| 47 | | - | SECTION 1. The legislature finds that the affordable housing crisis continues to be one of the State's most significant and challenging social problems and is a critical issue for many Hawaii residents. Considering the current median home value is estimated at between $820,000 and $977,000, the allowed contribution requires a minimum of eight years of savings. As the cost of housing continues to rise, the State must assist residents in finding methods of increasing the availability of homeownership. Saving for a down-payment on a home loan continues to be a barrier for many Hawaii residents with few programs available to assist in this endeavor. Contributions to the first-time home buyer savings account will reduce taxable income. This incentivizes first time home ownership through saving for a down payment and closing costs. The purpose of this Act is to increase the maximum contribution levels and maximum account levels individuals and couples can contribute to their individual housing accounts, to more accurately reflect current housing prices. SECTION 2. Section 235-5.5, Hawaii Revised Statutes, is amended as follows: 1. By amending subsections (a) and (b) to read: "(a) There shall be allowed as a deduction from gross income the amount, not to exceed [$5,000,] $ , paid in cash during the taxable year by an individual taxpayer to an individual housing account established for the individual's benefit to provide funding for the purchase of the individual's first principal residence. A deduction not to exceed [$10,000] $ shall be allowed for a married couple filing a joint return. No deduction shall be allowed on any amounts distributed less than three hundred sixty-five days from the date on which a contribution is made to the account. Any deduction claimed for a previous taxable year for amounts distributed less than three hundred sixty-five days from the date on which a contribution was made shall be disallowed and the amount deducted shall be included in the previous taxable year's gross income and the tax reassessed. The interest paid or accrued within the taxable year on the account shall not be included in the individual's gross income. For purposes of this section, the term "first principal residence" means a residential property purchased with the payment or distribution from the individual housing account which shall be owned and occupied as the only home by an individual who did not have any interest in, individually, or whose spouse did not have any interest in, if the individual is married, a residential property within the last five years of opening the individual housing account. In the case of a married couple filing separate returns, the sum of the deductions allowable to each of them for the taxable year shall not exceed [$5,000,] $ , or [$10,000] $ for a joint return, for amounts paid in cash, excluding interest paid or accrued thereon. The amounts paid in cash allowable as a deduction under this section to an individual for all taxable years shall not exceed [$25,000,] $ , excluding interest paid or accrued. In the case of married individuals having separate individual housing accounts, the sum of the separate accounts and the deduction under this section shall not exceed [$25,000,] $ , excluding interest paid or accrued thereon. (b) For purposes of this section, the term "individual housing account" means a trust created or organized in Hawaii for the exclusive benefit of an individual, or, in the case of a married individual, for the exclusive benefit of the individual and spouse jointly, but only if the written governing instrument creating the trust meets the following requirements: (1) Contributions shall not be accepted for the taxable year in excess of [$5,000] $ (or [$10,000] $ in the case of a joint return) or in excess of [$25,000] $ for all taxable years, exclusive of interest paid or accrued; (2) The trustee is a bank, a savings and loan association, a credit union, or a depository financial services loan company, chartered, licensed, or supervised under federal or state law, whose accounts are insured by the Federal Deposit Insurance Corporation, the National Credit Union Administration, or any agency of this State or any federal agency established for the purpose of insuring accounts in these financial institutions. The financial institution must actively make residential real estate mortgage loans in Hawaii; (3) The assets of the trust shall be invested only in fully insured savings or time deposits. Funds held in the trust may be commingled for purposes of investment, but individual records shall be maintained by the trustee for each individual housing account holder that show all transactions in detail; (4) The entire interest of an individual or married couple for whose benefit the trust is maintained shall be distributed to the individual or couple not later than one hundred twenty months after the date on which the first contribution is made to the trust; (5) Except as provided in subsection (g), the trustee shall not distribute the funds in the account unless the trustee: (A) Verifies that the money is to be used for the purchase of a first principal residence located in Hawaii, and provides that the instrument of payment is payable to the mortgagor, construction contractor, or other vendor of the property purchased; or (B) Withholds an amount equal to ten per cent of the amount withdrawn from the account and remits this amount to the director within ten days after the date of the withdrawal. The amount withheld shall be applied to the liability of the taxpayer under subsections (c) and (e); and (6) If any amounts are distributed before the expiration of three hundred sixty-five days from the date on which a contribution is made to the account, the trustee shall so notify in writing the taxpayer and the director. If the trustee makes the verification required in paragraph (5)(A), then the department shall disallow the deduction under subsection (a) and subsections (c), (e), and (f) shall not apply to that amount. If the trustee withholds an amount under paragraph (5)(B), then the department shall disallow the deduction under subsection (a) and subsection (e) shall apply, but subsection (c) shall not apply." 