Amended in Assembly April 21, 2016

Amended in Assembly March 10, 2016

California Legislature—2015–16 Regular Session

Assembly Bill No. 1736

Introduced by Assembly Member Steinorth

(Coauthors: Assembly Members Achadjian, Travis Allen, Baker, Brough, Brown, Chang, Dahle, Beth Gaines, Gallagher, Hadley, Harper, Jones, Kim, Lackey, Low, Maienschein, Mathis, Mayes, Obernolte, Olsen, Patterson, and Waldron)

(Coauthors: Senators Anderson, Cannella, Fuller, Glazer, Morrell, Nguyen, Runner, and Vidak)

February 1, 2016

An act to add Sections 17141.5 and 17204.5 to the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.

LEGISLATIVE COUNSEL’S DIGEST

AB 1736, as amended, Steinorth. Personal income taxes: deduction: homeownership savings accounts.

The Personal Income Tax Law, in modified conformity with federal income tax laws allows various exclusions from gross income, and allows various deductions in computing the income that is subject to the taxes imposed by that law, including miscellaneous itemized deductions that are allowed only to the extent that the aggregate amount of those deductions exceed 2% of adjusted gross income.

This bill, on and after January 1, 2017, would allow a deduction, not to exceed specified amounts, of the amount contributed in any taxable year to a homeownership savings account, and, would exclude from gross income any income earned on the moneys contributed to a homeownership savings account. The bill would provide that a qualified taxpayer may withdraw amounts from a homeownership savings account to pay for qualified homeownership savings expenses, as defined, and would provide that any amount withdrawn from that account that is not used for these expenses would be included as income for that taxpayer. The bill would define various terms for its purposes.

This bill would take effect immediately as a tax levy.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 17141.5 is added to the Revenue and
Taxation Code, to read:

17141.5.  

For each taxable year beginning on or after January
1, 2017, gross income does not include, under the same conditions
as provided in Section 408 of the Internal Revenue Code, relating
to individual retirement accounts, any income accruing during the
taxable year to a homeownership savings account as defined in
Section 17204.5.

SEC. 2.  

Section 17204.5 is added to the Revenue and Taxation
Code, to read:

17204.5.  

(a) For each taxable year beginning on or after
January 1, 2017, there shall be allowed as a deduction an amount
equal to the amount contributed by a qualified taxpayer during the
taxable year to a homeownership savings account, not to exceed
the amounts specified in subdivision (b).

(b) The deduction allowed under subdivision (a) shall not exceed
the following amounts:

(1) Twenty thousand dollars ($20,000) for qualified taxpayers
who are married filing a joint return, a head of household, and
surviving spouses, as defined in Section 17046.

(2) Ten thousand dollars ($10,000) in the case of a qualified
taxpayer filing a return other than as described in paragraph (1).

(c) Any amount withdrawn from a homeownership savings
account shall be included in the income of the payee or distributee
for the taxable year in which the payment or distribution is made,
unless the payment or distribution is used to pay for the
homeownership savings expenses of a qualified taxpayer who
established the account.

(d) For purposes of this section:

(1) “Homeownership savings account” means a trust that meets
all of the following requirements:

(A) Is designated as a homeownership savings account by the
trustee.

(B) Is established for the exclusive benefit of any qualified
taxpayer establishing the account where the written governing
instrument creating the account provides for the following:

(i) All contributions to the account are required to be in cash.

(ii) The account is established to pay, pursuant to the
requirements and limitations of this section, for the qualified
homeownership savings expenses of a qualified taxpayer
establishing the account.

(C) Is, except as otherwise required or authorized by this section,
subject to the same requirements and limitations as an individual
retirement account established under Section 408 of the Internal
Revenue Code, relating to individual retirement accounts, and any
regulations adopted thereunder.

(D) Is the only homeownership savings account established by
the qualified taxpayer.

begin insert

(E) Is established by a qualified taxpayer who has a gross
income of 80 percent or less than the area median income.

end insert

(2) “Qualified homeownership development expenses” means
expenses, including a begin delete down payment end delete begin insert downpayment end insert or closing
costs, paid or incurred in connection with the purchase of a
qualified taxpayer’s principal residence in California for use by
that taxpayer who established the homeownership savings account.

(3) “Qualified taxpayer” means any individual, or individual’s
spouse, who begin delete had no present ownership interest in a principal
residence during the preceding three-year period ending on the
date of the purchase of the end delete begin insert has never had an ownership interest in
a end insert principal residence subject to the contribution allowed by this
section.

(4) “Trustee” shall have the same meaning as those terms have
under Section 408 of the Internal Revenue Code, relating to
individual retirement accounts, and any regulations adopted
thereunder.

SEC. 3.  

This act provides for a tax levy within the meaning of
Article IV of the begin insert California end insert Constitution and shall go into
immediate effect.