SB2924 103RD GENERAL ASSEMBLY

LRB103 36979 HLH 67093 b

103RD GENERAL ASSEMBLY
State of Illinois
2023 and 2024
SB2924

Introduced 1/26/2024, by Sen. Laura Ellman

SYNOPSIS AS INTRODUCED:

New Act
310 ILCS 65/5	from Ch. 67 1/2, par. 1255

Creates the Family Home Ownership Act. Imposes a tax on certain partnerships, corporations, limited liability companies, or real estate investment trusts that purchase single-family residences. Provides that the amount of the tax is equal to 100% of the fair market value of the residence. Provides that the proceeds of the tax shall be deposited into the Illinois Affordable Housing Trust Fund for the purpose of providing rental and mortgage payment assistance. Requires hedge funds and other applicable taxpayers to reduce the number of single-family residences owned by the hedge fund over a 10-year period. Provides that, 10 years after the effective date of the Act, hedge funds may not own any applicable single-family residences. Provides that, 10 years after the effective date of the Act, applicable taxpayers other than hedge funds may not own more than 50 applicable single-family residences. Effective immediately.

A BILL FOR

AN ACT concerning home ownership.

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 Family Home Ownership Act.

Section 5. Definitions. As used in this Act, unless otherwise stated, the following words or phrases have the following meanings:

"Acquisition" means the acquisition of a majority ownership interest in a single-family residence, regardless of the percentage of that ownership interest.

"Applicable entity" means a partnership, corporation, limited liability company, or real estate investment trust.

"Applicable entity" does not include:

(1) an organization described in Section 501(c)(3) of the Internal Revenue Code that is exempt from tax under Section 501(a) of the Internal Revenue Code; or

(2) an organization that is primarily engaged in the construction or rehabilitation of single-family residences.

"Applicable taxpayer" means any applicable entity that:

(1) manages funds pooled from investors; and

(2) is a fiduciary with respect to such investors.

"Department" means the Department of Revenue.

"Disqualified sale" means any sale or transfer to:

(1) a corporation or other entity engaged in a trade or business; or

(2) an individual who owns any other single-family residence at the time of the sale or transfer.

"Fair market value" means the amount for which a property can be sold in the due course of business and trade, not under duress, between a willing buyer and a willing seller.

"Hedge fund taxpayer" means, with respect to any taxable year, any applicable taxpayer that has $25,000,000 or more in net assets.

"Ownership" means a majority ownership interest in the single-family residence, regardless of the percentage of that ownership interest.

"Single-family residence" means residential property consisting of 1 to 4 dwelling units.

"Single-family residence" does not include any single-family residence that is not rented or leased and that is used as the principal residence of any person who has an ownership interest in the applicable taxpayer.

Section 10. Newly acquired single-family residences. The acquisition of a single-family residence by an applicable taxpayer on or after the effective date of this Act is subject to a tax on the acquisition of the residence equal to 100% of the fair market value of the residence at the time of purchase. The proceeds of the tax shall be deposited into the Illinois Affordable Housing Trust Fund for the purpose of providing rental and mortgage payment assistance.

The tax under this Section shall be paid by the applicable taxpayer and shall be collected in the same manner as real estate transfer taxes are collected under the Real Estate Transfer Tax Law in the Property Tax Code, except that provisions concerning the distribution of proceeds and exemptions from the tax do not apply to the tax imposed under this Section.

Section 15. Maximum permissible single-family residences.

(a) The maximum number of single-family residences that may be owned by a hedge fund taxpayer shall be determined as follows:

(1) By December 31 of the first full calendar year to begin on or after the effective date of this Act, the number of single-family residences owned by a hedge fund taxpayer may not exceed 90% of the number of single-family residences owned by that taxpayer on the effective date of this Act.

(2) By December 31 of the second full calendar year to begin on or after the effective date of this Act, the number of single-family residences owned by a hedge fund taxpayer may not exceed 80% of the number of single-family residences owned by that taxpayer on the effective date of this Act.

(3) By December 31 of the third full calendar year to begin on or after the effective date of this Act, the number of single-family residences owned by a hedge fund taxpayer may not exceed 70% of the number of single-family residences owned by that taxpayer on the effective date of this Act.

(4) By December 31 of the fourth full calendar year to begin on or after the effective date of this Act, the number of single-family residences owned by a hedge fund taxpayer may not exceed 60% of the number of single-family residences owned by that taxpayer on the effective date of this Act.

