and do not represent the intent of the General Assembly or either chamber thereof for any purpose.

In general, fiscal impacts are based upon a variety of informational sources, including the analyst’s professional knowledge.

Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.

OFA Fiscal Note State Impact:

Agency Affected Fund-Effect FY 23 $ FY 24 $ Department of Revenue Services GF - Cost None Less than 100,000 Department of Revenue Services GF - Revenue None None Loss Note:

GF=General Fund Municipal Impact:

None Explanation The bill, which establishes a first-time homebuyer savings account program and associated personal income tax deduction, results in:

1) a General Fund revenue loss of less than $125,000 in FY 25 and less than $75,000 in FY 26.

The revenue loss would grow in FY 27 and beyond subject to program utilization rates.

The bill also results in a one-time cost to the Department of Revenue Servicesoflessthan$100,000forformpreparationandprinting/mailing costs in FY 24 only.

The Out Years The revenue loss would grow in FY 27 and beyond subject to program utilization rates.

The bill could result in a revenue loss approaching $500,000 by FY 33.

Sources:

Iowa Department of Revenue sSB182 / File No.

55 17 sSB182 File No.

55 OLR Bill Analysis sSB 182 AN ACT ESTABLISHING A FIRST-TIME HOMEBUYER SAVINGS ACCOUNT AND TAX DEDUCTION.

SUMMARY This bill establishes an income tax deduction for certain individuals who contribute to, or who are the qualified beneficiaries of, funds deposited into a first-time homebuyer savings account.

The bill requires the Department of Revenue Services (DRS) commissioner to implement the deduction, including preparing associated forms, and allows him to adopt associated regulations.

Under the bill, individuals may open at financial institutions (i.e., banks, out-of-state banks, credit unions, or their affiliates or third-party providers) savings accounts that are dedicated to paying for or reimbursing the down payment and closing costs of an account holder who is a first-time home buyer and resides (presumably, will reside) in a Connecticut home purchased with account funds (i.e., the “qualified beneficiary”).

The bill designates “first-time homebuyers” as those who have not previously owned or purchased, either individually or with someone else, a single-family residence (including a mobile home or residential unit in a cooperative, common interest community or condominium).

To qualify for the bill’s income tax deductions, account holders must have a federal adjusted gross income (AGI) below $100,000 (for single filers) or $200,000 (for joint filers) thresholds.

Beginning with the 2024 tax year, the bill allows these account holders to deduct (1) the contributions deposited in the account, generally capped at $2,500 for single filers and $5,000 for joint filers;

(2) any interest that accrues on the accounts;

and (3) for an account holder who is also the account’s qualified beneficiary, the amount withdrawn from the account that is sSB182 / File No.

55 18 sSB182 File No.

55 used to pay or reimburse him or her for program eligible costs.

If funds are withdrawn from a first-time homebuyer savings account for a reason other than an allowed purpose, the bill generally imposes a civil penalty of up to 10% of the withdrawn amount.

The bill requires the treasurer, by July 1, 2023, to make recommendations to the Banking Committee about if and how marketable securities may be held in a first-time homebuyer savings account (§ 3).

EFFECTIVE DATE:

January 1, 2023, for the homebuyer savings account tax deduction and upon passage for the treasurer’s recommendations about marketable securities.

ACCOUNT FUNDS The bill allows anyone to contribute to a first-time homebuyer savings account with no limit on contributions made to, or contained in, an account.

Accounts must only contain cash, but account holders may invest the funds in money market funds.

The bill limits the use of account funds to paying for (1) a qualified beneficiary’s down payment and closing costs to purchase a single- family residence in the state as his or her primary residence (i.e., “eligible costs”) and (2) the financial institution’s account service fees.

Allowable closing costs are the disbursements listed on the statement of receipts and disbursements associated with the home purchase.

Under the bill, a “single-family residence” is a single-family residentialdwellingandincludesamobilemanufacturedhomeoraunit in a cooperative, common interest community, or condominium.

ACCOUNT HOLDER POWERS AND RESPONSIBILITIES Establishing the Account Under the bill, an individual may establish one or more accounts.

Individuals who file a joint tax return may jointly establish and serve as account holders, but the bill requires them to jointly file tax returns for sSB182 / File No.

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55 each taxable year that the account exists.

The bill prohibits an account holder from using any funds deposited into an account for administrative fees or expenses, other than the financial institution’s service fees.

Designating the Beneficiary The bill requires an account holder or joint holders to designate the account’s qualified beneficiary.

They must do so by April 15 of the year immediately following the taxable year during which the holder or holders established the account.

