103RD GENERAL ASSEMBLY
State of Illinois
2023 and 2024
HB3934

 

Introduced 2/17/2023, by Rep. Michael J. Kelly

 

SYNOPSIS AS INTRODUCED:
 
New Act

    Creates the First-Time Home Buyer Savings Program Act. Creates the First-Time Home Buyer Savings Program in the Office of the State Treasurer. Provides that beginning January 1, 2023 through December 31, 2027, any individual may open an account with a financial institution and designate the account, in its entirety, as a first-time home buyer savings account to be used to pay or reimburse a qualified beneficiary's eligible costs for the purchase of a single-family residence in the State. Provides that the account holder is responsible for the use or application of funds in a first-time home buyer savings account. Provides a list of required documents an account holder shall submit to the Office of the State Treasurer under the Program. Allows the Treasurer to adopt rules to implement the Program. Requires the Office of the State Treasurer to prescribe the form and manner in which a taxpayer shall claim a deduction in accordance with the Act and the Illinois Income Tax Act. Allows the Office of the State Treasurer to prepare and distribute informational materials on the Program to financial institutions and potential home buyers. Sets forth the duties and liability of financial institutions under the Program. Provides that the maximum account balance limit for a first-time home buyer savings account shall not exceed a maximum of $50,000. Provides that if funds are withdrawn from an account for any purpose other than the payment of eligible costs by or on behalf of a qualified beneficiary, there is a penalty equal to 10% of the amount withdrawn. Effective immediately.


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A BILL FOR

 

HB3934LRB103 29596 DTM 55991 b

1    AN ACT concerning State government.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 1. Short title. This Act may be cited as the
5First-Time Home Buyer Savings Program Act.
 
6    Section 5. Definitions. As used in this Act:
7    "Account holder" means an individual who establishes,
8individually or jointly with one or more other individuals, an
9account with a financial institution for which the account
10holder claims a first-time home buyer savings account status
11on his or her income tax return.
12    "Allowable closing costs" means a disbursement listed on a
13settlement statement for the purchase of a single-family
14residence in this State by a qualified beneficiary.
15    "Eligible costs" means the down payment and allowable
16closing costs for the purchase of a single-family residence in
17this State by a qualified beneficiary.
18    "Financial institution" means any bank, trust company,
19savings institution, industrial loan association, consumer
20finance company, credit union, or any benefit association,
21insurance company, safe deposit company, money market mutual
22fund, broker, or similar entity authorized to do business in
23this State.

 

 

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1    "First-time home buyer" means an individual who is a
2resident of this State and has not owned or purchased, either
3individually or jointly, a single-family residence during a
4period of 3 years prior to the date of the purchase of a
5single-family residence.
6    "First-time home buyer savings account" or "account" means
7an account with a financial institution that an account holder
8designates as a first-time home buyer savings account on his
9or her income tax return under this Act for the purpose of
10paying or reimbursing eligible costs for the purchase of a
11single-family residence in this State by a qualified
12beneficiary.
13    "Principal residence" means the one place where an owner
14of the property has his or her true, fixed, and permanent home
15to which, whenever absent, he or she intends to return and that
16shall continue as a principal residence until another
17principal residence is established. "Principal residence"
18includes only that portion of a dwelling or unit in a
19multiple-unit dwelling that is subject to ad valorem taxes and
20that is owned and occupied by an owner of the dwelling or unit.
21"Principal residence" also includes all of an owner's
22unoccupied property classified as residential that is
23adjoining or contiguous to the dwelling subject to ad valorem
24taxes and that is owned and occupied by the owner. "Principal
25residence" also includes all of an owner's unoccupied property
26classified as timber-cutover real property that is adjoining

 

 

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1or contiguous to the dwelling subject to ad valorem taxes and
2that is owned and occupied by the owner. Contiguity is not
3broken by boundary between local tax collecting units, a road,
4a right-of-way, or property purchased or taken under
5condemnation proceedings by a public utility for power
6transmission lines if the 2 parcels separated by the purchased
7or condemned property were a single parcel prior to the sale or
8condemnation. "Principal residence" also includes any portion
9of a dwelling or unit of an owner that is rented or leased to
10another person as a residence as long as that portion of the
11dwelling or unit that is rented or leased is less than 50% of
12the total square footage of living space in that dwelling or
13unit. "Principal residence" also includes a life care
14facility. "Principal residence" also includes property owned
15by a cooperative housing corporation and occupied by tenant
16stockholders. Property that qualified as a principal residence
17shall continue to qualify as a principal residence for 3 years
18after all or any portion of the dwelling or unit included in or
19constituting the principal residence is rented or leased to
20another person as a residence if all of the following
21conditions are satisfied:
22        (1) The owner of the dwelling or unit is absent while
23    on active duty in the armed forces of the United States.
24        (2) The dwelling or unit would otherwise qualify as
25    the owner's principal residence.
26        (3) The owner files an affidavit with the assessor of