2. By amending subsection (f) to read: "(f) If the individual for whose benefit the individual housing account was established purchases a residential property in Hawaii with the distribution from the individual housing account[: (1) Before January 1, 1990, and if the individual sells in any manner or method or by use of any instrument conveying or transferring the residential property, the gross income of the individual under this chapter for the taxable year in which the residential property is sold, conveyed, or transferred, whichever is applicable, shall include an amount equal to the amount of the distribution from the individual housing account, and in addition, the gross income of the individual shall be increased by an amount equal to ten per cent of the total distribution from the individual housing account; or (2) After December 31, 1989], the individual shall report one-tenth of the total distribution from the individual housing account used to purchase the residential property as gross income in the taxable year in which the distribution is completed and in each taxable year thereafter until all of the distribution has been included in the individual's gross income at the end of the tenth taxable year after the purchase of the residential property. If the individual sells in any manner or method or by use of any instrument conveying or transferring the residential property, the gross income of the individual under this chapter for the taxable year in which the residential property is sold, conveyed, or transferred, whichever is applicable, shall include an amount equal to the amount of the distribution from the individual housing account not previously reported as gross income, and in addition, the tax liability of the individual shall be increased by an amount equal to ten per cent of the total distribution from the individual housing account. If the individual sells the residential property in any manner as provided in this paragraph after all of the distribution has been included in the individual's gross income at the end of the tenth taxable year after the purchase of the residential property, the tax liability of the individual shall not be increased by an amount equal to ten per cent of the total distribution from the individual housing account. [An individual who purchased a residential property in Hawaii with the distribution from an individual housing account before January 1, 1990, who is subject to paragraph (1) may elect to report as provided in paragraph (2). The election shall be made before January 1, 1991. If the individual makes the election, the individual shall report one-tenth of the total distribution from the individual housing account as gross income in the taxable year in which the election occurs and in each taxable year thereafter until all of the distribution has been included in gross income as provided by paragraph (2). If the individual making the election sells the residential property in any manner as provided in paragraph (2), then the individual shall include as income the amount of the distribution not previously reported as income and increase the individual's tax liability as provided in the second sentence of paragraph (2), except when the third sentence of paragraph (2) applies. In the alternative, any individual subject to paragraph (2) who established the individual housing account before January 1, 1990, may elect within one year after the date of purchase, to be subject to paragraph (1).]" SECTION 3. The department of taxation shall promptly create and implement awareness programs and materials to educate the public about the individual housing account program, eligibility requirements, and other information or helpful resources. SECTION 4. In accordance with section 9 of article VII, of the Constitution of the State of Hawaii and sections 37-91 and 37-93, Hawaii Revised Statutes, the legislature has determined that the appropriation contained in this Act will cause the state general fund expenditure ceiling for fiscal year 2024-2025 to be exceeded by $ , or per cent. The reasons for exceeding the general fund expenditure ceiling are that the appropriation made in this Act is necessary to serve the public interest and to meet the need provided for by this Act. SECTION 5. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2024-2025 for the creation and implementation of a public awareness program. The sum appropriated shall be expended by the department of taxation for the purposes of this Act. SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored. SECTION 7. This Act shall take effect on July 1, 2050; provided that this Act, upon its approval, shall apply to taxable years beginning after December 31, 2024. |
