First-Time Homeowners Assistance Act of 2019

I 116TH CONGRESS 1ST SESSION H. R. 4120 To amend the Internal Revenue Code of 1986 to provide for the tax treatment of first-time homeowner assistance programs established by States. IN THE HOUSE OF REPRESENTATIVES JULY 30, 2019 Mr. LAWSON of Florida (for himself and Ms. TLAIB) introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to provide for the tax treatment of first-time homeowner assistance programs established by States. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘First-Time Home- 4 owners Assistance Act of 2019’’. 5 SEC. 2. QUALIFIED FIRST-TIME HOMEOWNER ASSISTANCE 6 PROGRAM. 7 (a) IN GENERAL.—Part VIII of subchapter F of 8 chapter 1 of the Internal Revenue Code of 1986 is amend- 9 ed by adding at the end the following new section: 10 VerDate Sep 11 2014 03:37 Aug 15, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H4120.IH H4120 kjohnson on DSK79L0C42 with BILLS 2 •HR 4120 IH ‘‘SEC. 530A. QUALIFIED FIRST-TIME HOMEOWNER ASSIST- 1 ANCE PROGRAM. 2 ‘‘(a) GENERAL RULE.—A qualified first-time home- 3 owner assistance program shall be exempt from taxation 4 under this subtitle. Notwithstanding the preceding sen- 5 tence, such program shall be subject to the taxes imposed 6 by section 511 (relating to imposition of tax on unrelated 7 business income of charitable organizations). 8 ‘‘(b) QUALIFIED FIRST-TIME HOMEOWNER ASSIST- 9 ANCE PROGRAM.—For purposes of this section— 10 ‘‘(1) IN GENERAL.—The term ‘qualified first- 11 time homeowner assistance program’ means a pro- 12 gram established and maintained by a State, or 13 agency or instrumentality thereof— 14 ‘‘(A) under which a person may make con- 15 tributions to a first-time homeowner assistance 16 account, 17 ‘‘(B) under which neither contributors nor 18 beneficiaries are prohibited by reason of resi- 19 dency within the State, and 20 ‘‘(C) which meets the other requirements 21 of this subsection. 22 ‘‘(2) CASH CONTRIBUTIONS.—A program shall 23 not be treated as a qualified first-time homeowner 24 assistance program unless it provides that contribu- 25 tions— 26 VerDate Sep 11 2014 03:37 Aug 15, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H4120.IH H4120 kjohnson on DSK79L0C42 with BILLS 3 •HR 4120 IH ‘‘(A) may only be made in cash, 1 ‘‘(B) may not be made after the date on 2 which the account beneficiary attains age 40, or 3 ‘‘(C) except in the case of rollover con- 4 tributions, if such contribution would result in 5 aggregate contributions for all taxable years ex- 6 ceeding $20,000. 7 ‘‘(3) SEPARATE ACCOUNTING.—A program shall 8 not be treated as a qualified first-time homeowner 9 assistance program unless it provides separate ac- 10 counting for each designated beneficiary. 11 ‘‘(4) LIMITED INVESTMENT DIRECTION.—A 12 program shall not be treated as a qualified first-time 13 homeowner assistance program unless it provides 14 that any contributor to, or designated beneficiary 15 under, such program may, directly or indirectly, di- 16 rect the investment of any contributions to the pro- 17 gram (or any earnings thereon) no more than 2 18 times in any calendar year. 19 ‘‘(5) NO PLEDGING OF INTEREST AS SECU- 20 RITY.—A program shall not be treated as a qualified 21 first-time homeowner assistance program if it allows 22 any interest in the program or any portion thereof 23 to be used as security for a loan. 24 VerDate Sep 11 2014 03:37 Aug 15, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H4120.IH H4120 kjohnson on DSK79L0C42 with BILLS 4 •HR 4120 IH ‘‘(6) CERTAIN RESTRICTIONS DISALLOWED.