July 12, 2017, Introduced by Senators MACGREGOR, SCHMIDT, HORN, PROOS, MARLEAU, ZORN, GREGORY, CONYERS, HANSEN and BRANDENBURG and referred to the Committee on Finance.
A bill to create the Michigan first-time home buyer savings
program; to provide for first-time home buyer savings accounts; to
prescribe the powers and duties of certain state agencies, boards,
and departments; to allow certain tax deductions; and to provide
for penalties and remedies.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 1. This act shall be known and may be cited as the
"Michigan first-time home buyer savings program act".
Sec. 3. As used in this act:
(a) "Account holder" means an individual who establishes,
individually or jointly with 1 or more other individuals, an
account with a financial institution for which the account holder
claims a first-time home buyer savings account status on his or her
income tax return.
(b) "Allowable closing costs" means a disbursement listed on a
settlement statement for the purchase of a single-family residence
in this state by a qualified beneficiary.
(c) "Department" means the department of treasury.
(d) "Eligible costs" means the down payment and allowable
closing costs for the purchase of a single-family residence in this
state by a qualified beneficiary.
(e) "Financial institution" means any bank, trust company,
savings institution, industrial loan association, consumer finance
company, credit union, or any benefit association, insurance
company, safe deposit company, money market mutual fund, or similar
entity authorized to do business in this state.
(f) "First-time home buyer" means an individual who is a
resident of this state and has not owned or purchased, either
individually or jointly, a single-family residence during a period
of 3 years prior to the date of the purchase of a single-family
residence.
(g) "First-time home buyer savings account" or "account" means
an account with a financial institution that an account holder
designates as a first-time home buyer savings account status on his
or her income tax return pursuant to this act for the purpose of
paying or reimbursing eligible costs for the purchase of a single-
family residence in this state by a qualified beneficiary.
(h) "Principal residence" means that term as defined in
section 7dd of the general property tax act, 1893 PA 206, MCL
211.7dd.
(i) "Program" means the first-time home buyer savings program
established pursuant to this act.
(j) "Qualified beneficiary" means a first-time home buyer who
is designated as the beneficiary of an account designated by the
account holder as a first-time home buyer savings account.
(k) "Qualified withdrawal" means a withdrawal from an account
that is not subject to a penalty under this act or taxation under
the income tax act of 1967, 1967 PA 281, MCL 206.1 to 206.713, and
that meets any of the following:
(i) A withdrawal from an account to pay the eligible costs of
the qualified beneficiary incurred after the account is
established.
(ii) A withdrawal made as the result of the death or
disability of the qualified beneficiary of an account.
(l) "Settlement statement" means the statement of receipts and
disbursements for a transaction related to real estate, including a
statement prescribed under the real estate settlement procedures
act of 1974 (RESPA), 12 USC 2601 to 2617, or an executed sales
agreement for the purchase of a manufactured home being conveyed as
personal property.
(m) "Single-family residence" means a single-family residence
owned and occupied by a qualified beneficiary as the qualified
beneficiary's principal residence. Single-family residence includes
a manufactured home, trailer, mobile home, condominium unit, or
cooperative.
(n) "Treasurer" means the state treasurer.
Sec. 5. (1) The first-time home buyer savings program is
established in the department. The purposes, powers, and duties of
the first-time home buyer savings program are vested in and shall
be exercised by the treasurer or the designee of the treasurer.
(2) Beginning January 1, 2018, 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 this state. An account
holder shall designate a first-time home buyer as the qualified
beneficiary of the first-time home buyer savings account. The
account holder may designate himself or herself as the qualified
beneficiary and may change the designated qualified beneficiary at
any time, but there may not be more than 1 qualified beneficiary at
any 1 time.
(3) An individual may jointly own a first-time home buyer
savings account with another person if the joint account holders
file a joint return under part 1 of the income tax act of 1967,
1967 PA 281, MCL 206.1 to 206.532. An individual may be the account
holder of more than 1 first-time home buyer savings account.
However, an account holder cannot have multiple accounts that
designate the same qualified beneficiary. An individual may be
designated as the qualified beneficiary on more than 1 first-time
home buyer savings account.
