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SENATE DOCKET, NO. 2320 FILED ON: 1/20/2023
SENATE . . . . . . . . . . . . . . No. 1787
The Commonwealth of Massachusetts
_________________
PRESENTED BY:
Julian Cyr
_________________
To the Honorable Senate and House of Representatives of the Commonwealth of Massachusetts in General
Court assembled:
The undersigned legislators and/or citizens respectfully petition for the adoption of the accompanying bill:
An Act relative to first time homebuyer and rental savings accounts.
_______________
PETITION OF:
NAME:DISTRICT/ADDRESS :Julian CyrCape and Islands 1 of 12
SENATE DOCKET, NO. 2320 FILED ON: 1/20/2023
SENATE . . . . . . . . . . . . . . No. 1787
By Mr. Cyr, a petition (accompanied by bill, Senate, No. 1787) of Julian Cyr for legislation
relative to first time homebuyer and rental savings accounts. Revenue.
The Commonwealth of Massachusetts
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In the One Hundred and Ninety-Third General Court
(2023-2024)
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An Act relative to first time homebuyer and rental savings accounts.
Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority
of the same, as follows:
1 SECTION 1. Chapter 62 of the General Laws, as appearing in the 2020 Official Edition,
2is hereby amended by inserting after section 5D the following new section:-
3 Section 5E. (a) For the purposes of this section, unless the context clearly requires
4otherwise, the following words and phrases shall have the following meanings:-
5 “Account holder” means an individual who establishes, individually or jointly with one
6or more other individuals, a rental savings account.
7 “Allowable costs” means fee paid for accessing a rental that will be a permanent
8residence limited to the first and last month's rent, a security deposit equal to one month's rent
9and money for the purchase and installation costs for a lock and key.
10 “Eligible costs” means fees paid for accessing a rental that will be a permanent residence
11limited to the first and last month's rent, a security deposit equal to one month's rent and money
12for the purchase and installation costs for a lock and key. 2 of 12
13 “Financial institution” means any bank, trust company, savings institution, industrial loan
14association, consumer finance company, credit union, or any benefit association, insurance
15company, safe deposit company, money market mutual fund, or similar entity authorized to do
16business in Massachusetts.
17 “Qualified Beneficiary” means anyone seeking to rent a permanent residence.
18 (b) Beginning January 1, 2023, any individual may open an account with a financial
19institution and designate the account, in its entirety, as a rental savings account to be used to pay
20or reimburse a qualified beneficiary’s eligible costs for the costs of renting a permanent
21residence in Massachusetts.
22 (c) An account holder must designate no later than April 15 of the year following the tax
23year during which the account is established, a resident as the qualified beneficiary of the rental
24savings account. The account holder may designate himself or herself as the qualified
25beneficiary and may change the designated qualified beneficiary at any time, but there may not
26be more than one qualified beneficiary at any one time.
27 (d) An individual may jointly own a rental savings account with another person if the
28joint account holders file a joint income tax return.
29 (e) An individual may be the account holder of more than one rental savings account.
30However, an account holder cannot have multiple accounts that designate the same qualified
31beneficiary.
32 (f) An individual may be designated as the qualified beneficiary on more than one rental
33savings account. 3 of 12
34 (g) Only cash and marketable securities may be contributed to a rental savings account.
35Subject to the limitations of this section, persons other than the account holder may contribute
36funds to a rental savings account. There is no limitation on the amount of contributions that may
37be made to or retained in a rental savings account.
38 (h) The funds held in a rental savings account shall not be used to pay expenses of
39administering the account, except that a service fee may be deducted from the account by a
40financial institution in which the account is held;
41 (i) The account holder shall submit the following to the department of revenue:
42 (1) detailed information regarding the rental savings account, including a list of
43transactions for the account during the tax year and the Form 1099 issued by the financial
44institution for such account with the account holder’s Massachusetts income tax return on forms
45prepared by the department of revenue; and
46 (2) a detailed account of the eligible costs toward which the account funds were applied,
47if there was a withdrawal from the account, and a statement of the amount of funds remaining in
48the account, if any.
49 (j) Under this section and section 5D of this chapter, a financial institution shall not be
50required to:
51 (1) Designate an account as a rental savings account, or designate the qualified
52beneficiaries of an account, in the financial institution’s account contracts or systems or in any
53other way;
54 (2) Track the use of funds withdrawn from a rental savings account; 4 of 12
55 (3) Allocate funds in a rental savings account among joint account holders or multiple
56qualified beneficiaries; or
57 (4) Report any information to the Department of Revenue or any other governmental
58agency that is not otherwise required by law.
59 (k) A financial institution is not responsible or liable for:
60 (1) Determining or ensuring that an account satisfies the requirements to be a rental
61savings account;
62 (2) Determining or ensuring that funds in a rental savings account are used for eligible
63costs; or
64 (3) Reporting or remitting taxes or penalties related to the use of a rental savings account.
65 (l) Except as otherwise provided in this section and subject to the limitations under this
66subsection, there shall be deducted from taxable income of an account holder, for Massachusetts
67income tax purposes:
68 (1) the amount contributed to a first-time home buyer savings account during each tax
69year, not to exceed $15,000 for an account holder who files an individual tax return or $30,000
70for joint account holders who file a joint tax return.