—A 1 program shall not be treated as a qualified first-time 2 homeowner assistance program unless, with respect 3 to each first-time homeowner assistance account, the 4 program does not— 5 ‘‘(A) prohibit the designated beneficiary 6 from acquiring or constructing a principal resi- 7 dence outside of the State, 8 ‘‘(B) limit any State tax preferences for 9 contributions to these accounts based on the 10 residence of the contributor or the designated 11 beneficiary, or 12 ‘‘(C) condition withdrawals, or limit any 13 State tax preferences for withdrawals, from 14 these accounts from being applied only with re- 15 spect to residences located within the State. 16 ‘‘(c) FIRST-TIME HOMEOWNER ASSISTANCE AC- 17 COUNT.—For purposes of this section— 18 ‘‘(1) IN GENERAL.—The term ‘first-time home- 19 owner assistance account’ means an account estab- 20 lished under a qualified first-time homeowner assist- 21 ance program for the purpose of providing qualified 22 down payment assistance to the designated bene- 23 ficiary of the account. 24 VerDate Sep 11 2014 03:37 Aug 15, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H4120.IH H4120 kjohnson on DSK79L0C42 with BILLS 5 •HR 4120 IH ‘‘(2) QUALIFIED DOWN PAYMENT ASSIST- 1 ANCE.— 2 ‘‘(A) IN GENERAL.—The term ‘qualified 3 down payment assistance’ means a distribu- 4 tion— 5 ‘‘(i) to a designated beneficiary who is 6 a first-time homeowner of a principal resi- 7 dence in the United States, 8 ‘‘(ii) under a qualified first-time 9 homeowner assistance program in connec- 10 tion with the acquisition, construction, or 11 substantial improvement of a principal res- 12 idence at or before the time of such acqui- 13 sition or construction, and 14 ‘‘(iii) the amount of which, when 15 added to all prior qualified down payment 16 assistance under this subparagraph during 17 any taxable year, does not exceed 10 per- 18 cent of the cost of acquiring, constructing, 19 or substantially improving the principal 20 residence of the designated beneficiary. 21 ‘‘(B) FIRST-TIME HOMEOWNER.—The 22 term ‘first-time homeowner’ means any indi- 23 vidual if such individual (and if married, such 24 individual’s spouse) had no present ownership 25 VerDate Sep 11 2014 03:37 Aug 15, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H4120.IH H4120 kjohnson on DSK79L0C42 with BILLS 6 •HR 4120 IH interest in a principal residence during the 3- 1 year period ending on the date of the acquisi- 2 tion, construction, or substantial improvement 3 of the principal residence. 4 ‘‘(C) PRINCIPAL RESIDENCE.—The term 5 ‘principal residence’ has the same meaning as 6 when used in section 121. 7 ‘‘(D) EXCEPTION.—A residence may be 8 taken into account for purposes of this para- 9 graph only if— 10 ‘‘(i) the residence is not acquired from 11 a person related to the person acquiring 12 such residence (or, if married, such indi- 13 vidual’s spouse), and 14 ‘‘(ii) the basis of the residence in the 15 hands of the person acquiring such resi- 16 dence is not determined— 17 ‘‘(I) in whole or in part by ref- 18 erence to the adjusted basis of such 19 residence in the hands of the person 20 from whom acquired, or 21 ‘‘(II) under section 1014(a) (re- 22 lating to property acquired from a de- 23 cedent). 24 VerDate Sep 11 2014 03:37 Aug 15, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H4120.IH H4120 kjohnson on DSK79L0C42 with BILLS 7 •HR 4120 IH ‘‘(E) CONSTRUCTION.—A residence which 1 is constructed by the taxpayer shall be treated 2 as purchased by the taxpayer on the date the 3 taxpayer first occupies such residence. 4 ‘‘(F) SPECIAL RULES RELATING TO MAR- 5 RIAGE.— 6 ‘‘(i) MARRIED COUPLES MUST FILE 7 JOINT RETURN.