Amended in Senate June 1, 2016

Amended in Senate May 2, 2016

Senate Bill No. 1149

Introduced by Senator Stone

February 18, 2016

An act to add begin delete Sections 17141.7 and 17205 to end delete begin insert and repeal Section 17059 of end insert 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: begin delete deduction: individual home ownership savings accounts. end delete begin insert credit: principal residence. end insert

The Personal Income Tax begin delete 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. end delete begin insert Law allows various credits against the taxes imposed by that law. end insert

begin delete

This bill, on and after January 1, 2017, would allow a 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 would exclude from gross income any income accrued during the taxable year to a home ownership savings account. The bill would provide that a qualified taxpayer may withdraw amounts from a home ownership savings account to pay for the downpayment of a principal residence, as defined, and would provide that any amount withdrawn from that account that is not used for that purpose would be included as income for that taxpayer. The bill would define various terms for its purposes.

end delete begin insert

This bill would, for a qualified principal residence, as defined, that is purchased after January 1, 2017, and before January 1, 2020, allow a credit against those taxes in an amount equal to the lesser of 5% of the purchase price or $10,000 to qualified first-time homebuyers, as defined. This bill would require the credit to be applied in equal amounts over 3 successive taxable years and would limit the total amount of the credit that may be allowed to $100,000,000.

end insert

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:

begin insert

begin insert SECTION 1. end insert   

end insert

begin insert Section 17059 is added to the end insert begin insert Revenue and
Taxation Code end insert begin insert , to read: end insert

begin insert

begin insert 17059. end insert   

(a) (1) In the case of any qualified first-time
homebuyer who purchases a qualified principal residence on and
after January 1, 2017, and before January 1, 2020, there shall be
allowed as a credit against the “net tax,” as defined in Section
17039, an amount equal to the lesser of 5 percent of the purchase
price of the qualified principal residence or ten thousand dollars
($10,000).

(2) The amount of any credit allowed under paragraph (1) shall
be applied in equal amounts over the three successive taxable
years beginning with the taxable year in which the purchase of
the qualified principal residence is made.

(3) The credit under this section shall be allowed for the
purchase of only one qualified principal residence with respect to
any qualified first-time homebuyer.

(b) For purposes of this section:

(1) “Qualified first-time homebuyer” means any individual, or
the individual’s spouse, 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 qualified principal
residence. A qualified first-time homebuyer’s adjusted gross income
during that period shall not exceed the following amounts:

(A) One hundred thousand dollars ($100,000) for a qualified
taxpayer filing a joint return, head of household, or a surviving
spouse, as defined in Section 17046.

(B) Fifty thousand dollars ($50,000) for a qualified taxpayer
filing a return other than as described in subparagraph (A).

(2) “Qualified principal residence” means a single-family
residence, whether detached or attached, that has never been
occupied, that is purchased to be the principal residence of the
taxpayer for a minimum of two years and is eligible for the
homeowner’s exemption under Section 218.

(c) (1) No credit shall be allowed under this section unless the
qualified first-time homebuyer submits with his or her tax return
a certification by the seller of the qualified principal residence
that the residence has never been previously occupied. The seller
shall provide the certification to the qualified first-time homebuyer
and to the Franchise Tax Board within one week of the sale of the
qualified principal residence.

(2) If the qualified first-time homebuyer does not occupy the
qualified principal residence as his or her principal residence for
at least two years immediately following the purchase the credit
shall be canceled, and the qualified first-time homebuyer shall be
liable for any credit allowed under this section on previous tax
returns.

(3) A credit shall not be allowed under this section unless the
qualified first-time homebuyer submits a certification that he or
she is a first-time homebuyer.

(d) (1) In the case of two married qualified first-time
homebuyers filing separately, the credit allowed under subdivision
(a) shall be equally apportioned between the two qualified
first-time homebuyers.

(2) If two or more qualified first-time homebuyers who are not
married purchase a qualified principal residence, the amount of
the credit allowed under subdivision (a) shall be allocated among
them in the same manner as each qualified first-time homebuyer’s
percentage of ownership, except that the total amount of the credits
allowed to all of these qualified first-time homebuyers shall not
exceed ten thousand dollars ($10,000).

(e) The total amount of credit that may be allowed pursuant to
this section shall not exceed one hundred million dollars
($100,000,000).

(f) The qualified first-time homebuyer shall claim the credit on
a timely filed original return.

(g) (1) Upon receipt of the certification from the qualified
first-time homebuyer, as described in paragraph (1) of subdivision
(c), the Franchise Tax Board shall allocate the credit to the
qualified first-time homebuyer on a first-come-first-served basis.

(2) If the certifications of two or more qualified first-time
homebuyers are received on the same day and the remaining
amount of credit to be allocated is insufficient to be allocated fully
to each, the credit shall be allocated to those qualified first-time
homebuyers on a pro rata basis.

(3) The date a certification is received shall be determined by
the Franchise Tax Board. The determinations of the Franchise
Tax Board with respect to the date a certification is received, and
whether a return has been timely filed for purposes of this
subdivision, may not be reviewed in any administrative or judicial
proceeding.

(4) Any disallowance of a credit claimed due to a determination
under this section, including the application of the limitation
specified in paragraph (2), shall be treated as a mathematical
error appearing on the return. Any amount of tax resulting from
that disallowance may be assessed by the Franchise Tax Board in
the same manner as provided by Section 19051.

(h) A credit shall not be allowed under this section if the
qualified first-time homebuyer, or his or her spouse, is related to
the seller within the meaning of Section 267 of the Internal Revenue
Code, related to losses, expenses, and interest with respect to
transactions between related taxpayers.

(i) A credit shall not be allowed under this section if the qualified
first-time homebuyer qualifies as a dependent, as defined in Section
17056, of any other taxpayer during the taxable year of the
purchase.

(j) The Franchise Tax Board may prescribe rules, guidelines,
or procedures necessary or appropriate to carry out the purposes
of this section, including any guidelines regarding the allocation
of the credit allowed under this section. Chapter 3.5 (commencing
with Section 11340) of Part 1 of Division 3 of Title 2 of the
Government Code does not apply to any rule, guideline, or
procedure prescribed by the Franchise Tax Board pursuant to this
section.

(k) Section 41 does not apply to the credit allowed by this
section.

(l) This section shall remain in effect only until December 1,
2023, and as of that date is repealed.

end insert

begin insert

begin insert SEC. 2. end insert   

end insert begin insert

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

end insert

begin delete

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 a home ownership savings account, as defined in
Section 17205.

SEC. 2.  

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

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 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.

(b) Any amount withdrawn from a 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
downpayment of a principal residence by a qualified taxpayer who
established the account.

(c) For purposes of this section:

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

(A) Is designated as a 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 of the qualified amount 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 downpayment
of a principal residence by a qualified taxpayer establishing the
account.

(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.

(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 and any regulations adopted thereunder. 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.

(D) Is the only home ownership savings account ever established
by the qualified taxpayer.

(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.

(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.

(4) (A) “Qualified taxpayer” means a taxpayer who qualifies
under clause (i) or (ii) and 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 residence. A
qualified taxpayer’s adjusted gross income per taxable year shall
not exceed the following amounts:

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

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

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

(5) “Trustee” shall have the same meaning as it does 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 Constitution and shall go into immediate effect.

end delete