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A05616 Summary:

BILL NOA05616B
 
SAME ASSAME AS S04058-B
 
SPONSORRamos
 
COSPNSRSkoufis, Schimminger, Santabarbara, Mosley, Hooper, Cook, Skartados, Joyner, Sepulveda, Cahill, Davila, Otis, Blake, Jean-Pierre, Ortiz, Braunstein, Cusick, Rodriguez, Weprin, Colton, Quart, Lupardo, Carroll, Rivera, Kim, Harris, Crespo, Steck, Vanel, Perry, Benedetto, Fahy, Hyndman, Dickens, Brabenec, Aubry, Barron, Woerner, Jones, Zebrowski, Lifton, Wright, Raia, Niou, De La Rosa, Rosenthal L, D'Urso, Morelle, Simon, Dilan, Glick, Gunther, Pichardo, Arroyo, Jaffee, Johns, Barrett, Peoples-Stokes, Cymbrowitz, Lavine, Barnwell, Mayer, Bronson, Wallace
 
MLTSPNSRAbbate, Crouch, Englebright, Hevesi, Jenne, Lentol, Magee, McDonald, Nolan, Thiele, Titone
 
Add Art 28 1250 - 1256, Priv Hous Fin L; amd 612, Tax L
 
Establishes the New York state first home savings program to authorize first time home buyers to establish savings accounts to buy their first home.
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A05616 Actions:

BILL NOA05616B
 
02/10/2017referred to ways and means
05/23/2017reported
05/25/2017advanced to third reading cal.525
06/05/2017passed assembly
06/05/2017delivered to senate
06/05/2017REFERRED TO RULES
06/07/2017recalled from senate
06/07/2017RETURNED TO ASSEMBLY
06/07/2017vote reconsidered - restored to third reading
06/07/2017amended on third reading 5616a
06/14/2017amended on third reading 5616b
06/19/2017repassed assembly
06/19/2017returned to senate
06/19/2017RECOMMITTED TO RULES
06/19/2017SUBSTITUTED FOR S4058B
06/19/20173RD READING CAL.1950
06/19/2017PASSED SENATE
06/19/2017RETURNED TO ASSEMBLY
12/06/2017delivered to governor
12/18/2017signed chap.472
12/18/2017approval memo.43
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A05616 Memo:

NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
submitted in accordance with Assembly Rule III, Sec 1(f)
 
