Trial Engrossment of Amendment A05224 to House Bill 0126 P.N. 3133, Regular Session 2023-2024

A05224

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

No.

126

Session of

2023

INTRODUCED BY BIZZARRO, ZABEL, HILL-EVANS, CIRESI, SANCHEZ,

T. DAVIS, ISAACSON, D. WILLIAMS, PISCIOTTANO, GUENST,

DELLOSO, R. MACKENZIE, MADDEN, NEILSON, DEASY, FREEMAN,

OTTEN, KUTZ, KINKEAD, GILLEN, BRENNAN AND KHAN, MARCH 7, 2023

AS REPORTED FROM COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT,

HOUSE OF REPRESENTATIVES, AS AMENDED, MAY 21, 2024

AN ACT

Providing for the establishment of first-time homebuyer savings

accounts for first-time homebuyers in this Commonwealth; and

imposing duties on the Department of Revenue.

ESTABLISHING THE FIRST-TIME HOMEBUYER SAVINGS ACCOUNT PROGRAM

AND THE FIRST-TIME HOMEBUYER SAVINGS ACCOUNT PROGRAM FUND;

AND IMPOSING DUTIES ON THE TREASURY DEPARTMENT.

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 Homebuyer 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 homebuyer savings account.

"Allowable closing costs." A disbursement listed on a

settlement statement for the purchase of a single-family

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. The term does not

include costs incurred prior to the establishment of a first-

time homebuyer 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 homebuyer." 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 homebuyer savings account." An account

established under section 3.

"Qualified beneficiary." A first-time homebuyer who is

designated as a qualified beneficiary by the account holder of

the first-time homebuyer 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

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manufactured home, trailer, mobile home or unit in a

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 homebuyer savings

account.

(a) Designation of first-time homebuyer savings account.--

Beginning six months after the effective date of this section,

an individual may open a first-time homebuyer savings account

with a financial institution.

(b) Designation of qualified beneficiary.--An account holder

shall designate no more than one first-time homebuyer as the

qualified beneficiary of a first-time homebuyer 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 homebuyer savings account is established and for any

year in which the qualified beneficiary is changed.

a first-time homebuyer 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 money held in

a first-time homebuyer 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 homebuyer savings account is held.

(e) Joint account holders.--An account holder may jointly

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own a first-time homebuyer savings account with another person

if the joint account holders file a joint personal income tax

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 homebuyer savings account.

(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 homebuyer savings account.

(2) The maximum amount of all contributions to a first-

time homebuyer savings account is $150,000.

(h) Transfer of money.--An account holder may withdraw money

from a first-time homebuyer savings account and deposit the

money into a new first-time homebuyer 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 homebuyer 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

under 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

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under subsection (c), the amount of earnings on a first-time

homebuyer 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.

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 homebuyer

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 money into a first-time homebuyer

savings account under section 3(g) is not entitled to the

deduction and exclusion provided for under this section.

(e) Remaining money.--Money in a first-time homebuyer

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:

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(1) Upon a withdrawal of money from a first-time

homebuyer savings account, a detailed record of the eligible

costs toward which the money was applied and a statement of

the amount of money remaining in the account.

(2) With the account holder's personal income tax

return:

(i) information regarding the first-time homebuyer

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 homebuyer

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

homebuyer savings account.

(3) Allocate money in a first-time homebuyer 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 homebuyer savings account.

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(6) Ensure that money in a first-time homebuyer savings

account is used for eligible costs.

(7) Report or remit taxes or penalties related to the

use of a first-time homebuyer savings account.

(b) Distribution of money.--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 homebuyer 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 homebuyer

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 may not apply to money withdrawn from

an account that was:

(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 11 U.S.C.

(relating to Bankruptcy).

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 homebuyer savings account;

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(2) to designate a qualified beneficiary of a first-time

homebuyer savings account; and

(3) for an account holder to annually submit to the

department detailed information regarding the first-time

homebuyer 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.

SECTION 1. SHORT TITLE.

THIS ACT SHALL BE KNOWN AND MAY BE CITED AS THE FIRST-TIME

HOMEBUYER SAVINGS ACCOUNT PROGRAM 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." A FIRST-TIME HOMEBUYER SAVINGS ACCOUNT

ESTABLISHED UNDER SECTION 6.

"ACCOUNT HOLDER." AN INDIVIDUAL WHO ESTABLISHES,

INDIVIDUALLY OR JOINTLY, AN ACCOUNT.

