HB5503 100TH GENERAL ASSEMBLY

LRB100 17407 HLH 32573 b

100TH GENERAL ASSEMBLY
State of Illinois
2017 and 2018
HB5503

Introduced , by Rep. Tony McCombie

SYNOPSIS AS INTRODUCED:

New Act
35 ILCS 5/227 new

Creates the Illinois First-Time Homebuyer Savings Account Act. Provides that first-time homebuyers may open a first-time homebuyer savings account to pay or reimburse costs in connection with a qualified home purchase. Provides that the account holder shall not use any funds in a first-time homebuyer savings account to pay expenses of administering the account except for fees and charges assessed by the financial institution. Provides for reporting to the Department of Revenue. Defines terms. Amends the Illinois Income Tax Act. Provides that a taxpayer shall be allowed an annual credit for amounts deposited by the taxpayer into a first-time homebuyer savings account of up to $2,000 for individual taxpayers, and up to $4,000 for married taxpayers. Provides a maximum lifetime credit of 10 times the taxpayer's annual maximum deduction. Provides that beginning January 1, 2020, the Department shall adjust, every year, the maximum tax credits available to a first-time homebuyer savings account holder for inflation.

A BILL FOR

AN ACT concerning revenue.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 1. Short title. This Act may be cited as the Illinois First-Time Homebuyer Savings Account Act.

Section 5. Definitions. As used in this Act:

"Account holder" means an individual who establishes, either individually or jointly with the individual's spouse, a first-time homebuyer savings account under this Act.

"Department" means the Department of Revenue.

"Designated beneficiary" means an individual meeting the requirements under this Act and designated by an account holder as beneficiary of the account holder's first-time homebuyer savings account.

"Eligible home costs" means the following: (1) the down payment for the purchase of a single-family residence in Illinois by a designated beneficiary; and (2) a cost, fee, tax, or payment incurred by, or charged or assigned to, a designated beneficiary for the purchase of a single-family residence in Illinois, and listed on the statement of receipts and disbursements for the sale, including any statement prescribed by 12 C.F.R. 1026.38. "Eligible home costs" also includes any United States Department of Veterans Affairs funding fee incurred by, or charged or assigned to, a designated beneficiary in connection with a United States Department of Veterans Affairs home loan guaranty program.

"Financial institution" means a State or federally chartered bank, savings and loan association, credit union, or trust company in this state.

"First-time homebuyer" means an individual who is a resident of Illinois and who does not own, either individually or jointly, a single-family or multifamily residence, and who has not owned or purchased, either individually or jointly, a single-family or multifamily residence for a period of 3 years prior to either of the following: the date on which the individual is named as a designated beneficiary of a first-time homebuyer savings account; or the date of the qualified home purchase for which the eligible home costs are paid or reimbursed from a first-time homebuyer savings account.

"First-time homebuyer savings account" means an account that meets the requirements under this Act and that was established for the purpose of paying or reimbursing a designated beneficiary's eligible home costs in connection with a qualified home purchase.

"Qualified home purchase" means, with respect to a first-time homebuyer savings account, the purchase of a single-family residence in Illinois by the account's designated beneficiary 90 or more days after the date the account holder first opened a first-time homebuyer savings account.

"Single-family residence" means a single-family residence owned and occupied by a designated beneficiary as the designated beneficiary's principal residence.

Section 10. First-time homebuyer savings account.

(a) Beginning January 1, 2018, an individual may open an interest-bearing savings account with a financial institution and designate the entire account as a first-time homebuyer savings account for the purpose of paying or reimbursing a designated beneficiary's eligible home costs in connection with a qualified home purchase. The first-time homebuyer savings account designation shall be made no later than April 30 of the year following the tax year during which the account is opened, on forms provided by the Department.

(b) A married couple electing to file a joint Illinois individual income tax return may establish a joint first-time homebuyer savings account. Married taxpayers electing to file separate tax returns or separately on a combined tax return for Illinois tax purposes shall not establish or maintain a joint first-time homebuyer savings account.

(c) An individual may establish more than one first-time homebuyer savings account, provided each account has a different designated beneficiary.

(d) The account holder shall designate one individual as beneficiary of the first-time homebuyer savings account. The designation shall be made on forms provided by the Department and no later than April 30 of the year following the tax year during which the account is opened. The account holder may change the designated beneficiary of the first-time homebuyer savings account at any time.

(e) The account holder and designated beneficiary of a first-time homebuyer savings account may be the same individual. An individual may be the designated beneficiary of more than one first-time homebuyer savings account. The designated beneficiary of a first-time homebuyer savings account must be a first-time homebuyer.