71 (2) the amount of earnings, including interest and other income on the principal, from the
72rental savings account during the tax year.
73 (m) An account holder may claim the deduction and exclusion under subsection (k):
74 (1) For a period not to exceed 15 years; 5 of 12
75 (2) For an aggregate total amount of principal and earnings, not to exceed $50,000 during
76that 15-year period; and
77 (3) Only if the principal and earnings of the account remain in the account until a
78withdrawal is made for eligible costs related to the securing a rental intended as a permanent
79residence.
80 (n) Any funds in a rental savings account not expended on eligible costs by December 31
81of the last year of the 15-year period under Subsection 7(2)(a) of this Chapter shall thereafter be
82included in the account holder’s taxable income.
83 (o) A person other than the account holder who deposits funds in a rental savings account
84shall not be entitled to the deduction and exclusion provided for under this Chapter.
85 (p) The deduction and exclusion from taxable income provided for by this Section shall
86apply to any alternative bases for calculating taxable income for Massachusetts income tax
87purposes.
88 (q) Except as otherwise authorized in this of this section, if the account holder withdraws
89any funds from a rental savings account for a purpose other than eligible costs for the securing a
90rental property to be used as a permanent residence
91 (1) Those funds shall be included in the account holder’s taxable income; and
92 (2) The account holder shall pay a penalty to the Department of Revenue equal to the tax
93that would have been collected had the withdrawn funds been subject to income tax. Such
94penalty shall not apply to funds withdrawn from an account that were:
95 (i) Withdrawn by reason of the account holder’s death or disability; 6 of 12
96 (ii) A disbursement of assets of the account pursuant to a filing for protection under the
97United States Bankruptcy Code, 11 U.S.C. § 101 et seq.; or
98 (iii) A transfer of the funds from a rental savings account to a new rental savings account
99held by a different financial institution or the same financial institution.
100 (r) The Department of Revenue shall prepare forms for:
101 (1) The designation of an account with a financial institution to serve as a first-time home
102buyer savings account;
103 (2) The designation of a qualified beneficiary of a rental savings account; and
104 (3) For an account holder to annually submit to the Department of Revenue detailed
105information regarding the rental savings account, including but not limited to a list of
106transactions for the account during the tax year, and identifying any supporting documentation
107that is required to be maintained by the account holder.
108 SECTION 2. Said Chapter 62 of the General Laws is hereby amended by inserting after
109section 5E the following new section:-
110 Section 5F. (a) For the purposes of this section, unless the context clearly requires
111otherwise, the following words and phrases shall have the following meanings:-
112 “Account holder” means an individual who establishes, individually or jointly with one
113or more other individuals, a first-time homebuyer savings account.
114 “Allowable closing costs” means a disbursement listed on a settlement statement for the
115purchase of a single-family residence in Massachusetts by a qualified beneficiary. 7 of 12
116 “Eligible costs” means the down payment and allowable closing costs for the purchase of
117a single-family residence in Massachusetts by a qualified beneficiary.
118 “Financial institution” means any bank, trust company, savings institution, industrial loan
119association, consumer finance company, credit union, or any benefit association, insurance
120company, safe deposit company, money market mutual fund, or similar entity authorized to do
121business in Massachusetts.
122 “First-Time Homebuyer” means an individual who resides in Massachusetts and has not
123owned or purchased, either individually or jointly, a single-family residence during a period of
124three (3) years prior to the date of the purchase of a single-family residence.
125 “First-Time Home Buyer Savings Account” or “account” means an account with a
126financial institution that an account holder designates as a first-time home buyer savings account
127on the account holder’s Massachusetts income tax return for tax year 2017 or any tax year
128thereafter, pursuant to this Chapter for the purpose of paying or reimbursing eligible costs for the
129purchase of a single-family residence in Massachusetts by a qualified beneficiary.
130 “Qualified Beneficiary” means a first-time home buyer who is designated as the qualified
131beneficiary of an account designated by the account holder as a first-time home buyer savings
132account.
133 “Settlement Statement” means the statement of receipts and disbursements for a
134transaction related to real estate, including a statement prescribed under the Real Estate
135Settlement Procedures Act of 1974, 12 U.S.C. 2601 et seq., as amended, and regulations
136thereunder. 8 of 12
137 “Single-Family Residence” means a single-family residence owned and occupied by a
138qualified beneficiary as the qualified beneficiary’s principal residence, which may include a
139manufactured home, trailer, mobile home, condominium unit, or cooperative.
140 (b) Beginning January 1, 2023, any individual may open an account with a financial
141institution and designate the account, in its entirety, as a first-time home buyer savings account
142to be used to pay or reimburse a qualified beneficiary’s eligible costs for the purchase of a
143single-family residence in Massachusetts.
144 (c) An account holder must designate no later than April 15 of the year following the tax
145year during which the account is established, a first-time home buyer as the qualified beneficiary
146of the first-time home buyer savings account. The account holder may designate himself or
147herself as the qualified beneficiary and may change the designated qualified beneficiary at any
148time, but there may not be more than one qualified beneficiary at any one time.
