Bill Text: NY S06047 | 2019-2020 | General Assembly | Introduced
Bill Title: Establishes the New York state first home savings program to authorize first time home buyers to establish savings accounts to buy their first home.
Spectrum: Slight Partisan Bill (Democrat 2-1)
Status: (Introduced - Dead) 2020-01-08 - REFERRED TO HOUSING, CONSTRUCTION AND COMMUNITY DEVELOPMENT [S06047 Detail]
Download: New_York-2019-S06047-Introduced.html
STATE OF NEW YORK ________________________________________________________________________ 6047 2019-2020 Regular Sessions IN SENATE May 16, 2019 ___________ Introduced by Sens. SAVINO, LITTLE -- read twice and ordered printed, and when printed to be committed to the Committee on Housing, Construction and Community Development AN ACT to amend the private housing finance law, in relation to estab- lishing the New York state first home savings program, which author- izes first time home buyers to establish savings accounts to purchase a home; and to amend the tax law, in relation to establishing a personal income tax deduction for deposits into such accounts The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. The private housing finance law is amended by adding a new 2 article 28 to read as follows: 3 ARTICLE XXVIII 4 NEW YORK STATE FIRST HOME 5 SAVINGS PROGRAM 6 Section 1250. Program established. 7 1251. Purposes. 8 1252. Definitions. 9 1253. Functions of the comptroller. 10 1254. Powers of the comptroller. 11 1255. Program requirements; first home savings account. 12 1256. Program limitations; first home savings account. 13 § 1250. Program established. There is hereby established a first home 14 savings program and such program shall be known and may be cited as the 15 "New York state first home savings program". 16 § 1251. Purposes. The purposes of the program shall be to authorize 17 the establishment of first home savings accounts and to provide guide- 18 lines for the maintenance of such accounts to: 19 1. enable residents of this state to benefit from the tax incentive 20 provided for qualified state first home savings accounts under section 21 six hundred twelve of the tax law; and EXPLANATION--Matter in italics (underscored) is new; matter in brackets [] is old law to be omitted. LBD11818-01-9S. 6047 2 1 2. incentivize residents to save for the purchase of a first home 2 within the state. 3 § 1252. Definitions. As used in this article, the following terms 4 shall have the following meanings: 5 1. "Account" or "first home savings account" shall mean an individual 6 savings account established in accordance with the provisions of this 7 article for the exclusive benefit of the account owner or designated 8 beneficiary that is the first time buyer of a home, townhome, condomin- 9 ium or unit in a cooperative housing corporation. 10 2. "Account owner" shall mean a taxpayer who enters into a first home 11 savings agreement pursuant to the provisions of this article, including 12 a person who enters into such an agreement as a fiduciary or agent on 13 behalf of a trust, estate, partnership, association, company or corpo- 14 ration. 15 3. "Designated beneficiary" shall mean, with respect to an account or 16 accounts, the designated individual or individuals whose first home 17 purchase expenses are expected to be paid from the account or accounts. 18 4. "Financial organization" shall mean an organization authorized to 19 do business in the state, and (a) which is an authorized fiduciary to 20 act as a trustee pursuant to the provisions of an act of congress enti- 21 tled "Employee Retirement Income Security Act of 1974", as such 22 provisions may be amended from time to time, or an insurance company; 23 and (b)(i) is licensed or chartered by the department of financial 24 services, (ii) is chartered by an agency of the federal government, 25 (iii) is subject to the jurisdiction and regulation of the securities 26 and exchange commission of the federal government, (iv) is any other 27 entity otherwise authorized to act in this state as a trustee pursuant 28 to the provisions of an act of congress entitled "Employee Retirement 29 Income Security Act of 1974", as such provisions may be amended from 30 time to time, (v) or any banking organization as defined in subdivision 31 eleven of section two of the banking law, national banking association, 32 state chartered credit union, federal mutual savings bank, federal 33 savings and loan association or federal credit union. 