Bill Text: IL SB3497 | 2023-2024 | 103rd General Assembly | Introduced

---

Bill Title: Creates the Illinois Home Buyer Savings Accounts Act. Provides that a first-time and second-chance home buyer may open an account with a financial institution designated in its entirety by the financial institution as a first-time and second-chance home buyer savings account. Provides that the funds in a first-time and second-chance home buyer savings account may be used only to pay a first-time and second-chance home buyer's eligible costs for the purchase of a single-family residence in Illinois. Provides that 2 first-time and second-chance home buyers may jointly own a first-time and second-chance home buyer savings account. Provides that only cash and marketable securities may be contributed to a first-time and second-chance home buyer savings account. Sets forth provisions concerning the responsibilities of an account holder; the responsibilities of financial institutions; deduction of contributions, exclusion of earnings, and limitations; the penalty for withdrawal for purpose other than eligible costs; and the forms the Department of Revenue must adopt.

Spectrum: Partisan Bill (Democrat 3-0)

Status: (Introduced) 2024-09-12 - Added as Chief Co-Sponsor Sen. David Koehler [SB3497 Detail]

Download: Illinois-2023-SB3497-Introduced.html

---

103RD GENERAL ASSEMBLY State of Illinois 2023 and 2024 SB3497 Introduced 2/9/2024, by Sen. Cristina Castro SYNOPSIS AS INTRODUCED:
New Act
Creates the Illinois Home Buyer Savings Accounts Act. Provides that a first-time and second-chance home buyer may open an account with a financial institution designated in its entirety by the financial institution as a first-time and second-chance home buyer savings account. Provides that the funds in a first-time and second-chance home buyer savings account may be used only to pay a first-time and second-chance home buyer's eligible costs for the purchase of a single-family residence in Illinois. Provides that 2 first-time and second-chance home buyers may jointly own a first-time and second-chance home buyer savings account. Provides that only cash and marketable securities may be contributed to a first-time and second-chance home buyer savings account. Sets forth provisions concerning the responsibilities of an account holder; the responsibilities of financial institutions; deduction of contributions, exclusion of earnings, and limitations; the penalty for withdrawal for purpose other than eligible costs; and the forms the Department of Revenue must adopt.
LRB103 38134 RTM 68266 b
A BILL FOR
SB3497 LRB103 38134 RTM 68266 b
AN ACT concerning regulation.
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 Home Buyer Savings Accounts Act.
Section 5. Findings and purpose.
(a) The General Assembly finds that:
(1) The American Dream has always been closely
associated with owning your own home.
(2) It is becoming more and more difficult to achieve
the goal of homeownership in Illinois and throughout the
country.
(3) Homeownership provides more than a dream to an
individual person or family. An increase in homeownership
rates in Illinois has a direct positive impact on the
quality of our communities, our schools, our economy, and
public safety.
(b) The purpose of this Act is to:
(1) Make it easier for those in Illinois to achieve
their goal of homeownership for the first time.
(2) Provide a tax incentivized savings account for
qualified first-time and certain second-chance home
buyers, which, in turn, can be used toward a down payment

SB3497 - 2 - LRB103 38134 RTM 68266 b
or certain eligible closing costs for the purchase of a
home in Illinois.
Section 10. Definitions. As used in this Act:
"Account holder" means a first-time and second-chance home
buyer who establishes, individually or jointly with another
first-time and second-chance home buyer, a first-time and
second-chance home buyer savings account.
"Allowable closing costs" means a disbursement listed on a
settlement statement for the purchase of a single-family
residence in Illinois by a first-time and second-chance home
buyer.
"Department" means the Department of Revenue.
"Eligible costs" means the down payment and allowable
closing costs for the purchase of a single-family residence in
Illinois by a first-time and second-chance home buyer.
"Eligible costs" does not include any costs incurred prior to
the establishment of a first-time and second-chance home buyer
savings account.
"Financial institution" means any bank, savings
institution, industrial loan association, credit union, or
other similar entity authorized to do business and accept
deposits in Illinois.
"First-time and second-chance home buyer" means an
individual who resides in Illinois and has not owned or
purchased, either individually or jointly, a single-family