"ALLOWABLE CLOSING COSTS." A DISBURSEMENT LISTED ON A

SETTLEMENT STATEMENT FOR THE PURCHASE OF A SINGLE-FAMILY

RESIDENCE IN THIS COMMONWEALTH BY A QUALIFIED BENEFICIARY.

"BUREAU." THE BUREAU OF SAVINGS PROGRAMS ESTABLISHED UNDER

SECTION 3.

"DEPARTMENT." THE TREASURY DEPARTMENT OF THE COMMONWEALTH.

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"DISABILITY." THE INABILITY TO ENGAGE IN ANY SUBSTANTIAL

ACTIVITY BECAUSE OF MEDICALLY DETERMINABLE PHYSICAL OR MENTAL

IMPAIRMENT THAT CAN BE EXPECTED TO RESULT IN DEATH OR TO BE OF

LONG-CONTINUED AND INDEFINITE DURATION.

"ELIGIBLE COSTS." THE DOWN PAYMENT AND ALLOWABLE CLOSING

COSTS FOR THE PURCHASE OF A SINGLE-FAMILY RESIDENCE IN THIS

COMMONWEALTH BY A QUALIFIED BENEFICIARY. THE TERM DOES NOT

INCLUDE COSTS INCURRED PRIOR TO THE ESTABLISHMENT OF AN ACCOUNT.

"FINANCIAL INSTITUTION." A BANK, TRUST COMPANY, SAVINGS

INSTITUTION, CREDIT UNION, BROKER-DEALER, INSURANCE COMPANY OR

MUTUAL FUND OR SIMILAR ENTITY AUTHORIZED TO DO BUSINESS IN THIS

COMMONWEALTH.

"FIRST-TIME HOMEBUYER." AN INDIVIDUAL WHO RESIDES IN THIS

COMMONWEALTH, IS CERTIFIED AS A FIRST-TIME HOMEBUYER 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 IN THIS

COMMONWEALTH OR ANOTHER STATE.

"FUND." THE FIRST-TIME HOMEBUYER SAVINGS ACCOUNT PROGRAM

FUND ESTABLISHED UNDER SECTION 4.

"Ineligible use." The sale or lease of a single-family

residence within three years of the settlement date.

"PROGRAM." THE FIRST-TIME HOMEBUYER SAVINGS ACCOUNT PROGRAM

ESTABLISHED UNDER SECTION 4.

"QUALIFIED BENEFICIARY." A FIRST-TIME HOMEBUYER WHO IS

DESIGNATED AS A QUALIFIED BENEFICIARY BY THE ACCOUNT HOLDER OF

AN ACCOUNT.

"Settlement date." The date on which a seller in a real

estate transaction executes a deed or signs a settlement

statement, whichever occurs later, to convey title to a

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purchaser.

"SETTLEMENT STATEMENT." A STATEMENT OF RECEIPTS AND

DISBURSEMENTS FROM A REAL ESTATE TRANSACTION, INCLUDING A

STATEMENT PRESCRIBED UNDER 12 U.S.C. CH. 27 (RELATING TO REAL

ESTATE SETTLEMENT PROCEDURES).

"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 TOWNHOME,

A MANUFACTURED HOME, TRAILER, MOBILE HOME OR UNIT IN A

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. BUREAU OF SAVINGS PROGRAMS.

THE BUREAU OF SAVINGS PROGRAMS IS ESTABLISHED WITHIN THE

DEPARTMENT TO ADMINISTER THE PROGRAM.

SECTION 4. FIRST-TIME HOMEBUYER SAVINGS ACCOUNT PROGRAM.

(A) ESTABLISHMENT.--THE BUREAU OF SAVINGS PROGRAMS IS

ESTABLISHED WITHIN THE DEPARTMENT TO ADMINISTER THE PROGRAM.

(B) PURPOSE.--THE PROGRAM SHALL ALLOW AN INDIVIDUAL TO OPEN

AN ACCOUNT UNDER SECTION 6 FOR A QUALIFIED BENEFICIARY. AN

INDIVIDUAL MAY CONTRIBUTE MONEY INTO AN ACCOUNT TO SAVE FOR

ELIGIBLE COSTS.