—If the designated bene- 8 ficiary is married on the date of the dis- 9 tribution, the distribution shall not be 10 treated as qualified down payment assist- 11 ance unless the taxpayer and the tax- 12 payer’s spouse file a joint return for the 13 taxable year. 14 ‘‘(ii) MARITAL STATUS.—An indi- 15 vidual legally separated from his spouse 16 under a decree of divorce or of separate 17 maintenance shall not be considered as 18 married. 19 ‘‘(3) DESIGNATED BENEFICIARY.—The term 20 ‘designated beneficiary’ with respect to a first-time 21 homeowner assistance account means— 22 ‘‘(A) the individual designated at the es- 23 tablishment of the account as the beneficiary of 24 VerDate Sep 11 2014 03:37 Aug 15, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H4120.IH H4120 kjohnson on DSK79L0C42 with BILLS 8 •HR 4120 IH amounts paid (or to be paid) to the account, 1 and 2 ‘‘(B) in the case of a change in bene- 3 ficiaries described in subsection (d)(3)(C), the 4 individual who is the new beneficiary of the ac- 5 count. 6 ‘‘(4) MEMBER OF FAMILY.—The term ‘member 7 of the family’ means, with respect to any designated 8 beneficiary— 9 ‘‘(A) the spouse of such beneficiary, 10 ‘‘(B) an individual who bears a relation- 11 ship to such beneficiary which is described in 12 subparagraphs (A) through (G) of section 13 152(d)(2), 14 ‘‘(C) the spouse of any individual described 15 in subparagraph (B), and 16 ‘‘(D) any first cousin of such beneficiary. 17 ‘‘(d) TAX TREATMENT OF DESIGNATED BENE- 18 FICIARIES AND CONTRIBUTORS.— 19 ‘‘(1) IN GENERAL.—Except as otherwise pro- 20 vided in this subsection, no amount shall be includ- 21 ible in gross income of— 22 ‘‘(A) a designated beneficiary under a 23 qualified first-time homeowner assistance pro- 24 gram, or 25 VerDate Sep 11 2014 03:37 Aug 15, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H4120.IH H4120 kjohnson on DSK79L0C42 with BILLS 9 •HR 4120 IH ‘‘(B) a contributor to such program on be- 1 half of a designated beneficiary, with respect to 2 any distribution or earnings under such pro- 3 gram. 4 ‘‘(2) GIFT TAX TREATMENT OF CONTRIBU- 5 TIONS.—For purposes of chapters 12 and 13— 6 ‘‘(A) IN GENERAL.—Any contribution to a 7 qualified first-time homeowner assistance pro- 8 gram on behalf of any designated beneficiary— 9 ‘‘(i) shall be treated as a completed 10 gift to such beneficiary which is not a fu- 11 ture interest in property, and 12 ‘‘(ii) shall not be treated as a qualified 13 transfer under section 2503(e). 14 ‘‘(B) TREATMENT OF EXCESS CONTRIBU- 15 TIONS FOR GIFT TAX PURPOSES.—If the aggre- 16 gate amount of contributions described in sub- 17 paragraph (A) during the calendar year by a 18 donor exceeds the limitation for such year 19 under section 2503(b), such aggregate amount 20 shall, at the election of the donor, be taken into 21 account for purposes of such section ratably 22 over the 5-year period beginning with such cal- 23 endar year. 24 ‘‘(3) DISTRIBUTIONS.— 25 VerDate Sep 11 2014 03:37 Aug 15, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H4120.IH H4120 kjohnson on DSK79L0C42 with BILLS 10 •HR 4120 IH ‘‘(A) IN GENERAL.—Any distribution 1 under a qualified first-time homeowner assist- 2 ance program shall be includible in the gross in- 3 come of the distributee in the manner as pro- 4 vided under section 72 to the extent not ex- 5 cluded from gross income under this paragraph. 6 ‘‘(B) DISTRIBUTIONS FOR QUALIFIED 7 DOWN PAYMENT ASSISTANCE.