Illinois General Assembly - Full Text of SB3497
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Full Text of SB3497  103rd General Assembly

SB3497 103RD GENERAL ASSEMBLY

 


 
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

 

SB3497LRB103 38134 RTM 68266 b

1    AN ACT concerning regulation.
 
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
5Illinois Home Buyer Savings Accounts Act.
 
6    Section 5. Findings and purpose.
7    (a) The General Assembly finds that:
8        (1) The American Dream has always been closely
9    associated with owning your own home.
10        (2) It is becoming more and more difficult to achieve
11    the goal of homeownership in Illinois and throughout the
12    country.
13        (3) Homeownership provides more than a dream to an
14    individual person or family. An increase in homeownership
15    rates in Illinois has a direct positive impact on the
16    quality of our communities, our schools, our economy, and
17    public safety.
18    (b) The purpose of this Act is to:
19        (1) Make it easier for those in Illinois to achieve
20    their goal of homeownership for the first time.
21        (2) Provide a tax incentivized savings account for
22    qualified first-time and certain second-chance home
23    buyers, which, in turn, can be used toward a down payment

 

 

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1    or certain eligible closing costs for the purchase of a
2    home in Illinois.
 
3    Section 10. Definitions. As used in this Act:
4    "Account holder" means a first-time and second-chance home
5buyer who establishes, individually or jointly with another
6first-time and second-chance home buyer, a first-time and
7second-chance home buyer savings account.
8    "Allowable closing costs" means a disbursement listed on a
9settlement statement for the purchase of a single-family
10residence in Illinois by a first-time and second-chance home
11buyer.
12    "Department" means the Department of Revenue.
13    "Eligible costs" means the down payment and allowable
14closing costs for the purchase of a single-family residence in
15Illinois by a first-time and second-chance home buyer.
16"Eligible costs" does not include any costs incurred prior to
17the establishment of a first-time and second-chance home buyer
18savings account.
19    "Financial institution" means any bank, savings
20institution, industrial loan association, credit union, or
21other similar entity authorized to do business and accept
22deposits in Illinois.
23    "First-time and second-chance home buyer" means an
24individual who resides in Illinois and has not owned or
25purchased, either individually or jointly, a single-family

 

 

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1residence during a period of 10 years prior to the date of the
2purchase of a single-family residence.
3    "First-time and second-chance home buyer savings account
4or account" means an account with a financial institution
5created for the purpose of payment or reimbursement of
6eligible costs for the purchase of a single-family residence
7in Illinois by a first-time and second-chance home buyer and
8designated by the financial institution upon its creation as a
9first-time and second-chance home buyer savings account.
10    "Settlement statement" means the statement of receipts and
11disbursements for a transaction related to real estate,
12including a statement prescribed under the federal Real Estate
13Settlement Procedures Act of 1974 and regulations under that
14Act.
15    "Single-family residence" means a single-family residence
16owned and occupied by a first-time and second-chance home
17buyer as the first-time and second-chance home buyer's
18principal residence. "Single-family residence" includes, but
19is not limited to, a manufactured home, a trailer, a mobile
20home, a condominium unit, or a cooperative.
 
21    Section 15. Establishment of a first-time and
22second-chance home buyer savings account. After the effective
23date of this Act, a first-time and second-chance home buyer
24may open an account with a financial institution designated in
25its entirety by the financial institution as a first-time and

 

 

SB3497- 4 -LRB103 38134 RTM 68266 b

1second-chance home buyer savings account.
 
2    Section 20. Use of a first-time and second-chance home
3buyer savings account.
4    (a) Funds from a first-time and second-chance home buyer
5savings account may be used only to pay a first-time and
6second-chance home buyer's eligible costs for the purchase of
7a single-family residence in Illinois.
8    (b) A first-time and second-chance home buyer may jointly
9own a first-time and second-chance home buyer savings account
10with another first-time and second-chance home buyer if the
11joint account holders file a joint income tax return.
12    (c) Only cash and marketable securities may be contributed
13to a first-time and second-chance home buyer savings account.
14Subject to the limitations described in Section 35, persons
15other than the account holder may contribute funds to a
16first-time and second-chance home buyer savings account. There
17is no limitation on the amount of contributions that may be
18made to or retained in a first-time and second-chance home
19buyer savings account.
 
20    Section 25. Account holder responsibilities.
21    (a) The account holder shall do all the following:
22        (1) not use funds held in a first-time and
23    second-chance home buyer savings account to pay expenses
24    of administering the account, except that a service or

 

 

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1    other account fee may be deducted from the account by the
2    financial institution in which the account is held;
3        (2) submit the following to the Department with the
4    account holder's Illinois income tax return:
5            (A) detailed information, in a form prescribed by
6        the Department, regarding the first-time and
7        second-chance home buyer savings account, including a
8        list of transactions for the account during the tax
9        year; and
10            (B) the Form 1099 issued by the financial
11        institution for the account;
12        (3) submit to the Department, upon a withdrawal of
13    funds from a first-time and second-chance home buyer
14    savings account, a detailed account of the eligible costs
15    toward which the account funds were applied and a
16    statement of the amount of funds remaining in the account,
17    if any. If upon withdrawal of funds from the first-time
18    and second-chance home buyer savings account, the account
19    holder fails to provide the Department with the detailed
20    account of the eligible costs towards which the account
21    funds were applied, then the entire account's funds,
22    including the interest and other income on principal,
23    shall be subject to the penalties described in Section 40.
24    (b) Failure to submit the documentation required under
25subsection (a) on an annual basis with the filing of the
26Illinois income tax return shall result in the automatic

 

 

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1denial of the deduction and exclusion.
 