BILL NUMBER: A5616B
 
SPONSOR: Ramos (MS)
  TITLE OF BILL: An act to amend the private housing finance law, in relation to establishing the New York state first home savings program, which authorizes first time home buyers to establish savings accounts to purchase a home; and to amend the tax law, in relation to establishing a personal income tax deduction for deposits into such accounts   PURPOSE: To provide future first time homebuyers a special savings account and deduction similar to the 529 College Savings Program that may be used for the purchase of a first home in New York State. Under this legis- lation, an individual would be eligible to make a $5,000.00 per year tax deductible deposit into a New York State First Home Savings account, $10,000.00 for couples. In addition, any interest accrued would remain untaxed. The savings account would remain under the sole custody of the New York State Comptroller.   SUMMARY OF PROVISIONS: Section 1 adds a new Article 28 to the Private Housing Finance Law to create the New York State First Home Savings Program to incentivize residents to save for the purchase of a first home in the State. A first time home can be the purchase or construction of a house, townhouse, condominium, or unit in a cooperative housing corporation within the State to be used as a primary residence of the individual for not less than two years after purchase, or construction. The New York State Comptroller and Commissioner of the Department of Taxation and Finance shall develop and implement the program in a manner consistent with the provisions of this article through rules and regu- lations. The Comptroller is responsible for entering into contracts with financial organizations to allow for holding and investments associated with this program. Contributions to first home savings accounts shall be limited to $100,000 per account. In the event of a non-qualified withdrawal, or if the home is not used as a primary residence for a period of two years, the entire account would be taxed, including any interest, as though it were income in the tax years the monies were withdrawn. A 10% state penalty tax on earnings may also apply. Penalties may be waived in the event of death, an unforeseeable emergency, qualifying military service, or employment location outside of the State whereby residency is required. Statements shall be provided to account owners annually and include contributions made, the value and distributions made during such period. An annual fee may be imposed upon the account owner for the maintenance of the account. To establish that an individual is a first time home buyer, the individ- ual shall complete a form prescribed by the Comptroller certifying under penalties of perjury, that such individual is a first time home buyer. A New York First Time Home Savings account may not be used for business, a vacation home, or as an investment, except an owner occupied multiple dwelling with no more than two rental units. Monies withdrawn from a New York First Home Savings account and any interest which has accrued shall not be considered as income to the individual and taxed as such if the monies are applied for the purchase, or construction of a qualified first home purchase. Section 2 amends subsection (c) of section 612 of the tax law by adding a new paragraph 44 to provide the amount that may be subtracted from federal adjusted gross income pursuant to subsection (w) of this section. Section 3 amends section 612 of the tax law to add a new subsection (w) to provide that an account owner shall be able to deduct annually from his or her federal adjusted gross income an amount, not to exceed five thousand dollars ($10,000 if married and filing jointly), deposited into a New York State First Home Savings account. Section 4 sets forth the effective date.   JUSTIFICATION: Home ownership has long been recognized as a part of the "American Dream." However, down payment requirements, closing costs, real estate transfer taxes and mortgage recording taxes can often make first time homeownership seem out of reach. The New York State First Home Savings Program will allow persons who have not had an ownership interest in a principal residence to establish an account for the purchase of their first home, using a deduction against their personal income taxes of up to five thousand dollars for individuals and ten thousand dollars for married couples. This legislation is a responsible way to incentivize the dream of home ownership and help our housing market rebound. It will also stimulate the local economy and create jobs by increasing the demand for single family homes, townhouses, condominiums or cooperative housing units in New York State. Responsible homeownership is an important part of the housing continuum and the New York State First Time Home Savings Program will help make that a reality for future first time home buyers.   PRIOR LEGISLATIVE HISTORY: 2016: S.7903-A Passed Senate   FISCAL IMPLICATIONS: To be determined.   EFFECTIVE DATE: This act shall take effect on the 180th day after it shall have become a law, and shall apply to all taxable years commencing on or after the first of January next succeeding the date on which it shall have become law; provided however, that subdivision 14 of section 1255 of the private housing finance law, as added by section one of this act, shall take effect immediately.
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A05616 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                         5616--B
                                                                Cal. No. 525
 
                               2017-2018 Regular Sessions
 
                   IN ASSEMBLY
 
                                    February 10, 2017
                                       ___________
 
        Introduced  by  M.  of  A.  RAMOS,  SKOUFIS,  SCHIMMINGER, SANTABARBARA,
          MOSLEY, HOOPER, COOK, SKARTADOS, JOYNER,  SEPULVEDA,  CAHILL,  DAVILA,
          OTIS,  BLAKE, JEAN-PIERRE, ORTIZ, BRAUNSTEIN, CUSICK, MOYA, RODRIGUEZ,
          WEPRIN, COLTON, QUART, LUPARDO, CARROLL, RIVERA, KIM, HARRIS,  KEARNS,
          CRESPO, STECK, VANEL, PERRY, BENEDETTO, FAHY, HYNDMAN, DICKENS, BRABE-
          NEC,  AUBRY,  BARRON, WOERNER, JONES, ZEBROWSKI, LIFTON, WRIGHT, RAIA,
          NIOU, DE LA ROSA,  ROSENTHAL,  D'URSO,  SIMANOWITZ,  GJONAJ,  MORELLE,
          SIMON,   DILAN,  GLICK,  GUNTHER,  PICHARDO,  ARROYO,  JAFFEE,  JOHNS,
          BARRETT, PEOPLES-STOKES, CYMBROWITZ, LOPEZ, LAVINE,  BARNWELL,  MAYER,
          BRONSON -- Multi-Sponsored by -- M. of A. ABBATE, CROUCH, ENGLEBRIGHT,
          HEVESI,  JENNE, LENTOL, MAGEE, McDONALD, NOLAN, THIELE, TITONE -- read
          once and referred to the Committee on Ways and Means -- advanced to  a
          third  reading,  passed  by  Assembly  and  delivered  to  the Senate,
          recalled from the Senate, vote  reconsidered,  bill  amended,  ordered
          reprinted,  retaining its place on the order of third reading -- again
          amended on third reading, ordered reprinted, retaining  its  place  on
          the order of third reading
 
        AN  ACT  to amend the private housing finance law, in relation to estab-
          lishing the New York state first home savings program,  which  author-
          izes  first time home buyers to establish savings accounts to purchase
          a home; and to amend the  tax  law,  in  relation  to  establishing  a
          personal income tax deduction for deposits into such accounts
 