(5) By December 31 of the fifth full calendar year to begin on or after the effective date of this Act, the number of single-family residences owned by a hedge fund taxpayer may not exceed 50% of the number of single-family residences owned by that taxpayer on the effective date of this Act.

(6) By December 31 of the sixth full calendar year to begin on or after the effective date of this Act, the number of single-family residences owned by a hedge fund taxpayer may not exceed 40% of the number of single-family residences owned by that taxpayer on the effective date of this Act.

(7) By December 31 of the seventh full calendar year to begin on or after the effective date of this Act, the number of single-family residences owned by a hedge fund taxpayer may not exceed 30% of the number of single-family residences owned by that taxpayer on the effective date of this Act.

(8) By December 31 of the eighth full calendar year to begin on or after the effective date of this Act, the number of single-family residences owned by a hedge fund taxpayer may not exceed 20% of the number of single-family residences owned by that taxpayer on the effective date of this Act.

(9) By December 31 of the ninth full calendar year to begin on or after the effective date of this Act, the number of single-family residences owned by a hedge fund taxpayer may not exceed 10% of the number of single-family residences owned by that taxpayer on the effective date of this Act.

(10) On and after December 31 of the tenth full calendar year to begin on or after the effective date of this Act, a hedge fund taxpayer may not own any single-family residences.

(b) The maximum number of single-family residences that may be owned by an applicable taxpayer other than a hedge fund taxpayer shall be determined as follows:

(1) By December 31 of the first full calendar year to begin on or after the effective date of this Act, the number of single-family residences owned by an applicable taxpayer other than a hedge fund taxpayer may not exceed 90% of the number of single-family residences owned by that taxpayer on the effective date of this Act plus 50 single-family residences.

(2) By December 31 of the second full calendar year to begin on or after the effective date of this Act, the number of single-family residences owned by an applicable taxpayer other than a hedge fund taxpayer may not exceed 80% of the number of single-family residences owned by that taxpayer on the effective date of this Act plus 50 single-family residences.

(3) By December 31 of the third full calendar year to begin on or after the effective date of this Act, the number of single-family residences owned by an applicable taxpayer other than a hedge fund taxpayer may not exceed 70% of the number of single-family residences owned by that taxpayer on the effective date of this Act plus 50 single-family residences.

(4) By December 31 of the fourth full calendar year to begin on or after the effective date of this Act, the number of single-family residences owned by an applicable taxpayer other than a hedge fund taxpayer may not exceed 60% of the number of single-family residences owned by that taxpayer on the effective date of this Act plus 50 single-family residences.

(5) By December 31 of the fifth full calendar year to begin on or after the effective date of this Act, the number of single-family residences owned by an applicable taxpayer other than a hedge fund taxpayer may not exceed 50% of the number of single-family residences owned by that taxpayer on the effective date of this Act plus 50 single-family residences.

(6) By December 31 of the sixth full calendar year to begin on or after the effective date of this Act, the number of single-family residences owned by an applicable taxpayer other than a hedge fund taxpayer may not exceed 40% of the number of single-family residences owned by that taxpayer on the effective date of this Act plus 50 single-family residences.

(7) By December 31 of the seventh full calendar year to begin on or after the effective date of this Act, the number of single-family residences owned by an applicable taxpayer other than a hedge fund taxpayer may not exceed 30% of the number of single-family residences owned by that taxpayer on the effective date of this Act plus 50 single-family residences.

(8) By December 31 of the eighth full calendar year to begin on or after the effective date of this Act, the number of single-family residences owned by an applicable taxpayer other than a hedge fund taxpayer may not exceed 20% of the number of single-family residences owned by that taxpayer on the effective date of this Act plus 50 single-family residences.

(9) By December 31 of the ninth full calendar year to begin on or after the effective date of this Act, the number of single-family residences owned by an applicable taxpayer other than a hedge fund taxpayer may not exceed 10% of the number of single-family residences owned by that taxpayer on the effective date of this Act plus 50 single-family residences.

(10) On and after December 31 of the tenth full calendar year to begin on or after the effective date of this Act, a hedge fund taxpayer may not own more than 50 applicable single-family residences.

(c) For the purpose of calculating the number of single-family residences owned by a taxpayer during the calendar year, a single-family residence that is sold or transferred by the taxpayer in a disqualified sale during a calendar year shall be treated as a single-family residence that is owned by the applicable taxpayer as of the last day of that calendar year.

