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PRIOR PRINTER'S NOS. 1545, 1706
PRINTER'S NO. 2028
THE GENERAL ASSEMBLY OF PENNSYLVANIA
SENATE BILL
No.
1066
Session of
2018
INTRODUCED BY MENSCH, FONTANA, SCARNATI, GORDNER, COSTA,
SCHWANK, TARTAGLIONE, RAFFERTY, RESCHENTHALER, MARTIN,
ARGALL, YUDICHAK, VULAKOVICH, SCAVELLO, BOSCOLA, BLAKE,
HUGHES, STEFANO, WARD, BROOKS, BARTOLOTTA, BREWSTER, LEACH,
McGARRIGLE, KILLION AND SABATINA, MARCH 16, 2018
AS AMENDED ON THIRD CONSIDERATION, SEPTEMBER 25, 2018
AN ACT
Providing for the establishment of first-time home buyer savings
accounts for first-time home buyers in this Commonwealth.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Short title.
This act shall be known and may be cited as the Pennsylvania
First-Time Home Buyer Savings Account Act.
Section 2. Definitions.
The following words and phrases when used in this act shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Account holder." An individual who establishes,
individually or jointly, a first-time home buyer savings
account.
"Allowable closing costs." A disbursement listed on a
settlement statement for the purchase of a single-family
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residence in this Commonwealth by a qualified beneficiary.
"Department." The Department of Revenue of the Commonwealth.
"Eligible costs." The down payment and allowable closing
costs for the purchase of a single-family residence in this
Commonwealth by a qualified beneficiary. Eligible costs shall
not include costs incurred prior to the establishment of a
first-time home buyer savings account.
"Financial institution." A bank, trust company, savings
institution, credit union, broker-dealer, insurance company and
mutual fund or similar entity authorized to do business in this
Commonwealth.
"First-time home buyer." An individual who resides in this
Commonwealth and has not owned or purchased directly or through
a trust, limited liability company, partnership or other legal
entity, either individually or jointly, a single-family
residence during the three-year period prior to the purchase
date of a single-family residence.
"First-time home buyer savings account." An account
established under section 3.
"Qualified beneficiary." A first-time home buyer who is
designated as a qualified beneficiary by the account holder of
the first-time home buyer savings account.
"Settlement statement." A statement of receipts and
disbursements from a real estate transaction, including a
statement prescribed under the Real Estate Settlement Procedures
Act of 1974 (Public Law 93-533, 88 Stat. 1724).
"Single-family residence." A single-family residence owned
and occupied by a qualified beneficiary as the qualified
beneficiary's principal residence, which may include a
manufactured home, trailer, mobile home or a unit in a
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condominium, cooperative or planned community.
"Tax Reform Code of 1971." The act of March 4, 1971 (P.L.6,
No.2), known as the Tax Reform Code of 1971.
Section 3. Establishment of first-time home buyer savings
account.
(a) Designation of first-time home buyer savings account.--
Beginning January 1, 2019, an individual may open a first-time
home buyer savings account with a financial institution.
(b) Designation of qualified beneficiary.--An account holder
shall designate no more than one first-time home buyer as the
qualified beneficiary of a first-time home buyer savings
account. The account holder may designate himself as the
qualified beneficiary and may change the designated qualified
beneficiary at any time. The account holder shall declare the
qualified beneficiary on the annual personal income tax return
required under the Tax Reform Code of 1971 for the tax year in
which the first-time home buyer savings account is established
and for any year in which the qualified beneficiary is changed.
(c) Use of first-time home buyer savings account.--Funds
from a first-time home buyer savings account may only be used to
pay or reimburse a qualified beneficiary's eligible costs for
the purchase of a single-family residence in this Commonwealth.
(d) Expenses.--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 a service fee may be
deducted from the account by a financial institution in which
the first-time home buyer savings account is held.
(e) Joint account holders.--An account holder may jointly
own a first-time home buyer savings account with another person
if the joint account holders file a joint personal income tax
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return under Article III of the Tax Reform Code of 1971.
(f) Qualified beneficiary of more than one account.--An
individual may be designated as the qualified beneficiary on
more than one first-time buyer savings account.
(g) Contributions to account.--Subject to the limitations
(G) CONTRIBUTIONS TO ACCOUNT.--
(1) SUBJECT TO THE LIMITATIONS under section 4(d), an
individual other than the account holder may contribute to a
first-time home buyer savings account.
(2) THE MAXIMUM AMOUNT OF ALL CONTRIBUTIONS TO A FIRST-
TIME HOME BUYER SAVINGS ACCOUNT IS $150,000.
(h) Transfer of funds.--An account holder may withdraw funds
from a first-time home buyer savings account and deposit the
funds in a new first-time home buyer savings account held by the
same or a different financial institution.
Section 4. Deduction and exclusion from taxable income.