—For purposes of 8 this paragraph, if— 9 ‘‘(i) distributions under a qualified 10 first-time homeowner assistance program 11 do not exceed the qualified down payment 12 assistance, no amount shall be includible in 13 gross income, and 14 ‘‘(ii) in any other case, the amount 15 otherwise includible in gross income shall 16 be reduced by an amount which bears the 17 same ratio to such amount as such assist- 18 ance bear to such distributions. 19 ‘‘(C) CHANGE IN BENEFICIARIES OR PRO- 20 GRAMS.— 21 ‘‘(i) ROLLOVERS.—Subparagraph (A) 22 shall not apply to that portion of any dis- 23 tribution which, within 60 days of such 24 distribution, is transferred— 25 VerDate Sep 11 2014 03:37 Aug 15, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H4120.IH H4120 kjohnson on DSK79L0C42 with BILLS 11 •HR 4120 IH ‘‘(I) to another qualified distribu- 1 tion under a qualified first-time home- 2 owner assistance program or the ben- 3 efit of the designated beneficiary, or 4 ‘‘(II) to the credit of another des- 5 ignated beneficiary under a qualified 6 distribution under a qualified first- 7 time homeowner assistance program 8 who is a member of the family of the 9 designated beneficiary with respect to 10 which the distribution was made. 11 ‘‘(ii) CHANGE IN DESIGNATED BENE- 12 FICIARIES.—Any change in the designated 13 beneficiary of an interest in a qualified dis- 14 tribution under a qualified first-time home- 15 owner assistance program shall not be 16 treated as a distribution for purposes of 17 subparagraph (A) if the new beneficiary is 18 a member of the family of the old bene- 19 ficiary. 20 ‘‘(iii) LIMITATION ON CERTAIN ROLL- 21 OVERS.—Clause (i)(I) shall not apply to 22 any transfer if such transfer occurs within 23 12 months from the date of a previous 24 transfer to any qualified distribution under 25 VerDate Sep 11 2014 03:37 Aug 15, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H4120.IH H4120 kjohnson on DSK79L0C42 with BILLS 12 •HR 4120 IH a qualified first-time homeowner assistance 1 program for the benefit of the designated 2 beneficiary. 3 ‘‘(4) ESTATE TAX TREATMENT.— 4 ‘‘(A) IN GENERAL.—No amount shall be 5 includible in the gross estate of any individual 6 for purposes of chapter 11 by reason of an in- 7 terest in a qualified distribution under a quali- 8 fied first-time homeowner assistance program. 9 ‘‘(B) AMOUNTS INCLUDIBLE IN ESTATE OF 10 DESIGNATED BENEFICIARY IN CERTAIN 11 CASES.—Subparagraph (A) shall not apply to 12 amounts distributed on account of the death of 13 a beneficiary. 14 ‘‘(C) AMOUNTS INCLUDIBLE IN ESTATE OF 15 DONOR MAKING EXCESS CONTRIBUTIONS.—In 16 the case of a donor who makes the election de- 17 scribed in paragraph (2)(B) and who dies be- 18 fore the close of the 5-year period referred to 19 in such paragraph, notwithstanding subpara- 20 graph (A), the gross estate of the donor shall 21 include the portion of such contributions prop- 22 erly allocable to periods after the date of death 23 of the donor. 24 VerDate Sep 11 2014 03:37 Aug 15, 2019 Jkt 089200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H4120.IH H4120 kjohnson on DSK79L0C42 with BILLS 13 •HR 4120 IH ‘‘(5) OTHER GIFT TAX RULES.—For purposes 1 of chapters 12 and 13— 2 ‘‘(A) TREATMENT OF DISTRIBUTIONS.— 3 Except as provided in subparagraph (B), in no 4 event shall a distribution from a qualified dis- 5 tribution under a qualified first-time home- 6 owner assistance program be treated as a tax- 7 able gift. 8 ‘‘(B) TREATMENT OF DESIGNATION OF 9 NEW BENEFICIARY.—The taxes imposed by 10 chapters 12 and 13 shall apply to a transfer by 11 reason of a change in the designated beneficiary 12 under the program (or a rollover to the account 13 of a new beneficiary) unless the new beneficiary 14 is— 15 ‘‘(i) [Text truncated for display. 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