ON A FORM AND IN A MANNER PRESCRIBED BY THE DEPARTMENT. THE

DEPARTMENT SHALL MAKE THE APPLICATION AVAILABLE ON THE

DEPARTMENT'S PUBLICLY ACCESSIBLE INTERNET WEBSITE.

(D) FUND.--THE FIRST-TIME HOMEBUYER SAVINGS ACCOUNT PROGRAM

FUND IS ESTABLISHED IN THE DEPARTMENT. THE FOLLOWING APPLY:

(1) THE FUND SHALL CONSIST OF:

(I) ALL CONTRIBUTIONS MADE BY ACCOUNT HOLDERS AND

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ALL INTEREST, EARNINGS AND ADDITIONS TO THE FUND.

(II) ANY OTHER MONEY, PUBLIC OR PRIVATE,

APPROPRIATED OR MADE AVAILABLE TO THE DEPARTMENT FOR THE

FUND FROM ANY SOURCE AND ALL INTEREST, EARNINGS AND

ADDITIONS TO THE FUND.

(2) THE DEPARTMENT SHALL ANNUALLY SUBMIT TO THE GENERAL

ASSEMBLY A BUDGET REQUEST OUTLINING THE OPERATING AND

ADMINISTRATIVE EXPENSES OF THE PROGRAM. UPON APPROPRIATION BY

THE GENERAL ASSEMBLY, EXPENSES INCURRED BY THE DEPARTMENT AND

THE BUREAU SHALL BE PAID FROM THE FEES, CHARGES AND

INVESTMENT EARNINGS OF MONEY IN THE FUND.

(3) ASSETS OF THE FUND SHALL BE PRESERVED, INVESTED AND

EXPENDED SOLELY FOR THE PURPOSES SPECIFIED IN THIS ACT.

(4) THE DEPARTMENT SHALL REPAY FROM THE FEES, CHARGES

AND INVESTMENT EARNINGS OF THE FUND TO THE GENERAL FUND ANY

MONEY APPROPRIATED FOR THE INITIAL PLANNING, ORGANIZATION AND

ADMINISTRATION OF THE PROGRAM. THE REPAYMENT MUST OCCUR

WITHIN A 10-YEAR PERIOD COMMENCING ON SEPTEMBER 1, 2030.

NOTWITHSTANDING ANY OTHER PROVISION OF LAW, THE DEPARTMENT

MAY NOT PLEDGE THE CREDIT OR TAXING POWERS OF THE

COMMONWEALTH. ANY OBLIGATION OF DEBT UNDER THIS SECTION SHALL

NOT BE DEEMED AN OBLIGATION OR DEBT OF THE COMMONWEALTH, NOR

SHALL THE COMMONWEALTH BE LIABLE TO PAY PRINCIPAL AND

INTEREST ON OBLIGATIONS OR TO OFFSET ANY LOSS OF PRINCIPAL

AND INTEREST EARNINGS ON INVESTMENTS MADE BY THE DEPARTMENT.

(5) THE POLICIES GOVERNING THE INVESTMENT OF THE FUND

SHALL BE DIRECTED TO OBTAINING SUFFICIENT INCOME TO MEET THE

FUND'S OBLIGATIONS UNDER THIS ACT, MAINTAINING NECESSARY

RESERVES AND COVERING OPERATING EXPENSES. THE POLICIES

GOVERNING THE FUND SHALL BE DIRECTED TO PROVIDING FOR AN

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APPROPRIATE BALANCE OF RISK, LIQUIDITY AND RETURN

COMMENSURATE WITH THE MANAGEMENT OF A PRUDENT INVESTOR. THE

DEPARTMENT, ITS INVESTMENT MANAGERS, PROGRAM MANAGERS AND

TRUSTEES SHALL HAVE THE AUTHORITY TO INVEST AND REINVEST

MONEY IN THE FUND. THE DEPARTMENT MAY USE A THIRD PARTY TO

INVEST THE ASSETS AND MAINTAIN THE FUND.

SECTION 5. FIRST-TIME HOMEBUYER SAVINGS ACCOUNT ADVISORY BOARD.

(A) ESTABLISHMENT.--THE FIRST-TIME HOMEBUYER SAVINGS ACCOUNT

ADVISORY BOARD IS ESTABLISHED WITHIN THE DEPARTMENT.

(B) COMPOSITION OF BOARD.--THE BOARD SHALL CONSIST OF THE

FOLLOWING MEMBERS:

(1) THE GOVERNOR OR A DESIGNEE.