          The  People of the State of New York, represented in Senate and Assem-
        bly, do enact as follows:
 
     1    Section 1. The private housing finance law is amended by adding a  new
     2  article 28 to read as follows:
     3                               ARTICLE XXVIII
     4                          NEW YORK STATE FIRST HOME
     5                               SAVINGS PROGRAM
     6  Section 1250. Program established.
     7          1251. Purposes.
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD00765-10-7

        A. 5616--B                          2
 
     1          1252. Definitions.
     2          1253. Functions of the comptroller.
     3          1254. Powers of the comptroller.
     4          1255. Program requirements; first home savings account.
     5          1256. Program limitations; first home savings account.
     6    §  1250. Program established. There is hereby established a first home
     7  savings program and such program shall be known and may be cited as  the
     8  "New York state first home savings program".
     9    §  1251.  Purposes.  The purposes of the program shall be to authorize
    10  the establishment of first home savings accounts and to  provide  guide-
    11  lines for the maintenance of such accounts to:
    12    1.  enable  residents  of this state to benefit from the tax incentive
    13  provided for qualified state first home savings accounts  under  section
    14  six hundred twelve of the tax law; and
    15    2.  incentivize  residents  to  save  for the purchase of a first home
    16  within the state.
    17    § 1252. Definitions. As used in  this  article,  the  following  terms
    18  shall have the following meanings:
    19    1.  "Account" or "first home savings account" shall mean an individual
    20  savings account established in accordance with the  provisions  of  this
    21  article  for  the  exclusive  benefit of the account owner or designated
    22  beneficiary that is the first time buyer of a home, townhome,  condomin-
    23  ium or unit in a cooperative housing corporation.
    24    2.  "Account owner" shall mean a taxpayer who enters into a first home
    25  savings agreement pursuant to the provisions of this article,  including
    26  a  person  who  enters into such an agreement as a fiduciary or agent on
    27  behalf of a trust, estate, partnership, association, company  or  corpo-
    28  ration.
    29    3.  "Designated beneficiary" shall mean, with respect to an account or
    30  accounts, the designated individual or individuals    whose  first  home
    31  purchase expenses are expected to be paid from the account or accounts.
    32    4.  "Financial  organization" shall mean an organization authorized to
    33  do business in the state, and (a) which is an  authorized  fiduciary  to
    34  act  as a trustee pursuant to the provisions of an act of congress enti-
    35  tled  "Employee  Retirement  Income  Security  Act  of  1974",  as  such
    36  provisions  may  be  amended from time to time, or an insurance company;
    37  and (b)(i) is licensed or  chartered  by  the  department  of  financial
    38  services,  (ii)  is  chartered  by  an agency of the federal government,
    39  (iii) is subject to the jurisdiction and regulation  of  the  securities
    40  and  exchange  commission  of  the federal government, (iv) is any other
    41  entity otherwise authorized to act in this state as a  trustee  pursuant
    42  to  the  provisions  of an act of congress entitled "Employee Retirement
    43  Income Security Act of 1974", as such provisions  may  be  amended  from
    44  time  to time, (v) or any banking organization as defined in subdivision
    45  eleven of section two of the banking law, national banking  association,
    46  state  chartered  credit  union,  federal  mutual  savings bank, federal
    47  savings and loan association or federal credit union.
    48    5. "First time home buyer" shall mean an  individual  or  individuals,
    49  neither  of  whom  has or had an ownership interest in a principal resi-
    50  dence at any time, including residences owned in the  United  States  or
    51  abroad.    No such person shall own any other home including vacation or
    52  investment residences, including residences owned in the  United  States
    53  or  abroad,  except as otherwise provided in this subdivision. If either
    54  the individual or individuals are not first time  home  buyers,  neither
    55  the  individual  or  individuals  shall  be considered a first time home
    56  buyer. If an individual's only potentially disqualifying present  owner-