SB3497 - 3 - LRB103 38134 RTM 68266 b
residence during a period of 10 years prior to the date of the
purchase of a single-family residence.
"First-time and second-chance home buyer savings account
or account" means an account with a financial institution
created for the purpose of payment or reimbursement of
eligible costs for the purchase of a single-family residence
in Illinois by a first-time and second-chance home buyer and
designated by the financial institution upon its creation as a
first-time and second-chance home buyer savings account.
"Settlement statement" means the statement of receipts and
disbursements for a transaction related to real estate,
including a statement prescribed under the federal Real Estate
Settlement Procedures Act of 1974 and regulations under that
Act.
"Single-family residence" means a single-family residence
owned and occupied by a first-time and second-chance home
buyer as the first-time and second-chance home buyer's
principal residence. "Single-family residence" includes, but
is not limited to, a manufactured home, a trailer, a mobile
home, a condominium unit, or a cooperative.
Section 15. Establishment of a first-time and
second-chance home buyer savings account. After the effective
date of this Act, a first-time and second-chance home buyer
may open an account with a financial institution designated in
its entirety by the financial institution as a first-time and

SB3497 - 4 - LRB103 38134 RTM 68266 b
second-chance home buyer savings account.
Section 20. Use of a first-time and second-chance home
buyer savings account.
(a) Funds from a first-time and second-chance home buyer
savings account may be used only to pay a first-time and
second-chance home buyer's eligible costs for the purchase of
a single-family residence in Illinois.
(b) A first-time and second-chance home buyer may jointly
own a first-time and second-chance home buyer savings account
with another first-time and second-chance home buyer if the
joint account holders file a joint income tax return.
(c) Only cash and marketable securities may be contributed
to a first-time and second-chance home buyer savings account.
Subject to the limitations described in Section 35, persons
other than the account holder may contribute funds to a
first-time and second-chance home buyer savings account. There
is no limitation on the amount of contributions that may be
made to or retained in a first-time and second-chance home
buyer savings account.
Section 25. Account holder responsibilities.
(a) The account holder shall do all the following:
(1) not use funds held in a first-time and
second-chance home buyer savings account to pay expenses
of administering the account, except that a service or

SB3497 - 5 - LRB103 38134 RTM 68266 b
other account fee may be deducted from the account by the
financial institution in which the account is held;
(2) submit the following to the Department with the
account holder's Illinois income tax return:
(A) detailed information, in a form prescribed by
the Department, regarding the first-time and
second-chance home buyer savings account, including a
list of transactions for the account during the tax
year; and
(B) the Form 1099 issued by the financial
institution for the account;
(3) submit to the Department, upon a withdrawal of
funds from a first-time and second-chance home buyer
savings account, a detailed account of the eligible costs
toward which the account funds were applied and a
statement of the amount of funds remaining in the account,
if any. If upon withdrawal of funds from the first-time
and second-chance home buyer savings account, the account
holder fails to provide the Department with the detailed
account of the eligible costs towards which the account
funds were applied, then the entire account's funds,
including the interest and other income on principal,
shall be subject to the penalties described in Section 40.
(b) Failure to submit the documentation required under
subsection (a) on an annual basis with the filing of the
Illinois income tax return shall result in the automatic

SB3497 - 6 - LRB103 38134 RTM 68266 b
denial of the deduction and exclusion.
Section 30. Responsibilities of financial institutions.
(a) A financial institution shall be required to:
(1) create a new account for the first-time and
second-chance home buyer and designate the account as a
"first-time and second-chance home buyer's savings
account" on records and transactional statements related
to the account; and
(2) provide the account holder with a detailed account
statement relating to the first-time and second-chance
home buyer's savings account on a yearly basis.
(b) A financial institution is not required to:
(1) track the use of money withdrawn from a first-time
and second-chance home buyer savings account;
(2) allocate funds in a first-time and second-chance
home buyer savings account between joint account holders;
and
(3) report any information not otherwise required by
law to the Department or any other governmental agency.
(c) A financial institution is not responsible or liable
for:
(1) determining or ensuring that an account satisfies
the requirements to be a first-time and second-chance home
buyer savings account;
(2) determining or ensuring that funds in a first-time