(2) THE STATE TREASURER OR A DESIGNEE.

(3) FOUR MEMBERS WHO HAVE KNOWLEDGE, SKILL AND EXPERTISE

IN FINANCIAL PLANNING AND SAVING FOR RETIREMENT AS FOLLOWS:

(I) ONE APPOINTED BY THE PRESIDENT PRO TEMPORE OF

THE SENATE;

(II) ONE APPOINTED BY THE SPEAKER OF THE HOUSE OF

REPRESENTATIVES;

(III) ONE APPOINTED BY THE MINORITY LEADER OF THE

SENATE; AND

(IV) ONE APPOINTED BY THE MINORITY LEADER OF THE

HOUSE OF REPRESENTATIVES.

SERVE AS CHAIRPERSON OF THE BOARD.

(D) TERMS OF BOARD MEMBERS.--EACH APPOINTED BOARD MEMBER

SHALL SERVE A TERM OF FOUR YEARS.

(E) VACANCY.--A VACANCY ON THE BOARD SHALL BE FILLED FOR THE

UNEXPIRED TERM OF AN APPOINTED MEMBER OF THE BOARD IN THE SAME

MANNER AS THE ORIGINAL APPOINTMENT.

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(F) MEETINGS OF BOARD.--

(1) THE STATE TREASURER, OR THE DESIGNEE, SHALL CALL THE

ORGANIZATIONAL MEETING OF THE BOARD.

(2) MEETINGS OF THE BOARD SHALL BE HELD AT THE CALL OF

THE CHAIRPERSON.

(G) EMPLOYEES.--THE DEPARTMENT SHALL HAVE THE POWER AND ITS

DUTY SHALL BE TO PROVIDE THE BOARD WITH EXPERTS, STENOGRAPHERS

AND ASSISTANTS AS NECESSARY TO CARRY OUT THE WORK OF THE BOARD.

THE BOARD MAY ENLIST VOLUNTARY ASSISTANCE, RESEARCH

ORGANIZATIONS AND OTHER AGENCIES.

(H) DUTIES.--THE BOARD SHALL:

(1) STUDY AND REVIEW THE WORK OF THE PROGRAM.

(2) ADVISE THE DEPARTMENT UPON REQUEST.

(3) MAKE RECOMMENDATIONS ON BOARD INITIATIVES FOR THE

IMPROVEMENT OF THE PROGRAM.

(4) MAKE INTERIM REPORTS AS THE BOARD DEEMS ADVISABLE.

(I) PROHIBITIONS.--A BOARD MEMBER MAY NOT:

(1) DIRECTLY OR INDIRECTLY HAVE AN INTEREST IN THE

MAKING OF AN INVESTMENT UNDER THE PROGRAM OR IN GAINS OR

PROFITS ACCRUING FROM AN INVESTMENT UNDER THE PROGRAM.

(2) BORROW PROGRAM-RELATED MONEY OR DEPOSITS OR USE

PROGRAM-RELATED MONEY OR DEPOSITS IN ANY MANNER.

(3) BECOME AN ENDORSER, SURETY OR OBLIGOR ON AN

INVESTMENT MADE UNDER THE PROGRAM.

SECTION 6. FIRST-TIME HOMEBUYERS SAVINGS ACCOUNT.

(A) APPROVAL.--THE BUREAU SHALL REVIEW AN APPLICATION

SUBMITTED BY AN INDIVIDUAL FOR AN ACCOUNT AND, IF APPROVED BY

THE BUREAU, THE INDIVIDUAL MAY ESTABLISH AN ACCOUNT.

(B) DESIGNATION OF QUALIFIED BENEFICIARY.--AN ACCOUNT HOLDER

MAY DESIGNATE ONE FIRST-TIME HOMEBUYER AS THE QUALIFIED

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BENEFICIARY OF AN ACCOUNT. THE ACCOUNT HOLDER MAY DESIGNATE

THEMSELF 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 ACCOUNT IS ESTABLISHED AND FOR ANY

YEAR IN WHICH THE QUALIFIED BENEFICIARY IS CHANGED.

TO PAY OR REIMBURSE A QUALIFIED BENEFICIARY'S ELIGIBLE COSTS FOR

THE PURCHASE OF A SINGLE-FAMILY RESIDENCE IN THIS COMMONWEALTH.

