Bill Text: HI HB634 | 2024 | Regular Session | Introduced
Bill Title: Relating To The Individual Housing Account Program.
Spectrum: Partisan Bill (Republican 6-0)
Status: (Introduced - Dead) 2023-12-11 - Carried over to 2024 Regular Session. [HB634 Detail]
Download: Hawaii-2024-HB634-Introduced.html
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HOUSE OF REPRESENTATIVES |
H.B. NO. |
634 |
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THIRTY-SECOND LEGISLATURE, 2023 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
Relating to the individual housing account program.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION
1. The legislature finds that the affordable housing
crisis continues to be one of the State's most significant and challenging
social problems and is a critical issue for many Hawaii residents. As the cost
of housing increases, the State must continue to assist residents in finding
methods of increasing the availability of homeownership. Saving for a
down-payment on a home loan continues to be a barrier for many Hawaii residents
with few programs available to assist in this endeavor.
The purpose of this
Act is to update the Individual Housing Accounts statues (HRS§235-5.5) by
increasing the contribution levels, and maximum account levels, to reflect
current housing prices more accurately. This will allow taxable income to be
reduced by contributions to the first-time home buyer savings account thus
encouraging first time home ownership through incentivizing saving for a down
payment and closing costs. This incentive acknowledges the significant
financial and civic benefits of home ownership for the State.
SECTION 2. Section 235-5.5, Hawaii Revised Statutes, is amended to read as follows:
"§235-5.5
Individual housing accounts.
(a) There shall be allowed as a
deduction from gross income the amount, not to exceed [$5,000] $15,000,
paid in cash during the taxable year by an individual taxpayer to an individual
housing account established for the individual's benefit to provide funding for
the purchase of the individual's first principal residence. A deduction not to exceed [$10,000] $30,000
shall be allowed for a married couple filing a joint return. No deduction shall be allowed on any amounts
distributed less than three hundred sixty-five days from the date on which a
contribution is made to the account. Any
deduction claimed for a previous taxable year for amounts distributed less than
three hundred sixty-five days from the date on which a contribution was made
shall be disallowed and the amount deducted shall be included in the previous
taxable year's gross income and the tax reassessed. The interest paid or accrued within the
taxable year on the account shall not be included in the individual's gross
income. For purposes of this section,
the term "first principal residence" means a residential property
purchased with the payment or distribution from the individual housing account
which shall be owned and occupied as the only home by an individual who did not
have any interest in, individually, or whose spouse did not have any interest
in, if the individual is married, a residential property within the last five
years of opening the individual housing account.
In the
case of a married couple filing separate returns, the sum of the deductions
allowable to each of them for the taxable year shall not exceed [$5,000]
$15,000, or [$10,000] $30,000 for a joint return, for amounts paid in
cash, excluding interest paid or accrued thereon.
The
amounts paid in cash allowable as a deduction under this section to an
individual for all taxable years shall not exceed [$25,000] $200,000,
excluding interest paid or accrued. In
the case of married individuals having separate individual housing accounts,
the sum of the separate accounts and the deduction under this section shall not
exceed [$25,000] $200,000, excluding interest paid or accrued thereon.
(b) For purposes of this section, the term "individual housing account" means a trust created or organized in Hawaii for the exclusive benefit of an individual, or, in the case of a married individual, for the exclusive benefit of the individual and spouse jointly, but only if the written governing instrument creating the trust meets the following requirements:
(1) Contributions shall not be accepted for the
taxable year in excess of [$5,000] $15,000 (or [$10,000] $30,000 in
the case of a joint return) or in excess of [$25,000] $200,000 for all
taxable years, exclusive of interest paid or accrued;
(2) The trustee is a bank, a savings and loan association, a credit union, or a depository financial services loan company, chartered, licensed, or supervised under federal or state law, whose accounts are insured by the Federal Deposit Insurance Corporation, the National Credit Union Administration, or any agency of this State or any federal agency established for the purpose of insuring accounts in these financial institutions. The financial institution must actively make residential real estate mortgage loans in Hawaii;
(3) The assets of the trust shall be invested only in fully insured savings or time deposits. Funds held in the trust may be commingled for purposes of investment, but individual records shall be maintained by the trustee for each individual housing account holder that show all transactions in detail;
(4) The entire interest of an individual or married couple for whose benefit the trust is maintained shall be distributed to the individual or couple not later than one hundred twenty months after the date on which the first contribution is made to the trust;
(5) Except as provided in subsection (g), the trustee shall not distribute the funds in the account unless the trustee:
(A) Verifies that the money is to be used for the purchase of a first principal residence located in Hawaii, and provides that the instrument of payment is payable to the mortgagor, construction contractor, or other vendor of the property purchased; or
(B) Withholds an amount equal to ten per cent of the amount withdrawn from the account and remits this amount to the director within ten days after the date of the withdrawal. The amount withheld shall be applied to the liability of the taxpayer under subsections (c) and (e); and
(6) If any amounts are distributed before the expiration of three hundred sixty-five days from the date on which a contribution is made to the account, the trustee shall so notify in writing the taxpayer and the director. If the trustee makes the verification required in paragraph (5)(A), then the department shall disallow the deduction under subsection (a) and subsections (c), (e), and (f) shall not apply to that amount. If the trustee withholds an amount under paragraph (5)(B), then the department shall disallow the deduction under subsection (a) and subsection (e) shall apply, but subsection (c) shall not apply.
