Rhode Island 2025 Regular Session

Rhode Island Senate Bill S0445 Compare Versions

Only one version of the bill is available at this time.

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5	5	2025 -- S 0445
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7	7	LC001581
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9	9	S T A T E O F R H O D E I S L A N D
10	10	IN GENERAL ASSEMBLY
11	11	JANUARY SESSION, A.D. 2025
12	12	____________
13	13
14	14	A N A C T
15	15	RELATING TO TAXATION -- FIRST-TIME HOMEBUYER SAVINGS AC COUNT ACT
16	16	Introduced By: Senators Lawson, Tikoian, LaMountain, Murray, Sosnowski, Lauria,
17	17	Britto, DiMario, and Valverde
18	18	Date Introduced: February 26, 2025
19	19	Referred To: Senate Finance
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21	21
22	22	It is enacted by the General Assembly as follows:
23	23	SECTION 2. Title 44 of the General Laws entitled "TAXATION" is hereby amended by 1
24	24	adding thereto the following chapter: 2
25	25	CHAPTER 72 3
26	26	FIRST-TIME HOMEBUYER SAVINGS ACCOUNT ACT 4
27	27	44-72-1. Short title. 5
28	28	This chapter shall be known and may be cited as the "First-Time Homebuyer Savings 6
29	29	Account Act." 7
30	30	44-72-2. Definitions. 8
31	31	As used in this chapter: 9
32	32	(1) "Account holder" means an individual who establishes, individually or jointly, with one 10
33	33	or more other individuals, a first-time homebuyer savings account. 11
34	34	(2) "Allowable closing costs" means a disbursement listed on a settlement statement for 12
35	35	the purchase of a home in Rhode Island by a qualified beneficiary. 13
36	36	(3) "Eligible costs" means the down payment and allowable closing costs for the purchase 14
37	37	of a home in Rhode Island by a qualified beneficiary. 15
38	38	(4) "Financial institution" means any bank, trust company, mortgage lender, savings 16
39	39	institution, industrial loan association, consumer finance company, credit union, or any benefit 17
40	40	association, insurance company, safe deposit company, money market mutual fund, or similar 18
41	41	entity authorized to do business in Rhode Island. 19
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44	44	LC001581 - Page 2 of 6
45	45	(5) "First-time homebuyer" means an individual who resides in Rhode Island and has not 1
46	46	owned or purchased, either individually or jointly, a home during a period of three (3) years prior 2
47	47	to the date of the purchase of a home. 3
48	48	(6) "First-time homebuyer savings account" or "account" means an account with Rhode 4
49	49	Island housing that an account holder designates as a first-time home buyer savings account on the 5
50	50	account holder's Rhode Island income tax return, pursuant to this chapter for the purpose of paying 6
51	51	or reimbursing eligible costs for the purchase of a home in Rhode Island by a qualified beneficiary. 7
52	52	(7) "Home" means a dwelling owned and occupied by a qualified beneficiary as the 8
53	53	qualified beneficiary's primary residence, which may include a single-family dwelling, multifamily 9
54	54	dwelling, manufactured home, trailer, mobile home, condominium unit, or cooperative. 10
55	55	(8) "Qualified beneficiary" means a first-time homebuyer who is designated as the qualified 11
56	56	beneficiary of an account designated by the account holder as a first-time homebuyer savings 12
57	57	account. 13
58	58	(9) "Settlement statement" means the statement of receipts and disbursements for a 14
59	59	transaction related to real estate, including a statement prescribed under the Real Estate Settlement 15
60	60	Procedures Act of 1974, 12 U.S.C. 2601-2617, as amended, and regulations thereunder. 16
61	61	44-72-3. Establishment of first-time homebuyer savings account. 17
62	62	(a) The general treasurer, in conjunction with the division of taxation, secretary of the 18
63	63	Rhode Island department of housing, and executive director of Rhode Island housing, shall 19
64	64	establish, in any form as he or she deems appropriate, a first-time homebuyer savings program to 20
65	65	allow Rhode Island residents to save money for the sole purpose of purchasing a first home. 21
66	66	(b) Designation and use of first-time home buyer savings account. Any individual may 22
67	67	open an account with Rhode Island housing and designate the account, in its entirety, as a first-time 23
68	68	homebuyer savings account to be used to pay a qualified beneficiary’s eligible costs for the 24
69	69	purchase of a home in Rhode Island. 25
70	70	(c) Designation of qualified beneficiary. An account holder shall designate no later than 26
71	71	April 15 of the year following the tax year during which the account is established, a first-time 27
72	72	homebuyer as the qualified beneficiary of the first-time homebuyer savings account. The account 28
73	73	holder may designate themself as the qualified beneficiary and may change the designated qualified 29
74	74	beneficiary at any time, but there may not be more than one qualified beneficiary at any one time. 30
75	75	(d) Joint account holders. An individual may jointly own a first-time homebuyer savings 31
76	76	account with another person if the joint account holders file a joint income tax return. 32
77	77	(e) Qualified beneficiary of more than one account. An individual may be designated as 33
78	78	the qualified beneficiary on more than one first-time homebuyer savings account. 34
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82	82	(f) Contributions to account. Only cash and marketable securities may be contributed to a 1
83	83	first-time homebuyer savings account. Subject to the limitations of § 44-72-5, persons other than 2
84	84	the account holder may contribute funds to a first-time homebuyer savings account. There is no 3
85	85	limitation on the amount of contributions that may be made to or retained in a first-time homebuyer 4
86	86	savings account. 5
87	87	44-72-4. Account holder responsibilities. 6
88	88	(a) The account holder: 7
89	89	(1) Shall not use funds held in a first-time homebuyer savings account to pay expenses of 8
90	90	administering the account, except that a service fee may be deducted from the account by a financial 9
91	91	institution in which the account is held; 10
92	92	(2) Shall submit to the division of taxation, with the account holder's state income tax return 11