(D) JOINT ACCOUNT HOLDERS.--AN ACCOUNT HOLDER MAY JOINTLY

OWN AN ACCOUNT WITH ANOTHER INDIVIDUAL IF THE JOINT ACCOUNT

HOLDERS FILE A JOINT PERSONAL INCOME TAX RETURN UNDER ARTICLE

III OF THE TAX REFORM CODE OF 1971.

(E) QUALIFIED BENEFICIARY OF MORE THAN ONE ACCOUNT.--AN

INDIVIDUAL MAY BE DESIGNATED AS THE QUALIFIED BENEFICIARY ON

MORE THAN ONE ACCOUNT.

(F) CONTRIBUTIONS TO ACCOUNT.--

(1) SUBJECT TO THE LIMITATIONS UNDER SECTION 7(D), AN

INDIVIDUAL OTHER THAN THE ACCOUNT HOLDER MAY CONTRIBUTE TO AN

ACCOUNT.

(2) THE MAXIMUM AMOUNT OF ALL CONTRIBUTIONS TO AN

ACCOUNT SHALL BE $150,000.

SECTION 7. DEDUCTION AND EXCLUSION FROM TAXABLE INCOME.

(A) DEDUCTION OF CONTRIBUTIONS.--EXCEPT AS PROVIDED UNDER

SUBSECTION (C), THE AMOUNT CONTRIBUTED BY AN ACCOUNT HOLDER TO

AN 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

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RETURN.

(2) SHALL BE DEDUCTIBLE, UP TO THE CONTRIBUTION LIMITS

UNDER 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 PROVIDED UNDER

SUBSECTION (C), THE AMOUNT OF EARNINGS ON AN 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.

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 FOR INDIVIDUAL PERSONAL INCOME TAX

FILERS AND $100,000 FOR JOINT PERSONAL INCOME TAX FILERS

WITHIN 10 YEARS.

(3) IF THE PRINCIPAL AND EARNINGS OF AN 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 MONEY INTO AN ACCOUNT UNDER SECTION

6(F) IS NOT ENTITLED TO THE DEDUCTION AND EXCLUSION PROVIDED FOR

UNDER THIS SECTION.

(E) REMAINING MONEY.--MONEY IN AN 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

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ALTERNATIVE BASIS FOR CALCULATING TAXABLE INCOME UNDER ARTICLE

III OF THE TAX REFORM CODE OF 1971.

SECTION 8. DISTRIBUTION OF MONEY.

UPON PROOF OF DEATH OF AN ACCOUNT HOLDER, A FINANCIAL

INSTITUTION SHALL DISTRIBUTE THE ACCOUNT IN ACCORDANCE WITH THE

CONTRACT TERMS GOVERNING THE ACCOUNT.

SECTION 9. WITHDRAWAL FOR PURPOSE OTHER THAN ELIGIBLE COSTS.

(a) Other than eligible costs.--IF AN ACCOUNT HOLDER OR

QUALIFIED BENEFICIARY WITHDRAWS ANY AMOUNT FROM AN 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 QUALIFIED BENEFICIARY SHALL

PAY TO THE DEPARTMENT OF REVENUE A PENALTY EQUAL TO 10% OF

THE AMOUNT WITHDRAWN. THE PENALTY MAY NOT APPLY TO MONEY

WITHDRAWN FROM AN ACCOUNT THAT WAS:

(I) WITHDRAWN BY REASON OF THE ACCOUNT HOLDER'S OR

THE QUALIFIED BENEFICIARY'S DEATH OR DISABILITY; OR

(II) A DISBURSEMENT OF ASSETS OF THE ACCOUNT

PURSUANT TO A FILING FOR PROTECTION UNDER 11 U.S.C.

(RELATING TO BANKRUPTCY).

(b) Ineligible costs.--If an account holder or qualified

beneficiary withdraws any amount from an account and uses the

withdrawal for an ineligible use, 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. The department may

waive the taxable income requirement under this subsection if

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the account holder or qualified beneficiary uses the withdrawal

for an ineligible use due to any of the following:

(1) Loss of household income as a result of the

termination of employment, which was not caused by the

personal actions of the account holder or qualified

beneficiary.

(2) Loss of an income earner in the household.

(3) Transfer for employment purposes.

(4) Any other economic or personal hardship.

SECTION 10. EFFECTIVE DATE.

THIS ACT SHALL TAKE EFFECT IN ONE YEAR.

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