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| 47 | + | SECTION 1. The legislature finds that the affordable housing crisis continues to be one of the State's most significant and challenging social problems and is a critical issue for many Hawaii residents. Considering the current median home value is estimated at between $820,000 and $977,000, the allowed contribution requires a minimum of eight years of savings. As the cost of housing continues to rise, the State must assist residents in finding methods of increasing the availability of homeownership. Saving for a down-payment on a home loan continues to be a barrier for many Hawaii residents with few programs available to assist in this endeavor. Contributions to the first-time home buyer savings account will reduce taxable income. This incentivizes first time home ownership through saving for a down payment and closing costs. The purpose of this Act is to increase the maximum contribution levels and maximum account levels individuals and couples can contribute to their individual housing accounts, to more accurately reflect current housing prices. SECTION 2. Section 235-5.5, Hawaii Revised Statutes, is amended as follows: 1. By amending subsections (a) and (b) to read: "(a) There shall be allowed as a deduction from gross income the amount, not to exceed [$5,000,] $ , paid in cash during the taxable year by an individual taxpayer to an individual housing account established for the individual's benefit to provide funding for the purchase of the individual's first principal residence. A deduction not to exceed [$10,000] $ shall be allowed for a married couple filing a joint return. No deduction shall be allowed on any amounts distributed less than three hundred sixty-five days from the date on which a contribution is made to the account. Any deduction claimed for a previous taxable year for amounts distributed less than three hundred sixty-five days from the date on which a contribution was made shall be disallowed and the amount deducted shall be included in the previous taxable year's gross income and the tax reassessed. The interest paid or accrued within the taxable year on the account shall not be included in the individual's gross income. For purposes of this section, the term "first principal residence" means a residential property purchased with the payment or distribution from the individual housing account which shall be owned and occupied as the only home by an individual who did not have any interest in, individually, or whose spouse did not have any interest in, if the individual is married, a residential property within the last five years of opening the individual housing account. In the case of a married couple filing separate returns, the sum of the deductions allowable to each of them for the taxable year shall not exceed [$5,000,] $ , or [$10,000] $ for a joint return, for amounts paid in cash, excluding interest paid or accrued thereon. The amounts paid in cash allowable as a deduction under this section to an individual for all taxable years shall not exceed [$25,000,] $ , excluding interest paid or accrued. In the case of married individuals having separate individual housing accounts, the sum of the separate accounts and the deduction under this section shall not exceed [$25,000,] $ excluding interest paid or accrued thereon. (b) For purposes of this section, the term "individual housing account" means a trust created or organized in Hawaii for the exclusive benefit of an individual, or, in the case of a married individual, for the exclusive benefit of the individual and spouse jointly, but only if the written governing instrument creating the trust meets the following requirements: (1) Contributions shall not be accepted for the taxable year in excess of [$5,000] $ (or [$10,000] $ in the case of a joint return) or in excess of [$25,000] $ for all taxable years, exclusive of interest paid or accrued; (2) The trustee is a bank, a savings and loan association, a credit union, or a depository financial services loan company, chartered, licensed, or supervised under federal or state law, whose accounts are insured by the Federal Deposit Insurance Corporation, the National Credit Union Administration, or any agency of this State or any federal agency established for the purpose of insuring accounts in these financial institutions. The financial institution must actively make residential real estate mortgage loans in Hawaii; (3) The assets of the trust shall be invested only in fully insured savings or time deposits. Funds held in the trust may be commingled for purposes of investment, but individual records shall be maintained by the trustee for each individual housing account holder that show all transactions in detail; (4) The entire interest of an individual or married couple for whose benefit the trust is maintained shall be distributed to the individual or couple not later than one hundred twenty months after the date on which the first contribution is made to the trust; (5) Except as provided in subsection (g), the trustee shall not distribute the funds in the account unless the trustee: (A) Verifies that the money is to be used for the purchase of a first principal residence located in Hawaii, and provides that the instrument of payment is payable to the mortgagor, construction contractor, or other vendor of the property purchased; or (B) Withholds an amount equal to ten per cent of the amount withdrawn from the account and remits this amount to the director within ten days after the date of the withdrawal. The amount withheld shall be applied to the liability of the taxpayer under subsections (c) and (e); and (6) If any amounts are distributed before the expiration of three hundred sixty-five days from the date on which a contribution is made to the account, the trustee shall so notify in writing the taxpayer and the director. If the trustee makes the verification required in paragraph (5)(A), then the department shall disallow the deduction under subsection (a) and subsections (c), (e), and (f) shall not apply to that amount. If the trustee withholds an amount under paragraph (5)(B), then the department shall disallow the deduction under subsection (a) and subsection (e) shall apply, but subsection (c) shall not apply." 