SB3497 - 7 - LRB103 38134 RTM 68266 b
and second-chance home buyer savings account are used for
eligible costs; or
(3) reporting or remitting taxes or penalties related
to the use of a first-time and second-chance home buyer
savings account.
(d) Upon being furnished proof of the death of the account
holder and any other information related to the death required
by the financial institution or contract governing the
first-time and second-chance home buyer savings account, a
financial institution shall distribute the principal and
accumulated interest or other income in the account in
accordance with the terms of the contract governing the
account or as otherwise required by law.
Section 35. Deduction of contributions, exclusion of
earnings, and limitations.
(a) Except as otherwise provided in this Act and subject
to the limitations under this section, a first-time and
second-chance home buyer savings account holder shall be
entitled to a state tax deduction, subject to the limitations
of this Section, not to exceed $5,000 for an account holder who
files an individual tax return or $10,000 for joint account
holders who file a joint tax return, for contributions made by
the account holder to a first-time and second-chance home
buyer savings account during the tax year in which the
deduction is claimed.

SB3497 - 8 - LRB103 38134 RTM 68266 b
(b) Except as otherwise provided in this Act and subject
to the limitations under this Section, earnings from the
first-time and second-chance home buyer savings account,
including interest and other income on the principal, shall be
excluded from taxable income of an account holder for Illinois
income tax purposes during the tax year.
(c) An account holder may claim the deduction and
exclusion under this Section as follows:
(1) for a period not to exceed 10 years;
(2) for an aggregate total amount of principal and
earnings not to exceed $25,000 for individual accounts and
$50,000 for joint accounts during the 10-year period;
(3) only if the principal and earnings of the account
remain in the account until a withdrawal is made for
eligible costs related to the purchase of a single-family
residence by a first-time and second-chance home buyer.
(d) A person other than the account holder who deposits
funds in a first-time and second-chance home buyer savings
account shall not be entitled to the deduction and exclusion
provided under this Act.
(e) The deduction and exclusion from taxable income
provided by this Act shall apply to any alternative basis for
calculating taxable income for Illinois income tax purposes.
(f) The funds in the first-time and second-chance home
buyer savings account shall not be used to purchase a
single-family residence outside of this State.

SB3497 - 9 - LRB103 38134 RTM 68266 b
Section 40. Penalty for withdrawal for purpose other than
eligible costs. Except as otherwise provided in this Section,
if the account holder withdraws any funds from a first-time
and second-chance home buyer savings account for a purpose
other than eligible costs for the purchase of a single-family
residence in this State, all of the following shall apply:
(1) The entire balance of the fund, including interest
and other income on principal, shall be included in the
account holder's taxable income for the tax year in which
the withdrawal was made.
(2) The account holder shall pay a penalty to the
Department equal to 10% of the amount withdrawn. The
penalty shall not apply to funds withdrawn from an account
which were:
(A) withdrawn by reason of the account holder's
death or disability or due to unemployment after the
account holder has exhausted his or her applicable
unemployment compensation benefits; or
(B) a disbursement of assets of the account
pursuant to a filing for protection under the United
States Bankruptcy Code.
(c) Subsections (a) and (b) do not apply to funds
withdrawn or distributed from a first-time and second-chance
home buyer savings account that within 60 days of their
withdrawal or distribution are deposited in full into another

SB3497 - 10 - LRB103 38134 RTM 68266 b
first-time and second-chance home buyer savings account. This
subdivision shall apply both to transfers between any
qualifying first-time and second-chance home buyer savings
accounts whether such transfers are to or from qualifying
individual or joint accounts.
Section 45. Department of revenue; forms. The Department
shall adopt forms for the following:
(a) The designation of an account with a financial
institution to serve as a first-time and second-chance home
buyer savings account.
(b) An account holder to annually submit to the Department
detailed information regarding the first-time and
second-chance 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 required
to be maintained by the account holder.
Section 50. Annual report. The Department shall submit an
annual report to the General Assembly no later than March 31 of
each calendar year with the first annual report due no later
than March 31, 2025, in which the Department shall include the
total annual number of deductions claimed and total amount of
deposits deducted pursuant to this Act, the number of
taxpayers who submitted an account to the Department pursuant
to paragraph (3) of subsection (a)(3) of Section 25, and the

SB3497 - 11 - LRB103 38134 RTM 68266 b