(4) Only cash and marketable securities may be contributed to
a first-time home buyer savings account. Subject to the limitation
under section 11, persons other than the account holder may make
contributions to a first-time home buyer savings account.
Sec. 7. (1) The account holder is responsible for the use or
application of funds in a first-time home buyer savings account.
The account holder shall not use funds held in an account to pay
expenses of administering the account, except that a service fee
may be deducted from the account by a financial institution in
which the account is held. An account holder may withdraw funds, in
whole or in part, from a first-time home buyer savings account and
deposit the funds in a new first-time home buyer savings account
held by a different financial institution or the same financial
institution.
(2) An account holder shall submit, with the account holder's
income tax return filed under part 1 of the income tax act of 1967,
1967 PA 281, MCL 206.1 to 206.532, all of the following to the
department, on forms prescribed by the department:
(a) Detailed information regarding the first-time home buyer
savings account, including a list of transactions for the account
during the tax year.
(b) The Form 1099 issued by the financial institution for the
account.
(c) Upon a withdrawal of funds from a first-time 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.
(3) The treasurer may promulgate rules to implement the
program in accordance with the administrative procedures act of
1969, 1969 PA 306, MCL 24.201 to 24.328. The rules shall not apply
to, or impose administrative, reporting, or other obligations or
requirements on, financial institutions-related accounts for first-
time home buyer savings accounts.
(4) The department shall prepare the following forms for each
of the following to be filed with an income tax return filed under
part 1 of the income tax act of 1967, 1967 PA 281, MCL 206.1 to
206.532, as required under subsection (2):
(a) The designation of an account with a financial institution
to serve as a first-time home buyer savings account.
(b) The designation of a qualified beneficiary of a first-time
home buyer savings account.
(c) To annually submit to the department detailed information
regarding the first-time 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 that is
required to be maintained by the account holder.
(5) The department may prepare and distribute informational
materials on the Michigan first-time home buyer savings program to
financial institutions and potential home buyers to publicize the
availability of the program.
Sec. 9. (1) A financial institution is not required to do any
of the following:
(a) Designate an account as a first-time home buyer savings
account, or designate the qualified beneficiaries of an account, in
the financial institution's account contracts or systems or in any
other way.
(b) Track the use of money withdrawn from a first-time home
buyer savings account.
(c) Allocate funds in a first-time home buyer savings account
among joint account holders or multiple qualified beneficiaries.
(d) Report any information to the department that is not
otherwise required by law.
(2) A financial institution is not responsible or liable for
any of the following:
(a) Determining or ensuring that an account satisfies the
requirements to be a first-time home buyer savings account.
(b) Determining or ensuring that funds in a first-time home
buyer savings account are used for eligible cost.
(c) Reporting or remitting taxes or penalties related to the
use of a first-time home buyer savings account.
(3) Upon being furnished proof of the death of the account
holder and any other information required by the contract governing
the first-time 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.
Sec. 11. (1) The maximum account balance limit for a first-
time home buyer savings account shall not exceed a maximum of
$100,000.00. Accounts may continue to accrue earnings if the total
balance has reached the maximum account balance limit and shall not
be considered to have exceeded the maximum account balance limit
under this subsection.
(2) Contributions to and interest earned on a first-time home
buyer savings account are exempt from taxation as provided in
section 30 of the income tax act of 1967, 1967 PA 281, MCL 206.30.
(3) Qualified withdrawals made from first-time home buyer
savings accounts are exempt from taxation as provided in section 30
of the income tax act of 1967, 1967 PA 281, MCL 206.30.
Sec. 13. (1) 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. The penalty shall be paid to the department.
(2) The penalty does not apply if the funds withdrawn satisfy
any of the following:
(a) Withdrawn by reason of the qualified beneficiary's death
or disability.
(b) A disbursement of assets of the account pursuant to a
filing for protection under the United States bankruptcy code, 11
USC 101 to 1330.
(c) Transferred from an account established pursuant to this
act into another account established pursuant to this act for the
benefit of another qualified beneficiary as provided in section 7.
Enacting section 1. This act does not take effect unless
Senate Bill No. 512 of
the 99th Legislature is enacted into law.