149 (d) An individual may jointly own a first-time home buyer savings account with another
150person if the joint account holders file a joint income tax return.
151 (e) An individual may be the account holder of more than one first-time home buyer
152savings account. However, an account holder cannot have multiple accounts that designate the
153same qualified beneficiary.
154 (f) An individual may be designated as the qualified beneficiary on more than one first-
155time home buyer savings account.
156 (g) Only cash and marketable securities may be contributed to a first-time home buyer
157savings account. Subject to the limitations of this section, persons other than the account holder 9 of 12
158may contribute funds to a first-time home buyer savings account. There is no limitation on the
159amount of contributions that may be made to or retained in a first-time home buyer savings
160account.
161 (h) The funds held in a first-time home buyer savings account shall not be used to pay
162expenses of administering the account, except that a service fee may be deducted from the
163account by a financial institution in which the account is held;
164 (i) The account holder shall submit the following to the department of revenue:
165 (1) detailed information regarding the first-time home buyer savings account, including a
166list of transactions for the account during the tax year and the Form 1099 issued by the financial
167institution for such account with the account holder’s Massachusetts income tax return on forms
168prepared by the department of revenue; and
169 (2) a detailed account of the eligible costs toward which the account funds were applied,
170if there was a withdrawal from the account, and a statement of the amount of funds remaining in
171the account, if any.
172 (j) Under this section and section 5D of this chapter, a financial institution shall not be
173required to:
174 (1) Designate an account as a first-time home buyer savings account, or designate the
175qualified beneficiaries of an account, in the financial institution’s account contracts or systems or
176in any other way;
177 (2) Track the use of funds withdrawn from a first-time home buyer savings account; 10 of 12
178 (3) Allocate funds in a first-time home buyer savings account among joint account
179holders or multiple qualified beneficiaries; or
180 (4) Report any information to the Department of Revenue or any other governmental
181agency that is not otherwise required by law.
182 (k)A financial institution is not responsible or liable for:
183 (1) Determining or ensuring that an account satisfies the requirements to be a first-time
184home buyer savings account;
185 (2) Determining or ensuring that funds in a first-time home buyer savings account are
186used for eligible costs; or
187 (3) Reporting or remitting taxes or penalties related to the use of a first-time home buyer
188savings account.
189 (l) Except as otherwise provided in this section and subject to the limitations under this
190subsection, there shall be deducted from taxable income of an account holder, for Massachusetts
191income tax purposes:
192 (1) the amount contributed to a first-time home buyer savings account during each tax
193year, not to exceed $25,000 for an account holder who files an individual tax return or $50,000
194for joint account holders who file a joint tax return.
195 (2) the amount of earnings, including interest and other income on the principal, from the
196first-time home buyer savings account during the tax year.
197 (m) An account holder may claim the deduction and exclusion under subsection (k): 11 of 12
198 (1) For a period not to exceed 15 years;
199 (2) For an aggregate total amount of principal and earnings, not to exceed $250,000
200during that 15-year period; and
201 (3) Only if the principal and earnings of the account remain in the account until a
202withdrawal is made for eligible costs related to the purchase of a single-family residence by a
203qualified beneficiary, except as otherwise provided in this section.
204 (n) Any funds in a first-time home buyer savings account not expended on eligible costs
205by December 31 of the last year of the 15-year period under Subsection 7(2)(a) of this Chapter
206shall thereafter be included in the account holder’s taxable income.
207 (o) A person other than the account holder who deposits funds in a first-time home buyer
208savings account shall not be entitled to the deduction and exclusion provided for under this
209Chapter.
210 (p) The deduction and exclusion from taxable income provided for by this Section shall
211apply to any alternative bases for calculating taxable income for Massachusetts income tax
212purposes.
213 (q) Except as otherwise authorized in this of this section, if the account holder withdraws
214any funds from a first-time home buyer savings account for a purpose other than eligible costs
215for the purchase of a single-family residence:
216 (1) Those funds shall be included in the account holder’s taxable income; and 12 of 12
217 (2) The account holder shall pay a penalty to the Department of Revenue equal to the tax
218that would have been collected had the withdrawn funds been subject to income tax. Such
219penalty shall not apply to funds withdrawn from an account that were:
220 (i) Withdrawn by reason of the account holder’s death or disability;
221 (ii) A disbursement of assets of the account pursuant to a filing for protection under the
222United States Bankruptcy Code, 11 U.S.C. § 101 et seq.; or
223 (iii) A transfer of the funds from a first-time home buyer savings account to a new first-
224time home buyer savings account held by a different financial institution or the same financial
225institution.
226 (r) The Department of Revenue shall prepare forms for:
227 (1) The designation of an account with a financial institution to serve as a first-time home
228buyer savings account;
229 (2) The designation of a qualified beneficiary of a first-time home buyer savings account;
230and
231 (3) For an account holder to annually submit to the Department of Revenue detailed
232information regarding the first-time home buyer savings account, including but not limited to a
233list of transactions for the account during the tax year, and identifying any supporting
234documentation that is required to be maintained by the account holder.