(c) Any contributions paid or distributed out of an individual housing account shall be included in gross income by the individual for whose benefit the account was established for the taxable year in which the payment or distribution is received, unless the amount is used exclusively in connection with the purchase of the first principal residence in Hawaii for the individual for whose benefit the account was established.
(d) The transfer of an individual's interest in an individual housing account to a spouse under a dissolution of marriage decree or under a written instrument incident to a dissolution of marriage shall not be considered a taxable transfer made by the individual, and the interest, at the time of the transfer, shall be treated as part of an individual housing account of the transferee, and not of the transferor. After the transfer, the account shall be treated, for purposes of this section, as maintained for the benefit of the transferee.
(e) If a distribution from an individual housing account to an individual for whose benefit the account was established is made and not used in connection with the purchase of the first principal residence in Hawaii for the individual, the tax liability of the individual under this chapter for the taxable year in which the distribution is received shall be increased by an amount equal to ten per cent of the amount of the distribution which is includable in the individual's gross income for the taxable year.
If, during any taxable year, the individual uses the account or any portion thereof as security for a loan, the portion so used shall be treated as if it had been distributed to that individual.
(f) If the individual for whose benefit the
individual housing account was established purchases a residential property in
Hawaii with the distribution from the individual housing account[:
(1) Before January 1, 1990, and if the individual
sells in any manner or method or by use of any instrument conveying or
transferring the residential property, the gross income of the individual under
this chapter for the taxable year in which the residential property is sold,
conveyed, or transferred, whichever is applicable, shall include an amount
equal to the amount of the distribution from the individual housing account,
and in addition, the gross income of the individual shall be increased by an
amount equal to ten per cent of the total distribution from the individual
housing account; or
(2) After December 31, 1989, ]the individual
shall report one-tenth of the total distribution from the individual housing
account used to purchase the residential property as gross income in the
taxable year in which the distribution is completed and in each taxable year
thereafter until all of the distribution has been included in the individual's
gross income at the end of the tenth taxable year after the purchase of the
residential property. If the individual
sells in any manner or method or by use of any instrument conveying or transferring
the residential property, the gross income of the individual under this chapter
for the taxable year in which the residential property is sold, conveyed, or
transferred, whichever is applicable, shall include an amount equal to the
amount of the distribution from the individual housing account not previously
reported as gross income, and in addition, the tax liability of the individual
shall be increased by an amount equal to ten per cent of the total distribution
from the individual housing account. If
the individual sells the residential property in any manner as provided in this
paragraph after all of the distribution has been included in the individual's
gross income at the end of the tenth taxable year after the purchase of the
residential property, the tax liability of the individual shall not be
increased by an amount equal to ten per cent of the total distribution from the
individual housing account.
[An individual who purchased a residential
property in Hawaii with the distribution from an individual housing account
before January 1, 1990, who is subject to paragraph (1) may elect to report as
provided in paragraph (2). The election
shall be made before January 1, 1991. If
the individual makes the election, the individual shall report one-tenth of the
total distribution from the individual housing account as gross income in the
taxable year in which the election occurs and in each taxable year thereafter
until all of the distribution has been included in gross income as provided by
paragraph (2). If the individual making
the election sells the residential property in any manner as provided in
paragraph (2), then the individual shall include as income the amount of the
distribution not previously reported as income and increase the individual's
tax liability as provided in the second sentence of paragraph (2), except when
the third sentence of paragraph (2) applies.
In the
alternative, any individual subject to paragraph (2) who established the
individual housing account before January 1, 1990, may elect within one year
after the date of purchase, to be subject to paragraph (1).]
(g) No tax liability shall be imposed under this section if:
(1) The payment or distribution is attributable to the individual dying or becoming totally disabled; or
(2) Residential property subject to subsection (f) is transferred by will or by operation of law or sold due to the death or total disability of an individual or individual's spouse,
subject to the following:
An
individual shall not be considered to be totally disabled unless proof is
furnished of the total disability [in the form and manner as the director
may require] as defined in §235-1.
Upon the death of an individual for whose benefit an individual housing account has been established, the funds in the account shall be payable to the estate of the individual; provided that if the account was held jointly by the decedent and a spouse of the decedent, the account shall terminate and be paid to the surviving spouse; or, if the surviving spouse so elects, the spouse may continue the account as an individual housing account. Upon the total disability of an individual for whose benefit an individual housing account has been established, the individual or the individual's authorized representative may elect to continue the account or terminate the account and be paid the assets; provided that if the account was held jointly by a totally disabled person and a spouse of that person, then the spouse or an authorized representative may elect to continue the account or terminate the account and be paid the assets.
(h) If the individual for whose benefit the individual housing account was established subsequently marries a person who has or has had any interest in residential property, the individual's housing account shall be terminated, the funds therein shall be distributed to the individual, and the amount of the funds shall be includable in the individual's gross income for the taxable year in which such marriage took place; provided that the tax liability defined under subsection (f) shall not be imposed.
(i) The trustee of an individual housing account shall make reports regarding the account to the director and to the individual for whom the account is maintained with respect to contributions, distributions, and other matters as the director may require under rules. The reports shall be filed at a time and in a manner as may be required by rules adopted under chapter 91. A person who fails to file a required report shall be subject to a penalty of $10 to be paid to the director for each instance of failure to file."
SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 4. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2023.
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INTRODUCED BY: |
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Report Title:
Individual Housing Account; Pre-tax savings account for down-payment.
Description:
Updating the Individual Housing Account (IHA) statutes to more accurately reflect the current cost of housing down-payments.
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.