34 5. "First time home buyer" shall mean an individual or individuals, 35 neither of whom has or had an ownership interest in a principal resi- 36 dence at any time, including residences owned in the United States or 37 abroad. No such person shall own any other home including vacation or 38 investment residences, including residences owned in the United States 39 or abroad, except as otherwise provided in this subdivision. If either 40 the individual or individuals are not first time home buyers, neither 41 the individual or individuals shall be considered a first time home 42 buyer. If an individual's only potentially disqualifying present owner- 43 ship interest is ownership of a mobile or manufactured home, the indi- 44 vidual shall be considered a first time home buyer and shall be eligible 45 for a first home account deduction. For the purposes of this article a 46 "mobile or manufactured home" shall mean a structure that is valued as 47 personal property and not real property. If, due to his or her ownership 48 of a mobile or manufactured home, the individual has claimed a real 49 estate tax or home mortgage deduction on his or her personal income tax 50 returns, such individual shall not be considered a first time home buyer 51 regardless of whether the mobile of manufactured home was considered 52 personal or real property. 53 6. "Ownership interest" shall mean a fee simple interest, a joint 54 tenancy, a tenancy in common, a tenancy by the entirety, the interest of 55 a tenant-share holder in a cooperative, a life estate or a land 56 contract. Interests which do not constitute ownership interests includeS. 6047 3 1 the following: (a) remainder interests, (b) a lease with or without an 2 option to purchase, (c) a mere expectancy to inherit an interest in a 3 residence, (d) the interest that a purchaser of a residence acquires on 4 the execution of a purchase contract and (e) an interest in real estate 5 other than a residence. 6 7. "Program" shall mean the New York first home savings program estab- 7 lished pursuant to this article. 8 8. "Qualified first home purchase expenses" shall mean monies applied 9 for the purchase or construction of a house, townhouse, condominium or 10 unit in a cooperative housing corporation within the state to be used as 11 a primary residence of the account owner or designated beneficiary for a 12 period of not less than two years after purchase. 13 9. "Qualified residential housing" shall mean a house, townhouse, 14 condominium or unit in a cooperative housing corporation within the 15 state. 16 10. "Qualified withdrawal" shall mean a withdrawal from an account to 17 pay the qualified first home purchase expense of the account owner or 18 designated beneficiary of the account. 19 11. "Nonqualified withdrawal" shall mean a withdrawal from an account 20 but shall not include: 21 (a) a qualified withdrawal; 22 (b) a withdrawal made as the result of death; 23 (c) an unforeseeable emergency; or 24 (d) need based upon qualifying for military service in the armed forc- 25 es of the United States as determined by rules an regulations promulgat- 26 ed by the comptroller. 27 12. "Comptroller" shall mean the state comptroller. 28 13. "Management contract" shall mean the contract executed by the 29 comptroller and a financial organization selected to act as a depository 30 and manager of the program. 31 14. "First home savings agreement" shall mean an agreement between the 32 comptroller or a financial organization and the account owner. 33 15. "Program manager" shall mean a financial organization selected by 34 the comptroller to act as a depository and manager of the program. 35 16. "Commissioner" shall mean the commissioner of taxation and 36 finance. 37 § 1253. Functions of the comptroller. 1. The comptroller shall imple- 38 ment the program under the terms and conditions established by this 39 article and a memorandum of understanding with the commissioner relating 40 to any terms or conditions not otherwise expressly provided for in this 41 article. 42 2. In furtherance of such implementation the comptroller shall: 43 (a) develop and implement the program in a manner consistent with the 44 provisions of this article through rules and regulations established in 45 accordance with the state administrative procedure act; 46 (b) engage the services of consultants on a contract basis for render- 47 ing professional and technical assistance and advice; 48 (c) seek rulings and other guidance from the United States Department 49 of Treasury and the Internal Revenue Service relating to the program; 50 (d) make changes to the program required for the participants in the 51 program to obtain the state income tax benefits or treatment provided by 52 this article; 53 (e) charge, impose and collect administrative fees and service charges 54 in connection with any agreement, contract or transaction relating to 55 the program; 56 (f) develop marketing plans and promotion materials;S. 6047 4 1 (g) establish the methods by which the funds held in such accounts be 2 dispersed; 3 (h) establish the method by which funds shall be allocated to pay for 4 administrative costs; and 5 (i) do all things necessary and proper to carry out the purposes of 6 this article. 7 § 1254. Powers of the comptroller. 1. The comptroller may implement 8 the program through use of financial organizations as account deposito- 9 ries and managers. Under the program, an account owner may establish 10 accounts directly with an account depository. 