(d) An applicable taxpayer who fails to meet the requirements of this Section shall be subject to a $15,000 penalty on each single-family residence owned in excess of the permissible maximum units for the taxable year to be deposited into the Illinois Affordable Housing Trust Fund with the purpose of providing rental and mortgage payment assistance.

Section 20. Sale of applicable single-family residences; right of first refusal.

(a) An applicable taxpayer that intends to sell a single-family residence shall give notice to each tenant of the single-family residence of the requirements of this Act and of the applicable taxpayer's intent to sell the single-family residence in which the tenant resides. The notice under this subsection shall be mailed by certified mail.

(b) Before an applicable taxpayer may sell a single-family residence, the applicable taxpayer shall give notice to each tenant of the residence, by certified mail, of any third-party bona fide offer for sale that the taxpayer intends to accept. The notice shall include the price and the terms and conditions of the offer. The price shall be calculated as a single lump sum amount that reflects (i) the total purchase price or (ii) the present value of any installment payments offered in lieu of cash payments.

(c) Upon receiving notice of any third-party bona fide offer, the tenant of that residence shall have the right to purchase the subject property for the purpose of continuing the use of the property as their residence. The tenant shall: (1) submit to the applicable taxpayer notice of their interest in purchasing the applicable single-family residence; (2) submit to the applicable taxpayer a proposed purchase and sale agreement on substantially equivalent terms and conditions as the bona fide offer within 45 days after receipt of notice of the bona fide offer; (3) obtain a binding commitment for any necessary financing or guarantees within an additional 90 days after execution of the purchase and sale agreement; and (4) close on the purchase within an additional 90 days after the end of the 90-day period under item (3). No applicable taxpayer shall unreasonably refuse to enter into, or unreasonably delay the execution or closing on, a purchase and sale or lease agreement with tenants who have made a bona fide offer to meet the price and substantially equivalent terms and conditions of an offer for which notice is required to be given under subsection (b). Failure of the tenants to submit such a purchase and sale agreement within the first 45-day period, to obtain a binding commitment for financing within the additional 90-day period, or to close on the purchase within the second 90-day period shall serve to terminate the rights of such residents to purchase the applicable single-family residence. The time periods provided in this Section may be extended by agreement. Nothing in this Section shall be construed to require an applicable taxpayer to provide financing to tenants except to the extent such financing would be provided to the third-party offeror.

(d) The right of first refusal created in this Section shall inure to the tenants for the time periods set forth in this Section, beginning on the date of notice to the tenants under paragraph (b). The effective period for the right of first refusal shall obtain separately for each substantially different bona fide offer to purchase the applicable single-family residence, and for each offer substantially equivalent to an offer made more than 3 months prior to the later offer; provided however, that in the case of a substantially equivalent offer made by a prospective buyer who has previously made an offer for which notice to tenants was required by subsection (b), the right of first refusal shall obtain only if the subsequent offer is made more than 6 months after the earlier offer. The right of first refusal shall not apply with respect to any offer received by the applicable taxpayer for which a notice is not required under subsection (b). No right of first refusal shall apply to a government taking by eminent domain or negotiated purchase, a forced sale under a foreclosure by an unrelated third-party, transfer by gift, devise, or operation of law, or a sale to a person who would be an heir at law if there were to be a death intestate of the property owner.

(e) If the tenants of the applicable single-family residence are not the successful purchasers, the applicable taxpayer shall provide evidence of compliance with this Section by filing an affidavit of compliance with the authority having jurisdiction within 7 days after the sale or lease of the property.

Section 25. Reporting.

(a) The Department of Revenue shall adopt rules to administer and enforce the provisions of this Act. Those rules shall require such reporting as the Department determines necessary or appropriate to carry out the purposes of this Act, including reporting with respect to:

(1) the dates on which single-family residences owned by an applicable taxpayer were acquired by such taxpayer,

(2) the dates on which single-family residences owned by an applicable taxpayer are sold by such taxpayer in accordance with this Act, and

(3) whether any person acquiring a single-family residence from an applicable taxpayer owns any other single-family residences.

(b) Any applicable taxpayer who fails to report in accordance with this Section, or who fails to include correct information in the report, shall, on notice and demand of the Department, pay a penalty of $20,000 to be deposited into the Illinois Affordable Housing Trust Fund with the purpose of providing rental and mortgage payment assistance.