Under the bill, account holders may designate a new qualified beneficiary at any time but there may be only one qualified beneficiary associated with an account at a time.

In addition, the bill prohibits anyone from establishing or serving as an account holder of more than one account with the same qualified beneficiary.

Tax Reporting The bill requires an account holder to submit to the DRS commissioner the following information for each tax year during which the holder has a first-time homebuyer savings account:

1.

his or her tax return;

2.

any information the commissioner requires about the account to implement the tax deduction;

3.

the Internal Revenue Service Form 1099 issued by the financial institution for the account;

and 4.

if the account holder withdrew funds from the account during the taxable year, (a) a detailed accounting of the eligible and ineligible costs paid or reimbursed with account funds and (b) the remaining account balance.

Withdrawing Funds The bill allows an account holder to withdraw any amount of the sSB182 / File No.

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55 funds contributed to and deposited in an account, without penalty, as long as the funds are deposited in another first-time homebuyer savings account that the holder established.

The bill establishes a state civil penalty, collectible by the DRS commissioner, of up to 10% of the withdrawn amount for withdrawing from the account for a reason other than transferring the funds to another such account or paying or reimbursing the qualified beneficiary for the home purchase down payment or closing costs.

(The bill does not specify how or when the DRS commissioner must set or assess the withdrawal penalty.) If the account holder deducted these withdrawn funds for state income tax purposes (presumably as contributions to or accrued interest on the account), then they are considered income (and presumably must be added to the account holder’s AGI for the tax year in which they were withdrawn).

The bill waives the withdrawal penalty and does not consider the withdrawn funds as income under the following four circumstances:

1.

the account holder did not claim the funds for a state income tax deduction (presumably, for the deductions established under the bill), 2.

the withdrawn funds were subsequently deposited in another account under the first-time homebuyer savings program, 3.

the withdrawal was due to the death or disability of an account holder who established the account, or 4.

the withdrawal is considered an asset disbursement as part of a bankruptcy proceeding.

Commissioner Responsibilities As part of his responsibilities under the bill for implementing the deduction, the DRS commissioner must prepare forms:

1.

designating (a) accounts as first-time homebuyer savings accounts and (b) qualified beneficiaries and sSB182 / File No.

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55 2.

to collect from account holders information for tax purposes and any other information the commissioner needs to perform his program duties.

Financial Institution Responsibilities The bill allows the DRS commissioner to require financial institutions to provide certain (unspecified) information about each first-time homebuyer account.

However, the bill also limits the role of financial institutions by specifying that they are not required to:

1.

designate an account as a “first-time homebuyer savings account,” 2.

track the use of funds withdrawn from an account, or 3.

allocate account funds among account holders.

In addition, under the bill, a financial institution is not liable or responsible for:

1.

determining if, or ensuring that, an account meets the bill’s requirements;

2.

determining if account funds are used to pay for or reimburse eligible costs;

and 3.

disclosing or remitting taxes or penalties unless applicable law requires it.

However, the bill requires a financial institution to distribute funds in a first-time homebuyer savings account in accordance with the contract governing the account when it receives proof of an account holder’s death and all other information required by the contract.

TAX DEDUCTIONS Beginning with the 2023 tax year, the bill establishes three tax deductions for first-time homebuyer account holders for single filers (i.e., unmarried individuals, married individuals filing separately, and sSB182 / File No.

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55 heads of household) with a federal AGI of less than $100,000, and joint filers with a federal AGI of less than $200,000.

The deductions are for (1) qualifying contributions, (2) accrued interest, and (3) withdrawals, and apply only to the extent the income is included in the taxpayer’s federal AGI.

Under the bill, the deduction for contributions generally equals the amount contributed to an account during the applicable tax year, minus any funds withdrawn during the tax year that were not already claimed for a deduction, up to $2,500 for single filers and $5,000 for joint filers foreachsuchtaxyear.Forthe2024taxyear,accountholdersmaydeduct the amount contributed (less withdrawals) for both the 2023 and 2024 tax years, (i.e., $5,000 for single filers and $10,000 for joint filers, in the aggregate).The billalso specifiesthat thedeductionfor the2024taxyear may be claimed to the extent allowable under the federal American Rescue Plan Act of 2021.

The bill also establishes a tax deduction for an account holder who is aqualifiedbeneficiaryintheamountofanywithdrawalfromanaccount that is used to pay or reimburse for the eligible costs he or she incurs (i.e., the income from a withdrawal used to pay eligible expenses is offset by this tax deduction).

COMMITTEE ACTION Banking Committee Joint Favorable Yea 17 Nay 0 (03/08/2022) sSB182 / File No.

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