11 2. The comptroller may solicit proposals from financial organizations 12 to act as depositories and managers of the program. Financial organiza- 13 tions submitting proposals shall describe the investment instrument 14 which will be held in accounts. The comptroller shall select as program 15 depositories and managers the financial organization, from among the 16 bidding financial organizations that demonstrates the most advantageous 17 combination, both to potential program participants and this state, of 18 the following factors: 19 (a) financial stability and integrity of the financial organization; 20 (b) the safety of the investment instrument being offered; 21 (c) the ability of the investment instrument to track increasing costs 22 of residential housing; 23 (d) the ability of the financial organization to satisfy recordkeeping 24 and reporting requirements; 25 (e) the financial organization's plan for promoting the program and 26 the investment it is willing to make to promote the program; 27 (f) the fees, if any, proposed to be charged to persons for opening 28 accounts; 29 (g) the minimum initial deposit and minimum contributions that the 30 financial organization will require; 31 (h) the ability of banking organizations to accept electronic with- 32 drawals, including payroll deduction plans; and 33 (i) other benefits to the state or its residents included in the 34 proposal, including fees payable to the state to cover expenses of oper- 35 ation of the program. 36 3. The comptroller may enter into a contract with a financial organ- 37 ization. Such financial organization management may provide one or more 38 types of investment instrument. 39 4. The comptroller may select more than one financial organization for 40 the program. 41 5. A management contract shall include, at a minimum, terms requiring 42 the financial organization to: 43 (a) take any action required to keep the program in compliance with 44 requirements of section twelve hundred fifty-five of this article and 45 any actions not contrary to its contract to manage the program to quali- 46 fy as a "first home savings account" under paragraph forty-three of 47 subsection (c) of section six hundred twelve of the tax law; 48 (b) keep adequate records of each account, keep each account segre- 49 gated from each other account, and provide the comptroller with the 50 information necessary to prepare the statements required by section 51 twelve hundred fifty-five of this article; 52 (c) compile and total information contained in statements required to 53 be prepared under section twelve hundred fifty-five of this article and 54 provide such compilations to the comptroller;S. 6047 5 1 (d) if there is more than one program manager, provide the comptroller 2 with such information necessary to determine compliance with section 3 twelve hundred fifty-five of this article; 4 (e) provide the comptroller or his designee access to the books and 5 records of the program manager to the extent needed to determine compli- 6 ance with the contract; 7 (f) hold all accounts for the benefit of the account owner; 8 (g) be audited at least annually by a firm of certified public 9 accountants selected by the program manager and that the results of such 10 audit be provided to the comptroller; 11 (h) provide the comptroller with copies of all regulatory filings and 12 reports made by it during the term of the management contract or while 13 it is holding any accounts, other than confidential filings or reports 14 that will not become part of the program. The program manager shall make 15 available for review by the comptroller the results of any periodic 16 examination of such manager by any state or federal banking, insurance 17 or securities commission, except to the extent that such report or 18 reports may not be disclosed under applicable law or the rules of such 19 commission; and 20 (i) ensure that any description of the program, whether in writing or 21 through the use of any media, is consistent with the marketing plan as 22 developed pursuant to the provisions of section twelve hundred fifty- 23 three of this article. 24 6. The comptroller may provide that an audit shall be conducted of the 25 operations and financial position of the program depository and manager 26 at any time if the comptroller has any reason to be concerned about the 27 financial position, the recordkeeping practices, or the status of 28 accounts of such program depository and manager. 29 7. During the term of any contract with a program manager, the comp- 30 troller shall conduct an examination of such manager and its handling of 31 accounts. Such examination shall be conducted at least biennially if 32 such manager is not otherwise subject to periodic examination by the 33 superintendent of financial services, the federal deposit insurance 34 corporation or other similar entity. 