(c) No penalty shall be imposed under this Section with respect to any failure if it is shown that such failure is due to reasonable cause and not to willful neglect.

Section 900. The Illinois Affordable Housing Act is amended by changing Section 5 as follows:

(310 ILCS 65/5) (from Ch. 67 1/2, par. 1255)

Sec. 5. Illinois Affordable Housing Trust Fund.

(a) There is hereby created the Illinois Affordable Housing Trust Fund, hereafter referred to in this Act as the "Trust Fund" to be held as a separate fund within the State Treasury and to be administered by the Program Administrator. The purpose of the Trust Fund is to finance projects of the Illinois Affordable Housing Program as authorized and approved by the Program Administrator. The Funding Agent shall establish, within the Trust Fund, a General Account, a Bond Account, a Commitment Account and a Development Credits Account. The Funding Agent shall authorize distribution of Trust Fund moneys to the Program Administrator or a payee designated by the Program Administrator for purposes authorized by this Act. After receipt of the Trust Fund moneys by the Program Administrator or designated payee, the Program Administrator shall ensure that all those moneys are expended for a public purpose and only as authorized by this Act.

(b) Except as otherwise provided in Section 8(c) of this Act, there shall be deposited in the Trust Fund such amounts as may become available under the provisions of this Act, including, but not limited to:

(1) all receipts, including dividends, principal and interest repayments attributable to any loans or agreements funded from the Trust Fund;

(2) all proceeds of assets of whatever nature received by the Program Administrator, and attributable to default with respect to loans or agreements funded from the Trust Fund;

(3) any appropriations, grants or gifts of funds or property, or financial or other aid from any federal or State agency or body, local government or any other public organization or private individual made to the Trust Fund;

(4) any income received as a result of the investment of moneys in the Trust Fund;

(5) all fees or charges collected by the Program Administrator or Funding Agent pursuant to this Act;

(6) amounts as provided in Section 31-35 of the Real Estate Transfer Tax Law;

(7) other funds as appropriated by the General Assembly; and

(8) any income, less costs and fees associated with the Program Escrow, received by the Program Administrator that is derived from Trust Fund Moneys held in the Program Escrow prior to expenditure of such Trust Fund Moneys.

(c) Additional Trust Fund Purpose: Receipt and use of federal funding for programs responding to the COVID-19 public health emergency. Notwithstanding any other provision of this Act or any other law limiting or directing the use of the Trust Fund, the Trust Fund may receive, directly or indirectly, federal funds from the Homeowner Assistance Fund authorized under Section 3206 of the federal American Rescue Plan Act of 2021 (Public Law 117-2). Any such funds shall be deposited into a Homeowner Assistance Account which shall be established within the Trust Fund by the Funding Agent so that such funds can be accounted for separately from other funds in the Trust Fund. Such funds may be used only in the manner and for the purposes authorized in Section 3206 of the American Rescue Plan Act of 2021 and in related federal guidance. Also, the Trust Fund may receive, directly or indirectly, federal funds from the Emergency Rental Assistance Program authorized under Section 3201 of the federal American Rescue Plan Act of 2021 and Section 501 of Subtitle A of Title V of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260). Any such funds shall be deposited into an Emergency Rental Assistance Account which shall be established within the Trust Fund by the Funding Agent so that such funds can be accounted for separately from other funds in the Trust Fund. Such funds may be used only in the manner and for the purposes authorized in Section 3201 of the American Rescue Plan Act of 2021 and in related federal guidance. Expenditures under this subsection (c) are subject to annual appropriation to the Funding Agent. Unless used in this subsection (c), the defined terms set forth in Section 3 shall not apply to funds received pursuant to the American Rescue Plan Act of 2021. Notwithstanding any other provision of this Act or any other law limiting or directing the use of the Trust Fund, funds received under the American Rescue Plan Act of 2021 are not subject to the terms and provisions of this Act except as specifically set forth in this subsection (c).

(d) Additional Trust Fund Purpose. The Trust Fund may also receive moneys that are designated for deposit into the Trust Fund as provided in the Family Home Ownership Act. Those moneys may be used as provided in that Act.

(Source: P.A. 102-16, eff. 6-17-21; 103-8, eff. 7-1-23.)

Section 999. Effective date. This Act takes effect upon becoming law.