(a) Deduction of contributions.--Except as otherwise
provided under subsection (c), the amount contributed by an
account holder to a first-time home buyer savings account during
each tax year:
(1) may not exceed $5,000 for an account holder who
files an individual personal income tax return or $10,000 for
joint account holders who file a joint personal income tax
return; and
(2) shall be deductible, UP TO THE CONTRIBUTION LIMITS
IN SUBSECTION (A)(1) PARAGRAPH (1), from the taxable income
of the account holder under Article III of the Tax Reform
Code of 1971 during the tax year the contribution was made.
(b) Exclusion of earnings.--Except as otherwise provided
under subsection (c), the amount of earnings on a first-time
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home buyer savings account during the tax year may be excluded
from the taxable income of an account holder under Article III
of the Tax Reform Code of 1971.
(c) Limitations on deductions and exclusions.--An account
holder may claim a deduction and exclusion under this section:
(1) for a period of no more than 10 years;
(2) for an aggregate amount of principal and earnings
not to exceed $50,000 within 10 years; and
(3) except as otherwise provided in section 3(h), only
if the principal and earnings of a first-time home buyer
savings account remain in the account until a withdrawal is
made for the eligible costs relating to the purchase of a
single-family residence by a qualified beneficiary.
(d) Nonaccount holders.--An individual other than the
account holder who deposits funds in a first-time home buyer
savings account under section 3(g) is not entitled to the
deduction and exclusion provided for under this section.
(e) Remaining funds.--Funds in a first-time home buyer
savings account not expended on eligible costs before expiration
of the 10-year period under subsection (c)(1) shall be included
in the account holder's taxable income under Article III of the
Tax Reform Code of 1971.
(f) Application to alternative basis taxation.--The
deduction and exclusion from taxable income shall apply to any
alternative basis for calculating taxable income under Article
III of the Tax Reform Code of 1971.
Section 5. Reporting.
The account holder shall submit to the department all of the
following:
(1) Upon a withdrawal of funds from a first-time home
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buyer savings account, a detailed account of the eligible
costs toward which the funds were applied and a statement of
the amount of funds remaining in the account.
(2) With the account holder's personal income tax
return:
(i) information regarding the first-time home buyer
savings account, including a list of transactions for the
account during the tax year; and
(ii) the Form 1099 issued by the financial
institution holding the account.
(3) ANY OTHER INFORMATION AS REQUIRED BY THE DEPARTMENT.
Section 6. Financial institutions.
(a) Limitations on financial institutions.--A financial
institution may not be required or be held liable to do any of
the following:
(1) Designate an account as a first-time home buyer
savings account or designate a qualified beneficiary of an
account in a financial institution's account contracts or
systems.
(2) Track the use of money withdrawn from a first-time
home buyer savings account.
(3) Allocate funds in a first-time home buyer savings
account among joint account holders or multiple qualified
beneficiaries.
(4) Report any information to the department or any
other governmental agency that is not otherwise required by
law.
(5) Determine if an account satisfies the requirements
to be a first-time home buyer savings account.
(6) Ensure that funds in a first-time home buyer savings
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account are used for eligible costs.
(7) Report or remit taxes or penalties related to the
use of a first-time home buyer savings account.
(b) Distribution of funds.--Upon proof of the death of the
account holder, a financial institution shall distribute the
account in accordance with the contract terms governing the
first-time home buyer savings account.
Section 7. Withdrawal for purpose other than eligible costs.
Except as permitted under section 3(h), if an account holder
OR BENEFICIARY withdraws any amount from a first-time home buyer
savings account AND USES THE WITHDRAWAL for a purpose other than
eligible costs:
(1) The ENTIRE amount WITHDRAWN shall be included in the
account holder's taxable income AS INTEREST INCOME under
Article III of the Tax Reform Code of 1971 for the tax year
the withdrawal was made.
(2) The account holder OR BENEFICIARY shall pay to the
department a penalty equal to 10% of the amount
withdrawn. The penalty shall not apply to funds withdrawn
from an account that were:
(i) withdrawn by reason of the account holder's OR
THE BENEFICIARY'S death or disability; or
(ii) a disbursement of assets of the account
pursuant to a filing for protection under the Bankruptcy
Code (11 U.S.C. ยง 101 et seq.).
Section 8. Department of Revenue.
(a) Duties.--The department shall prepare forms:
(1) to designate an account with a financial institution
to serve as a first-time home buyer savings account;
(2) to designate a qualified beneficiary of a first-time
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home buyer savings account; and
(3) for an account holder to annually submit to the
department detailed information regarding the first-time home
buyer savings account, including, but not limited to, a list
of transactions for the account during the tax year and
identifying any supporting documentation that is required to
be maintained by the account holder.
(b) Rules and regulations.--The department may promulgate
rules and regulations necessary to administer and enforce this
act.
Section 9. Effective date.
This act shall take effect in 60 days.
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