35 8. (a) If selection of a financial organization as a program manager 36 or depository is not renewed, after the end of its term: 37 (i) accounts previously established and held in investment instruments 38 at such financial organization may be terminated; 39 (ii) additional contributions may be made to such accounts; 40 (iii) no new accounts may be placed with such financial organization; 41 and 42 (iv) existing accounts held by such depository shall remain subject to 43 all oversight and reporting requirements established by the comptroller. 44 (b) If the comptroller terminates a financial organization as a 45 program manager or depository, he or she shall take custody of accounts 46 held by such financial organization and shall seek to promptly transfer 47 such accounts to another financial organization that is selected as a 48 program manager or depository and into investment instruments as similar 49 to the original instruments as possible. 50 9. The comptroller may enter into such contracts as it deems necessary 51 and proper for the implementation of the program. 52 § 1255. Program requirements; first home savings account. 1. First 53 home savings accounts established pursuant to the provisions of this 54 article shall be governed by the provisions of this section. 55 2. A first home savings account may be opened by any person who 56 desires to save money for the payment of the qualified first homeS. 6047 6 1 purchase expenses of the account owner or designated beneficiary. An 2 account owner may designate another person as successor owner of the 3 account in the event of the death of the original account owner. Such 4 person who opens an account or any successor owner shall be considered 5 the account owner. 6 (a) An application for such account shall be in the form prescribed by 7 the program and contain the following: 8 (i) the name, address and social security number or employer identifi- 9 cation number of the account owner; 10 (ii) the designation of a designated beneficiary; 11 (iii) the name, address, and social security number of the designated 12 beneficiary; and 13 (iv) such other information as the program may require. 14 (b) The comptroller and the corporation may establish a nominal fee 15 for such application. 16 3. Any person, including the account owner, may make contributions to 17 the account after the account is opened. 18 4. Contributions to accounts may be made only in cash. 19 5. An account owner may withdraw all or part of the balance from an 20 account as authorized under rules governing the program. Such rules 21 shall include provisions that will generally enable the determination as 22 to whether a withdrawal is a nonqualified withdrawal or a qualified 23 withdrawal. 24 6. (a) An account owner may change the designated beneficiary of an 25 account in accordance with procedures established by the memorandum of 26 understating pursuant to the provisions of section twelve hundred 27 fifty-three of this article. 28 (b) An account owner may transfer all or a portion of an account to 29 another first home savings account. 30 (c) Changes in designated beneficiaries and transfers under this 31 subdivision shall not be permitted to the extent that they would cause 32 all accounts for the same beneficiary to exceed the permitted aggregate 33 maximum account balance. 34 7. The program shall provide separate accounting for each designated 35 beneficiary. 36 8. No account owner or designated beneficiary of any account shall be 37 permitted to direct the investment of any contributions to an account or 38 the earnings thereon more than two times in any calendar year. 39 9. Neither an account owner nor a designated beneficiary may use an 40 interest in an account as security for a loan. Any pledge of an interest 41 in an account shall be of no force and effect. 42 10. The comptroller shall promulgate rules or regulations to prevent 43 contributions on behalf of a designated beneficiary in excess of an 44 amount that would cause the aggregate account balance for all accounts 45 for a designated beneficiary to exceed a maximum account balance, as 46 established from time to time by the comptroller. 47 11. Contributions to a first home savings account shall be limited to 48 one hundred thousand dollars per account. This amount shall not take 49 into consideration any gain or loss to the principal investment into the 50 account. 51 12. In the event that an individual makes a "nonqualified withdrawal" 52 of monies from the first home savings account such individual shall have 53 the entire account taxed, including any interest, as though it was 54 income at the account owner's federal tax rate in the tax years the 55 monies were withdrawn, and incur an additional ten percent state penalty 56 on the amount of earnings. In the event account owners or designatedS. 6047 7 1 beneficiary does not use the qualified residential housing as a primary 2 residence for a period of not less than two years after the purchase of 3 such housing, the account owner shall have the entire account taxed, 4 including any interest, as though it was ordinary income at the account 5 owner's federal tax rate in the tax years the monies were withdrawn and 6 incur an additional ten percent state penalty on the amount of earnings. 