2. By amending subsection (f) to read: "(f) If the individual for whose benefit the individual housing account was established purchases a residential property in Hawaii with the distribution from the individual housing account[: (1) Before January 1, 1990, and if the individual sells in any manner or method or by use of any instrument conveying or transferring the residential property, the gross income of the individual under this chapter for the taxable year in which the residential property is sold, conveyed, or transferred, whichever is applicable, shall include an amount equal to the amount of the distribution from the individual housing account, and in addition, the gross income of the individual shall be increased by an amount equal to ten per cent of the total distribution from the individual housing account; or (2) After December 31, 1989,] the individual shall report one-tenth of the total distribution from the individual housing account used to purchase the residential property as gross income in the taxable year in which the distribution is completed and in each taxable year thereafter until all of the distribution has been included in the individual's gross income at the end of the tenth taxable year after the purchase of the residential property. If the individual sells in any manner or method or by use of any instrument conveying or transferring the residential property, the gross income of the individual under this chapter for the taxable year in which the residential property is sold, conveyed, or transferred, whichever is applicable, shall include an amount equal to the amount of the distribution from the individual housing account not previously reported as gross income, and in addition, the tax liability of the individual shall be increased by an amount equal to ten per cent of the total distribution from the individual housing account. If the individual sells the residential property in any manner as provided in this paragraph after all of the distribution has been included in the individual's gross income at the end of the tenth taxable year after the purchase of the residential property, the tax liability of the individual shall not be increased by an amount equal to ten per cent of the total distribution from the individual housing account. [An individual who purchased a residential property in Hawaii with the distribution from an individual housing account before January 1, 1990, who is subject to paragraph (1) may elect to report as provided in paragraph (2). The election shall be made before January 1, 1991. If the individual makes the election, the individual shall report one-tenth of the total distribution from the individual housing account as gross income in the taxable year in which the election occurs and in each taxable year thereafter until all of the distribution has been included in gross income as provided by paragraph (2). If the individual making the election sells the residential property in any manner as provided in paragraph (2), then the individual shall include as income the amount of the distribution not previously reported as income and increase the individual's tax liability as provided in the second sentence of paragraph (2), except when the third sentence of paragraph (2) applies. In the alternative, any individual subject to paragraph (2) who established the individual housing account before January 1, 1990, may elect within one year after the date of purchase, to be subject to paragraph (1).]" SECTION 3. The department of taxation shall promptly create and implement awareness programs and materials to educate the public about the individual housing account program, eligibility requirements, and other information or helpful resources. SECTION 4. In accordance with section 9 of article VII, of the Constitution of the State of Hawaii and sections 37-91 and 37-93, Hawaii Revised Statutes, the legislature has determined that the appropriation contained in this Act will cause the state general fund expenditure ceiling for fiscal year 2024-2025 to be exceeded by $ , or per cent. The reasons for exceeding the general fund expenditure ceiling are that the appropriation made in this Act is necessary to serve the public interest and to meet the need provided for by this Act. SECTION 5. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2024-2025 for the creation and implementation of a public awareness program. The sum appropriated shall be expended by the department of taxation for the purposes of this Act. SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored. SECTION 7. This Act shall take effect on July 1, 3000; provided that this Act, upon its approval, shall apply to taxable years beginning after December 31, 2024. |
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