Vote Smart's Synopsis:

Vote to pass a bill that authorizes first time home buyers to save for their purchasing costs using tax exempt savings accounts.

Highlights:

• Defines "financial institution" as any bank, trust company, savings institution, industrial loan association, consumer finance company, credit union, or any benefit association, insurance company, safe deposit company, money market mutual fund, broker, or similar entity authorized to do business in this state (Sec. 3.e).

• Defines "first-time home buyer savings account" or "account" as an account with a financial institution that an account holder designates as a first-time home buyer savings account on his or her income tax return according to this act to pay or reimburse eligible costs for the purchase of a single-family residence in this state by a qualified beneficiary (Sec. 3.g).

• Authorizes any individual to open an account with a financial institution and designate the account, in its entirety, as a first-time home buyer savings account to be used to pay or reimburse a qualified beneficiary's eligible costs for the purchase of a single-family residence in this state beginning January 1, 2022 (Sec. 5-2).

• Specifies only cash and marketable securities may be contributed to a first-time home buyer savings account (Sec. 5-4).

• Prohibits the account from using funds held in an account to pay expenses of administering the account, except that a service fee may be deducted from the account by a financial institution in which the account is held. An account holder may withdraw funds, in whole or in part, 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 (Sec. 7-1).

• Requires the Department of the Treasury to prescribe the form and manner in which a taxpayer can claim a deduction under this act on his or her income tax return. The form will include, at a minimum all of the following (Sec. 7-5):

• The account holder's name;

• The name of the qualified beneficiary;

• The name of the financial institution and the account number;

• The beginning and end of the year balance of the account; and

• The amount of the deduction claimed for the tax year.

• Prohibits requiring a financial institution to do any of the following (Sec. 9-1):

• Designate an account as a first-time home buyer savings account, or designate the qualified beneficiaries of an account, in the financial institution's account contracts or systems or in any other way;

• Track the use of money withdrawn from a first-time home buyer savings account;

• Allocate funds in a first-time home buyer savings account among joint account holders or multiple qualified beneficiaries; and

• Report any information to the department that is not otherwise required by law.

• Establishes a financial institution is not responsible or liable for any of the following (Sec. 9-2):

• Determining or ensuring that an account satisfies the requirements to be a first-time home buyer savings account;

• Determining or ensuring that funds in a first-time home buyer savings account are used for eligible costs; and

• Reporting or remitting taxes or penalties related to the use of a first-time home buyer savings account.

• Establishes funds that are withdrawn from an account for any purpose other than the payment of eligible costs by or on behalf of a qualified beneficiary, there is a penalty equal to 10% of the amount withdrawn. The penalty shall be paid to the department (Sec. 13-1).

Full Bill Text