7 For purposes of this article, the two year period shall begin at the 8 time title is transferred to the first time home buyer. The penalty 9 shall be in addition to any taxes due pursuant to a non-qualified with- 10 drawal from a first home savings account. 11 13. Penalties may be waived by the commissioner if the individual can 12 show proof that the reason the individual did not use the qualified 13 residential housing as a primary residence for a period of two years or 14 more after the purchase or construction was due to either: 15 (a) an employment relocation outside the state and such relocation 16 required the individual to become a resident of another state; 17 (b) an unforeseeable emergency; 18 (c) an absence due to qualifying military service; or 19 (d) death. 20 For purposes of this subdivision, an "unforeseeable emergency" shall 21 mean a severe financial hardship resulting from illness, accident or 22 property loss to the account owner, or his or her dependents resulting 23 in circumstances beyond their control. The circumstances that constitute 24 an unforeseeable financial emergency will depend on the facts of each 25 case, however, withdrawal of account funds may not be made, without 26 penalty, to the extent that such hardship is or may be relieved by 27 either: 28 (i) reimbursement or compensation by insurance or otherwise; or 29 (ii) liquidation of the individual's assets to the extent the liqui- 30 dation of such assets would not itself cause severe financial hardship. 31 14. The commissioner and the comptroller are directed to promulgate 32 all rules and regulations necessary to implement the provisions of this 33 subsection and are hereby directed to establish, supervise and regulate 34 first home savings accounts authorized to be created by this section. 35 15. (a) If there is any distribution from a first home savings account 36 to any individual or for the benefit of any individual during a calendar 37 year, such distribution shall be reported to the Internal Revenue 38 Service and the account owner, the designated beneficiary, or the 39 distributee to the extent required by federal law or regulation. 40 (b) Statements shall be provided to each account owner at least once 41 each year within sixty days after the end of the twelve month period to 42 which they relate. The statement shall identify the contributions made 43 during a preceding twelve month period, the total contributions made to 44 the account through the end of the period, the value of the account at 45 the end of such period, distributions made during such period and any 46 other information that the comptroller shall require to be reported to 47 the account owner. 48 (c) Statements and information relating to accounts shall be prepared 49 and filed to the extent required by federal and state tax laws. 50 16. An annual fee may be imposed upon the account owner for the main- 51 tenance of the account. 52 17. The program shall disclose the following information in writing to 53 each account owner of a first home savings account: 54 (a) the terms and conditions for establishing a first home savings 55 account; 56 (b) any restrictions on the substitution of beneficiaries;S. 6047 8 1 (c) the person or entity entitled to terminate the first home savings 2 agreement; 3 (d) the period of time during which a beneficiary may receive benefits 4 under the first home savings agreement; 5 (e) the terms and conditions under which money may be wholly or 6 partially withdrawn from the program, including, but not limited to, any 7 reasonable charges and fees that may be imposed for withdrawal; 8 (f) the probable tax consequences associated with contributions to and 9 distributions from accounts; and 10 (g) all other rights and obligations pursuant to first home savings 11 agreements, and any other terms, conditions, and provisions deemed 12 necessary and appropriate by the terms of the memorandum of understand- 13 ing entered into pursuant to section twelve hundred fifty-three of this 14 article. 15 18. First home savings agreements shall be subject to section four- 16 teen-c of the banking law and the "truth-in-savings" regulations promul- 17 gated thereunder. 18 19. Nothing in this article or in any first home savings agreement 19 entered into pursuant to this article shall be construed as a guarantee 20 by the state that the account owner or designated beneficiary will qual- 21 ify for the purchase of a home. 22 20. To establish that an account owner or designated beneficiary is a 23 first time home buyer, the individual shall complete a form promulgated 24 by the comptroller certifying, under the penalties of perjury, that such 25 individual is a first time home buyer. 