2    Section 30. Responsibilities of financial institutions.
3    (a) A financial institution shall be required to:
4        (1) create a new account for the first-time and
5    second-chance home buyer and designate the account as a
6    "first-time and second-chance home buyer's savings
7    account" on records and transactional statements related
8    to the account; and
9        (2) provide the account holder with a detailed account
10    statement relating to the first-time and second-chance
11    home buyer's savings account on a yearly basis.
12    (b) A financial institution is not required to:
13        (1) track the use of money withdrawn from a first-time
14    and second-chance home buyer savings account;
15        (2) allocate funds in a first-time and second-chance
16    home buyer savings account between joint account holders;
17    and
18        (3) report any information not otherwise required by
19    law to the Department or any other governmental agency.
20    (c) A financial institution is not responsible or liable
21for:
22        (1) determining or ensuring that an account satisfies
23    the requirements to be a first-time and second-chance home
24    buyer savings account;
25        (2) determining or ensuring that funds in a first-time

 

 

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1    and second-chance home buyer savings account are used for
2    eligible costs; or
3        (3) reporting or remitting taxes or penalties related
4    to the use of a first-time and second-chance home buyer
5    savings account.
6    (d) Upon being furnished proof of the death of the account
7holder and any other information related to the death required
8by the financial institution or contract governing the
9first-time and second-chance home buyer savings account, a
10financial institution shall distribute the principal and
11accumulated interest or other income in the account in
12accordance with the terms of the contract governing the
13account or as otherwise required by law.
 
14    Section 35. Deduction of contributions, exclusion of
15earnings, and limitations.
16    (a) Except as otherwise provided in this Act and subject
17to the limitations under this section, a first-time and
18second-chance home buyer savings account holder shall be
19entitled to a state tax deduction, subject to the limitations
20of this Section, not to exceed $5,000 for an account holder who
21files an individual tax return or $10,000 for joint account
22holders who file a joint tax return, for contributions made by
23the account holder to a first-time and second-chance home
24buyer savings account during the tax year in which the
25deduction is claimed.

 

 

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1    (b) Except as otherwise provided in this Act and subject
2to the limitations under this Section, earnings from the
3first-time and second-chance home buyer savings account,
4including interest and other income on the principal, shall be
5excluded from taxable income of an account holder for Illinois
6income tax purposes during the tax year.
7    (c) An account holder may claim the deduction and
8exclusion under this Section as follows:
9        (1) for a period not to exceed 10 years;
10        (2) for an aggregate total amount of principal and
11    earnings not to exceed $25,000 for individual accounts and
12    $50,000 for joint accounts during the 10-year period;
13        (3) only if the principal and earnings of the account
14    remain in the account until a withdrawal is made for
15    eligible costs related to the purchase of a single-family
16    residence by a first-time and second-chance home buyer.
17    (d) A person other than the account holder who deposits
18funds in a first-time and second-chance home buyer savings
19account shall not be entitled to the deduction and exclusion
20provided under this Act.
21    (e) The deduction and exclusion from taxable income
22provided by this Act shall apply to any alternative basis for
23calculating taxable income for Illinois income tax purposes.
24    (f) The funds in the first-time and second-chance home
25buyer savings account shall not be used to purchase a
26single-family residence outside of this State.
 

 

 

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1    Section 40. Penalty for withdrawal for purpose other than
2eligible costs. Except as otherwise provided in this Section,
3if the account holder withdraws any funds from a first-time
4and second-chance home buyer savings account for a purpose
5other than eligible costs for the purchase of a single-family
6residence in this State, all of the following shall apply:
7        (1) The entire balance of the fund, including interest
8    and other income on principal, shall be included in the
9    account holder's taxable income for the tax year in which
10    the withdrawal was made.
11        (2) The account holder shall pay a penalty to the
12    Department equal to 10% of the amount withdrawn. The
13    penalty shall not apply to funds withdrawn from an account
14    which were:
15            (A) withdrawn by reason of the account holder's
16        death or disability or due to unemployment after the
17        account holder has exhausted his or her applicable
18        unemployment compensation benefits; or
19            (B) a disbursement of assets of the account
20        pursuant to a filing for protection under the United
21        States Bankruptcy Code.
22    (c) Subsections (a) and (b) do not apply to funds
23withdrawn or distributed from a first-time and second-chance
24home buyer savings account that within 60 days of their
25withdrawal or distribution are deposited in full into another

 

 

SB3497- 10 -LRB103 38134 RTM 68266 b

1first-time and second-chance home buyer savings account. This
2subdivision shall apply both to transfers between any
3qualifying first-time and second-chance home buyer savings
4accounts whether such transfers are to or from qualifying
5individual or joint accounts.
 
6    Section 45. Department of revenue; forms. The Department
7shall adopt forms for the following:
8    (a) The designation of an account with a financial
9institution to serve as a first-time and second-chance home
10buyer savings account.
11    (b) An account holder to annually submit to the Department
12detailed information regarding the first-time and
13second-chance home buyer savings account, including, but not
14limited to, a list of transactions for the account during the
15tax year and identifying any supporting documentation required
16to be maintained by the account holder.
 
17    Section 50. Annual report. The Department shall submit an
18annual report to the General Assembly no later than March 31 of
19each calendar year with the first annual report due no later
20than March 31, 2025, in which the Department shall include the
21total annual number of deductions claimed and total amount of
22deposits deducted pursuant to this Act, the number of
23taxpayers who submitted an account to the Department pursuant
24to paragraph (3) of subsection (a)(3) of Section 25, and the

 

 

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1number of taxpayers who were subjected to the penalty
2provisions of Section 40.