 

 

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1    the local tax collecting unit on or before May 1 attesting
2    that it is his or her intent to occupy the dwelling or unit
3    as a principal residence upon completion of active duty in
4    the armed forces of the United States. A copy of an
5    affidavit filed under this paragraph shall be forwarded to
6    the Office of the State Treasurer pursuant to a schedule
7    prescribed by the Office of the State Treasurer.
8    "Program" means the First-Time Home Buyer Savings Program
9established by this Act.
10    "Qualified beneficiary" means a first-time home buyer who
11is designated as the beneficiary of an account designated by
12the account holder as a first-time home buyer savings account.
13    "Qualified withdrawal" means a withdrawal from an account
14that is not subject to a penalty under this Act or taxation
15under the Illinois Income Tax Act, and that is a withdrawal
16from an account that is made at least one year after the
17account was opened and designated as a first-time home buyer
18savings account and the withdrawal is used to pay the eligible
19costs of the qualified beneficiary incurred at least one year
20after the account is designated.
21    "Settlement statement" means the statement of receipts and
22disbursements for a transaction related to real estate or an
23executed sales agreement for the purchase of a manufactured
24home being conveyed as personal property.
25    "Single-family residence" means a single-family residence
26owned and occupied by a qualified beneficiary as the qualified

 

 

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1beneficiary's principal residence. "Single-family residence"
2includes a manufactured home, trailer, mobile home,
3condominium unit, or cooperative.
4    "Treasurer" means the State Treasurer.
 
5    Section 10. First-Time Home Buyer Savings Program.
6    (a) The First-Time Home Buyer Savings Program is
7established in the Office of the State Treasurer. The
8purposes, powers, and duties of the Program are vested in and
9shall be exercised by the Treasurer or the designee of the
10Treasurer.
11    (b) Beginning January 1, 2023 through December 31, 2027,
12any individual may open an account with a financial
13institution and designate the account, in its entirety, as a
14first-time home buyer savings account to be used to pay or
15reimburse a qualified beneficiary's eligible costs for the
16purchase of a single-family residence in this State. An
17account holder shall designate a first-time home buyer as the
18qualified beneficiary of the first-time home buyer savings
19account. The account holder may designate himself or herself
20as the qualified beneficiary and may change the designated
21qualified beneficiary at any time, but there may not be more
22than one qualified beneficiary at any one time.
23    (c) An individual may jointly own a first-time home buyer
24savings account with another person if the joint account
25holders file a joint return under the Illinois Income Tax Act.

 

 

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1An individual may be the account holder of more than one
2first-time home buyer savings account. However, an account
3holder shall not have multiple accounts that designate the
4same qualified beneficiary. An individual may be designated as
5the qualified beneficiary on more than one first-time home
6buyer savings account.
7    (d) Only cash and marketable securities may be contributed
8to a first-time home buyer savings account. Subject to the
9limitation under Section 25, persons other than the account
10holder may make contributions to a first-time home buyer
11savings account.
 
12    Section 15. Use of funds; required documentation; rules;
13deduction form; informational materials.
14    (a) The account holder is responsible for the use or
15application of funds in a first-time home buyer savings
16account. The account holder shall not use funds held in an
17account to pay expenses of administering the account, except
18that a service fee may be deducted from the account by a
19financial institution in which the account is held. An account
20holder may withdraw funds, in whole or in part, from a
21first-time home buyer savings account and deposit the funds in
22a new first-time home buyer savings account held by a
23different financial institution or the same financial
24institution. If necessary, an account holder or qualified
25beneficiary may make a hardship withdrawal from the account

 

 

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1due to an immediate and heavy financial need of the account
2holder or qualified beneficiary. However, the amount withdrawn
3must be limited to the amount necessary to satisfy that need. A
4hardship withdrawal is not a qualified withdrawal and will be
5subject to taxation under the Illinois Income Tax Act.
6    (b) An account holder shall submit, with the account
7holder's income tax return filed under the Illinois Income Tax
8Act all of the following to the Office of the State Treasurer,
9along with the form prescribed by the Office of the State
10Treasurer under subsection (e):
11        (1) Account statements that show the contributions
12    made during the tax year and the taxable interest or
13    earnings on the account in the tax year for which the
14    deduction is claimed.
15        (2) The Form 1099 issued by the financial institution
16    for the account for the tax year for which the deduction is
17    claimed.
18        (3) Upon a withdrawal of funds from a first-time home
19    buyer savings account, a copy of the real estate
20    settlement statement that shows that the withdrawal was
21    used for eligible costs.
22    (c) An account holder shall maintain and keep, for a
23period of at least 4 years, suitable records and
24documentation, for each first-time home buyer savings account,
25including, but not limited to, account statements for all
26contributions and withdrawals made, a detailed list describing