Section 15. Account administration; account holder responsibilities.

(a) Contributions to a first-time homebuyer savings account may be made by any person in the form of cash. There is no limitation on the amount of contributions that may be made to or retained in a first-time homebuyer savings account.

(b) The account holder shall not use funds held in a first-time homebuyer savings account to pay expenses, if any, of administering the account, except that all fees and charges assessed by the financial institution may be deducted from the account by the financial institution where the account is held.

(c) The account holder shall submit the following information to the Department:

(1) An annual report for the first-time homebuyer savings account on forms furnished by the Department. The report shall be filed with the Illinois income tax return of the account holder. The report shall include: a list of transactions occurring on the account during the tax year, and shall identify any supporting documentation to be included with the report or maintained by the taxpayer; information regarding the eligible home costs to which any withdrawn funds were applied in connection with a qualified home purchase; information regarding the amount of funds remaining, if any, in a first-time homebuyer savings account; and such other information as the Department may require by rule.

(2) A copy of the federal Internal Revenue Service form 1099, or other similar federal Internal Revenue Service income reporting form, if any, issued for the first-time homebuyer savings account to the account holder by the financial institution where the account is held. The form shall be included with the Illinois income tax return of the account holder.

(3) Upon a withdrawal of funds from a first-time homebuyer savings account, a transaction report on forms furnished by the department.

(d) The account holder may withdraw funds from a first-time homebuyer savings account at any time.

Section 20. Financial institution protections. Nothing in this Act shall be construed to require a financial institution to do any of the following, or to make the financial institution responsible or liable for any of the following:

(1) designate or label within the financial institution's account contracts, systems, or in any other manner, an account as a first-time homebuyer savings account;

(2) ascertain or verify the purpose of a withdrawal of funds from a first-time homebuyer savings account, or track the destination or use of the withdrawn funds;

(3) allocate funds in a first-time homebuyer savings account to a designated beneficiary or among joint account holders;

(4) report any information to the Department or any other governmental agency;

(5) determine or ensure that an account satisfies the requirements to be a first-time homebuyer savings account;

(6) determine or ensure that funds withdrawn from a first-time homebuyer savings account are used for the payment or reimbursement of a designated beneficiary's eligible home costs in connection with a qualified home purchase;

(7) report or remit taxes or penalties related to the ownership or use of a first-time homebuyer savings account; or

(8) include the name of a beneficiary in the title of a first-time homebuyer savings account, or document the change of any beneficiary to a first-time homebuyer savings account.

Section 25. Tax treatment. A first-time homebuyer savings account shall be taxable as provided in the Illinois Income Tax Act.

Section 30. Rulemaking; forms.

(a) The Department, in consultation with the Department of Financial and Professional Regulation, shall adopt rules necessary to implement and administer this Act.

(b) The Department shall create and make available forms to be used in complying with this Act, including, but not limited to, the following forms: for designating an account as a first-time homebuyer savings account; for designating an individual as beneficiary of a first-time homebuyer savings account; and a first-time homebuyer savings account annual report as required under subsection (c) of Section 15.

Section 35. The Illinois Income Tax Act is amended by adding Section 227 as follows:

(35 ILCS 5/227 new)

Sec. 227. Illinois First-Time Homebuyer Savings Account credit.

(a) For taxable years beginning on and after January 1, 2018, a taxpayer shall be allowed a credit for amounts deposited by the taxpayer during the taxable year into a first-time homebuyer savings account under the Illinois First-Time Homebuyer Savings Account Act, together with any interest earned during the taxable year on such an account. For single filers and married persons filing separately, the credit shall not exceed $2,000 per year; for married persons filing jointly, the credit shall not exceed $4,000 per year. The maximum amount of credit provided to a taxpayer shall not exceed 10 times the taxpayer's annual deduction limit in the first year of eligibility.

(b) On January 1, 2020, and January 1 of each year thereafter, the maximum credits established in subsection (a) shall be adjusted by the Department for inflation as determined by the Consumer Price Index for All Urban Consumers as published by the United States Department of Labor and rounded to the nearest $100.

(c) The credit may not be carried back and may not reduce the taxpayer's liability to less than zero. If the amount of the credit exceeds the tax liability for the year, the excess may be carried forward and applied to the tax liability of the 5 taxable years following the excess credit year. The tax credit shall be applied to the earliest year for which there is a tax liability. If there are credits for more than one year that are available to offset a liability, the earlier credit shall be applied first.

(d) This Section is exempt from the provisions of Section 250.