93	93	on forms prepared by the division of taxation, detailed information regarding the first-time home 12
94	94	buyer savings account, including a list of transactions for the account during the tax year; and the 13
95	95	Form 1099 issued by Rhode Island housing for such account; 14
96	96	(3) Shall submit to the division of taxation, upon a withdrawal of funds from a first-time 15
97	97	homebuyer savings account, a detailed account of the eligible costs toward which the account funds 16
98	98	were applied and a statement of the amount of funds remaining in the account, if any. 17
99	99	(b) Transfer of funds. An account holder may withdraw funds, in whole or in part, from a 18
100	100	first-time homebuyer savings account and deposit the funds in a new first-time homebuyer savings 19
101	101	account held by a different financial institution. 20
102	102	(c) The account holder shall use these funds to purchase a first-time home in Rhode Island 21
103	103	and shall only be eligible to use these funds for an out-of-state purchase upon relocation to another 22
104	104	state and provide documentation of residency. 23
105	105	44-72-5. Deduction and exclusion from taxable income. 24
106	106	(a) Deduction of contributions. Except as otherwise provided in this chapter and subject to 25
107	107	the limitations under this section, there shall be deducted from taxable income of an account holder 26
108	108	for Rhode Island income tax purposes the amount contributed to a first-time homebuyer savings 27
109	109	account during each tax year, subject to the limitations of subsection (b) of this section. There shall 28
110	110	be no limitation to the amount an account holder can deposit per year; provided, however, accounts 29
111	111	shall not exceed the limitations set forth in subsection (c) of this section. For taxable years 30
112	112	commencing on and after January 1, 2026, annual contributions and interest earned on a first-time 31
113	113	home buyer savings account may be deducted from the taxable income of the account holder. 32
114	114	Annual deductions shall not exceed fifteen thousand dollars ($15,000) per year for an individual or 33
115	115	thirty thousand dollars ($30,000) per year for those filing jointly. 34
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119	119	(b) Exclusion of earnings. Except as otherwise provided in this chapter and subject to the 1
120	120	limitations under this section, there shall be excluded from taxable income of an account holder for 2
121	121	Rhode Island income tax purposes the amount of earnings, including interest and other income on 3
122	122	the principal, from the first-time homebuyer savings account during the tax year. 4
123	123	(c) Limitations on deduction and exclusion from taxable income. An account holder may 5
124	124	claim the deduction and exclusion under this section: 6
125	125	(1) For a period not to exceed ten (10) years; 7
126	126	(2) For an aggregate total amount of principal, not to exceed one hundred fifty thousand 8
127	127	($150,000) dollars during that ten (10) year period; and 9
128	128	(3) Only if the principal and earnings of the account remain in the account until a 10
129	129	withdrawal is made for eligible costs related to the purchase of a home by a qualified beneficiary, 11
130	130	except as otherwise provided in subsection (b) of this section. 12
131	131	(d) Non-account holders. A person other than the account holder who deposits funds in a 13
132	132	first-time homebuyer savings account shall not be entitled to the deduction and exclusion provided 14
133	133	for under this chapter. 15
134	134	(e) Remaining funds. Any funds in a first-time homebuyer savings account not expended 16
135	135	on eligible costs by December 31 of the last year of the ten (10) year period shall thereafter be 17
136	136	included in the account holder's taxable income. 18
137	137	44-72-6. Penalty for withdrawal for purpose other than eligible costs. 19
138	138	(a) Except as otherwise authorized by this chapter, if the account holder withdraws any 20
139	139	funds from a first-time homebuyer savings account for a purpose other than eligible costs for the 21
140	140	purchase of a home: 22
141	141	(1) Those funds shall be included in the account holder's taxable income; and 23
142	142	(2) The account holder shall pay a penalty to the division of taxation equal to ten percent 24
143	143	(10%) of the amount withdrawn. Such penalty shall not apply to funds withdrawn from an account 25
144	144	that were: 26
145	145	(i) Withdrawn by reason of the account holder's death or disability; or 27
146	146	(ii) A disbursement of assets of the account pursuant to a filing for protection under the 28
147	147	United States Bankruptcy Code, 11 U.S.C. § 101 et seq. 29
148	148	(b) Account holder relocates to another state may withdraw funds due from the account. 30
149	149	Account holder must provide documentation to Rhode Island housing, prior to withdrawing, they 31
150	150	are no longer a resident of the state. 32
151	151	(c) The division of taxation shall prepare forms for the designation of an account with a 33
152	152	financial institution to serve as a first-time homebuyer savings account; and the designation of a 34
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155	155	LC001581 - Page 5 of 6
156	156	qualified beneficiary of a first-time home buyer savings account; and 1
157	157	(d) For an account holder to annually submit to the division of taxation detailed information 2
158	158	regarding the first-time homebuyer savings account including, but not limited to, a list of 3
159	159	transactions for the account during the tax year, and identifying any supporting documentation that 4
160	160	is required to be maintained by the account holder. 5
161	161	SECTION 3. This act shall take effect upon passage. 6
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168	168	EXPLANATION
169	169	BY THE LEGISLATIVE COUNCIL
170	170	OF
171	171	A N A C T
172	172	RELATING TO TAXATION -- FIRST-TIME HOMEBUYER SAVINGS ACCOUNT ACT
173	173	***
174	174	This act would allow an individual, who is a first-time homebuyer, to contribute funds to 1
175	175	a first-time homebuyer savings account with Rhode Island housing to pay for eligible costs to 2
176	176	purchase a home. 3
177	177	This act would take effect upon passage. 4
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