Amended in Senate May 2, 2016

Senate Bill No. 1149

Introduced by Senator Stone

February 18, 2016

An act to add Sections 17141.7 and 17205 to the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.

LEGISLATIVE COUNSEL’S DIGEST

SB 1149, as amended, Stone. Personal income taxes: deduction: individual home ownership 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 exceeds 2% of adjusted gross income.

This bill, on and after January 1, 2017, would allow a begin delete deduction, not to exceed specified amounts, of the amount contributed in any taxable year to an individual home ownership savings account, and end delete begin insert deduction in an amount equal to the amount of rent, not to exceed $18,000, paid during the taxable year by a qualified taxpayer, as defined, provided that the qualified taxpayer deposits the qualified amount, as defined, into a home ownership savings account, as defined. The bill end insert would exclude from gross income any income begin delete earned on the moneys contributed to an individual end delete begin insert accrued during the taxable year to a end insert home ownership savings account. The bill would provide that a qualified taxpayer may withdraw amounts from begin delete an individual end delete begin insert a end insert home ownership savings account to pay for begin delete qualified individual home ownership savings expenses, end delete begin insert the downpayment of a principal residence, end insert as defined, and would provide that any amount withdrawn from that account that is not used for begin delete these expenses end delete begin insert that purpose end insert would be included as income for that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 17141.7 is added to the Revenue and
Taxation Code, to read:

17141.7.  

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 begin delete an individual end delete begin insert a end insert home ownership savings account,
as defined in Section 17205.

SEC. 2.  

Section 17205 is added to the Revenue and Taxation
Code, to read:

begin delete

17205.  

(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 an individual home ownership 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) Thirty thousand dollars ($30,000) for a qualified taxpayer
who is married filing a joint return, head of household, and
surviving spouses, as defined in Section 17046.

(2) Fifteen thousand dollars ($15,000) in the case of a qualified
taxpayer filing a return other than as described in paragraph (1).

end delete

begin insert

begin insert 17205. end insert   

end insert begin insert

(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 of rent, not to exceed eighteen thousand dollars
($18,000), paid during the taxable year by a qualified taxpayer
provided that the qualified taxpayer deposits the qualified amount
into a home ownership savings account.

end insert begin delete

(c)

end delete

begin insert (b) end insert  Any amount withdrawn from begin delete an individual end delete begin insert a end insert home
ownership 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 begin delete individual home ownership savings expenses of end delete
begin insert downpayment of end insert begin insert a principal residence end insert begin insert by end insert a qualified taxpayer who
established the account.

begin delete

(d)

end delete

begin insert (c) end insert  For purposes of this section:

(1)  begin delete “Individual home end delete begin insert “Home end insert ownership savings account” means
a trust that meets all of the following requirements:

(A) Is designated as begin delete an individual end delete begin insert a end insert home ownership 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 begin insert of the qualified amount end insert 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 begin delete the qualified
individual home ownership savings expenses of end delete begin insert the downpayment
of a principal residence end insert begin insert by end insert a qualified taxpayer establishing the
account.

begin insert

(iii) The account shall be closed and any remaining balance
distributed to the qualified taxpayer after the qualified taxpayer
withdraws money from the home ownership savings account for
the down payment of a principal residence.

end insert

(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 begin delete Code, end delete begin insert Code end insert and any regulations adopted thereunder. begin insert If
a qualified taxpayer uses the money in the home ownership savings
account for the downpayment of a principal residence, no
additional tax shall be imposed in accordance with Section 72(t)
of the Internal Revenue Code, relating to 10-percent additional
tax on early distributions from qualified retirement plans, and
Section 219 of the Internal Revenue Code, relating to individual
retirement savings, shall not apply. Any age limitations that apply
to an individual retirement account established under Section 408
of the Internal Revenue Code, relating to individual retirement
plans, shall not apply to a home ownership savings account. end insert

(D) Is the only begin delete individual end delete home ownership savings account begin insert ever end insert
established by the qualified taxpayer.

begin delete

(2) “Qualified individual home ownership development
expenses” means expenses, including a downpayment or mortgage
payment, 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 individual home ownership
savings account.

end delete begin insert

(2) “Principal residence” has the same meaning as within
Section 121 of the Internal Revenue Code relating to exclusion of
gain from sale of principal residence.

end insert begin insert

(3) “Qualified amount” means the marginal tax rate applicable
to the qualified taxpayer multiplied by the amount of rent, not to
exceed eighteen thousand dollars ($18,000), paid during the
taxable year by the qualified taxpayer.

end insert begin delete

(3)

end delete

begin insert (4) end insert  (A) “Qualified taxpayer” means begin delete any individual, or
individual’s spouse, end delete begin insert a taxpayer who qualifies under clause (i) or
(ii) and end insert who had no present ownership interest in a principal
residence during the preceding three-year period ending on the
date of the purchase of the principal begin delete residence subject to the
contribution allowed by this section. end delete begin insert residence. end insert A qualified
taxpayer’s begin insert adjusted end insert gross income per taxable year shall not exceed
the following amounts:

begin delete

(1)

end delete

begin insert (i) end insert  One hundred thousand dollars ($100,000) for a qualified
taxpayer begin delete who is married end delete filing a joint return, head of household,
or a surviving spouse, as defined in Section 17046.

begin delete

(2)

end delete

begin insert (ii) end insert  Fifty thousand dollars ($50,000) for a qualified taxpayer
filing a return other than as described in begin delete paragraph (1). end delete begin insert clause (i). end insert

(B) For each taxable year beginning on or after January 1, begin delete 2017, end delete
begin insert 2018, end insert the Franchise Tax Board shall recompute the begin insert adjusted end insert gross
income amounts described in paragraph (A) in the same manner
as prescribed in subdivision (h) of Section 17041.

begin delete

(4)

end delete

begin insert (5) end insert  “Trustee” shall have the same meaning as it does under
Section 408 of the Internal Revenue begin delete Code end delete begin insert Code, end insert 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 Constitution and shall go into immediate effect.