26 21. An individual must not intend to use any portion of the real prop- 27 erty purchased using the first home savings account funds in a trade or 28 business, or as a vacation home or as an investment, except as an owner 29 occupied multiple dwelling with no more than two rental units. 30 22. Monies withdrawn from first home savings accounts and any interest 31 which has accrued shall not be considered as taxable income to the 32 account owner for state personal income taxation purposes, so long as 33 the monies are applied for the purchase or construction of a qualified 34 first home purchase by the account owner or designated beneficiary of 35 the account. 36 § 1256. Program limitations; first home savings account. 1. Nothing in 37 this article shall be construed to: 38 (a) give any designated beneficiary any rights or legal interest with 39 respect to an account unless the designated beneficiary is the account 40 owner; 41 (b) guarantee that the account owner or designated beneficiary will be 42 financially qualified to purchase a home; 43 (c) create state residency for an individual merely because the indi- 44 vidual is a designated beneficiary; or 45 (d) guarantee that amounts saved pursuant to the program will be 46 sufficient to cover the down payment or closing costs pursuant to the 47 purchase of a qualified first home. 48 2. (a) Nothing in this article shall create or be construed to create 49 any obligation of the comptroller, the state, or any agency or instru- 50 mentality of the state to guarantee for the benefit of the account owner 51 or designated beneficiary with respect to: 52 (i) the rate of interest or other return on any account; and 53 (ii) the payment of interest or other return on any account. 54 (b) The comptroller by rule or regulation shall provide that every 55 contract, application, deposit slip or other similar document that may 56 be used in connection with a contribution to an account clearly indicateS. 6047 9 1 that the account is not insured by the state and neither the principal 2 deposited nor the investment return is guaranteed by the state. 3 § 2. Subsection (b) of section 612 of the tax law is amended by adding 4 a new paragraph 42 to read as follows: 5 (42) (A) Excess distributions received during the taxable year by a 6 distributee of a first home savings account established under the New 7 York state first home savings program provided for under article twen- 8 ty-eight of the private housing finance law, to the extent such excess 9 distributions are deemed attributable to the deductible contributions 10 under paragraph forty-three of subsection (c) of this section. 11 (B) (i) The term "excess distributions" means distributions which are 12 not: 13 (I) qualified withdrawals within the meaning of subdivision ten of 14 section twelve hundred fifty-two of the private housing finance law; 15 (II) withdrawals made as a result of the death or disability of the 16 designated beneficiary within the meaning of subdivision eleven of 17 section twelve hundred fifty-two of such law; or 18 (III) transfers described in paragraph (b) of subdivision six of 19 section twelve hundred fifty-five of such law. 20 (ii) Excess distributions shall be deemed attributable to deductible 21 contributions to the extent the amount of any such excess distribution, 22 when added to all previous excess distributions from the account, 23 exceeds the aggregate of all nondeductible contributions to the account. 24 § 3. Subsection (c) of section 612 of the tax law is amended by adding 25 two new paragraphs 43 and 44 to read as follows: 26 (43) Contributions made during the taxable year by an account owner to 27 a first home savings account established under the New York state first 28 home savings program provided for under article twenty-eight of the 29 private housing finance law, to the extent not deductible or eligible 30 for credit for federal income tax purposes, provided, however, the 31 exclusion provided for in this paragraph shall not exceed five thousand 32 dollars for an individual or head of household, and for married couples 33 who file joint tax returns, shall not exceed ten thousand dollars; 34 provided, further that such exclusion shall be available only to the 35 account owner and not to any other person. 36 (44) Distributions from a first home savings account established under 37 the New York state first home savings program provided for under article 38 twenty-eight of the private housing finance law, to the extent includi- 39 ble in gross income for federal income tax purposes. 40 § 4. This act shall take effect on the one hundred eightieth day after 41 it shall have become a law, and shall apply to taxable years commencing 42 on or after the first of January next succeeding the date on which it 43 shall have become law; provided, however, that effective immediately, 44 the commissioner of taxation and finance and the comptroller are author- 45 ized and directed to promulgate any rules or regulations necessary to 46 implement the provisions of this act on its effective date on or before 47 such date.