 

 

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1the transactions for the account, and other pertinent records
2and papers as required by the Office of the State Treasurer for
3the administration of this Act.
4    (d) The Treasurer may adopt rules to implement the Program
5in accordance with the Illinois Administrative Procedure Act.
6The rules shall not apply to, or impose administrative,
7reporting, or other obligations or requirements on, financial
8institutions-related accounts for first-time home buyer
9savings accounts.
10    (e) The Office of the State Treasurer shall prescribe the
11form and manner in which a taxpayer shall claim a deduction in
12accordance with this Act and the Illinois Income Tax Act, on
13his or her income tax return filed under the Illinois Income
14Tax Act. The form shall include, at a minimum all of the
15following:
16        (1) The account holder's name.
17        (2) The name of the qualified beneficiary.
18        (3) The name of the financial institution and the
19    account number.
20        (4) The beginning and end of the year balance of the
21    account.
22        (5) The amount of the deduction claimed for the tax
23    year.
24    (f) The Office of the State Treasurer may prepare and
25distribute informational materials on the Program to financial
26institutions and potential home buyers to publicize the

 

 

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1availability of the Program.
 
2    Section 20. Financial institutions duties and liability.
3    (a) A financial institution is not required to do any of
4the following:
5        (1) Designate an account as a first-time home buyer
6    savings account, or designate the qualified beneficiaries
7    of an account, in the financial institution's account
8    contracts or systems or in any other way.
9        (2) Track the use of money withdrawn from a first-time
10    home buyer savings account.
11        (3) Allocate funds in a first-time home buyer savings
12    account among joint account holders or multiple qualified
13    beneficiaries.
14        (4) Report any information to the Office of the State
15    Treasurer that is not otherwise required by law.
16    (b) A financial institution is not responsible or liable
17for any of the following:
18        (1) Determining or ensuring that an account satisfies
19    the requirements to be a first-time home buyer savings
20    account.
21        (2) Determining or ensuring that funds in a first-time
22    home buyer savings account are used for eligible cost.
23        (3) Reporting or remitting taxes or penalties related
24    to the use of a first-time home buyer savings account.
25    (c) Upon being furnished proof of the death of the account

 

 

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1holder and any other information required by the contract
2governing the first-time home buyer savings account, a
3financial institution shall distribute the principal and
4accumulated interest or other income in the account in
5accordance with the terms of the contract governing the
6account.
 
7    Section 25. Account balance, contributions and interests,
8and qualified withdrawals.
9    (a) The maximum account balance limit for a first-time
10home buyer savings account shall not exceed a maximum of
11$50,000. Accounts may continue to accrue earnings if the total
12balance has reached the maximum account balance limit and
13shall not be considered to have exceeded the maximum account
14balance limit under this subsection.
15    (b) Contributions to and interest earned on a first-time
16home buyer savings account are exempt from taxation as
17provided in the Illinois Income Tax Act.
18    (c) Qualified withdrawals made from first-time home buyer
19savings accounts are exempt from taxation as provided in the
20Illinois Income Tax Act.
 
21    Section 30. Penalties.
22    (a) If funds are withdrawn from an account for any purpose
23other than the payment of eligible costs by or on behalf of a
24qualified beneficiary, there is a penalty equal to 10% of the

 

 

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1amount withdrawn. The penalty shall be paid to the Office of
2the State Treasurer.
3    (b) The penalty does not apply if the funds withdrawn
4satisfy any of the following:
5        (1) Withdrawn by reason of the qualified beneficiary's
6    death or disability.
7        (2) A disbursement of assets of the account pursuant
8    to a filing for protection under the United States
9    Bankruptcy Code, 11 U.S.C. Section 101 to 1330.
10        (3) Transferred from an account established under this
11    Act into another account established under this Act for
12    the benefit of another qualified beneficiary as provided
13    in Section 15.
14        (4) Withdrawn by reason of a hardship withdrawal as
15    provided in Section 15.
16        (5) Withdrawn by reason of qualified beneficiary who
17    is a service member who is transferred or deployed out of
18    this State on active duty pursuant to a permanent change
19    of station order and provides proof acceptable to the
20    Office of the State Treasurer that the qualified
21    beneficiary or his or her spouse is assigned to a duty
22    station outside this State under a permanent change of
23    station order.
24    (c) As used in this Section:
25    "Active duty" means active duty pursuant to an executive
26order of the President of the United States, an act of

 

 

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1Congress, or an order of the Governor.
2    "Armed forces" means means the army, air force, navy,
3marine corps, coast guard, or other military force designated
4by Congress as a part of the armed forces of the United States.
5    "Service member" means a member of the armed forces, a
6reserve branch of the armed forces, or the Illinois National
7Guard.
 
8    Section 99. Effective date. This Act takes effect upon
9becoming law.