        A. 5616--B                          3
 
     1  ship  interest  is ownership of a mobile or manufactured home, the indi-
     2  vidual shall be considered a first time home buyer and shall be eligible
     3  for a first home account deduction. For the purposes of this  article  a
     4  "mobile  or  manufactured home" shall mean a structure that is valued as
     5  personal property and not real property. If, due to his or her ownership
     6  of a mobile or manufactured home, the  individual  has  claimed  a  real
     7  estate  tax or home mortgage deduction on his or her personal income tax
     8  returns, such individual shall not be considered a first time home buyer
     9  regardless of whether the mobile of  manufactured  home  was  considered
    10  personal or real property.
    11    6.  "Ownership  interest"  shall  mean  a fee simple interest, a joint
    12  tenancy, a tenancy in common, a tenancy by the entirety, the interest of
    13  a tenant-share holder  in  a  cooperative,  a  life  estate  or  a  land
    14  contract.  Interests which do not constitute ownership interests include
    15  the following: (a) remainder interests, (b) a lease with or  without  an
    16  option  to  purchase,  (c) a mere expectancy to inherit an interest in a
    17  residence, (d) the interest that a purchaser of a residence acquires  on
    18  the  execution of a purchase contract and (e) an interest in real estate
    19  other than a residence.
    20    7. "Program" shall mean the New York first home savings program estab-
    21  lished pursuant to this article.
    22    8. "Qualified first home purchase expenses" shall mean monies  applied
    23  for  the  purchase or construction of a house, townhouse, condominium or
    24  unit in a cooperative housing corporation within the state to be used as
    25  a primary residence of the account owner or designated beneficiary for a
    26  period of not less than two years after purchase.
    27    9. "Qualified residential housing"  shall  mean  a  house,  townhouse,
    28  condominium  or  unit  in  a  cooperative housing corporation within the
    29  state.
    30    10. "Qualified withdrawal" shall mean a withdrawal from an account  to
    31  pay  the  qualified  first home purchase expense of the account owner or
    32  designated beneficiary of the account.
    33    11. "Nonqualified withdrawal" shall mean a withdrawal from an  account
    34  but shall not include:
    35    (a) a qualified withdrawal;
    36    (b) a withdrawal made as the result of death;
    37    (c) an unforeseeable emergency; or
    38    (d) need based upon qualifying for military service in the armed forc-
    39  es of the United States as determined by rules an regulations promulgat-
    40  ed by the comptroller.
    41    12. "Comptroller" shall mean the state comptroller.
    42    13.  "Management  contract"  shall  mean  the contract executed by the
    43  comptroller and a financial organization selected to act as a depository
    44  and manager of the program.
    45    14. "First home savings agreement" shall mean an agreement between the
    46  comptroller or a financial organization and the account owner.
    47    15. "Program manager" shall mean a financial organization selected  by
    48  the comptroller to act as a depository and manager of the program.
    49    16.  "Commissioner"  shall  mean  the  commissioner  of  taxation  and
    50  finance.
    51    § 1253. Functions of the comptroller.  1. The comptroller shall imple-
    52  ment the program under the terms  and  conditions  established  by  this
    53  article and a memorandum of understanding with the commissioner relating
    54  to  any terms or conditions not otherwise expressly provided for in this
    55  article.
    56    2. In furtherance of such implementation the comptroller shall:

        A. 5616--B                          4
 
     1    (a) develop and implement the program in a manner consistent with  the
     2  provisions  of this article through rules and regulations established in
     3  accordance with the state administrative procedure act;
     4    (b) engage the services of consultants on a contract basis for render-
     5  ing professional and technical assistance and advice;
     6    (c)  seek rulings and other guidance from the United States Department
     7  of Treasury and the Internal Revenue Service relating to the program;
     8    (d) make changes to the program required for the participants  in  the
     9  program to obtain the state income tax benefits or treatment provided by
    10  this article;
    11    (e) charge, impose and collect administrative fees and service charges
    12  in  connection  with  any agreement, contract or transaction relating to
    13  the program;
    14    (f) develop marketing plans and promotion materials;
    15    (g) establish the methods by which the funds held in such accounts  be
    16  dispersed;
    17    (h)  establish the method by which funds shall be allocated to pay for
    18  administrative costs; and
    19    (i) do all things necessary and proper to carry out  the  purposes  of
    20  this article.
    21    §  1254.  Powers  of the comptroller. 1. The comptroller may implement
    22  the program through use of financial organizations as account  deposito-
    23  ries  and  managers.  Under  the program, an account owner may establish
    24  accounts directly with an account depository.
    25    2. The comptroller may solicit proposals from financial  organizations
    26  to  act as depositories and managers of the program. Financial organiza-
    27  tions submitting proposals  shall  describe  the  investment  instrument
    28  which will be held in accounts.  The comptroller shall select as program
    29  depositories  and  managers  the  financial organization, from among the
    30  bidding financial organizations that demonstrates the most  advantageous
    31  combination,  both  to potential program participants and this state, of
    32  the following factors:
    33    (a) financial stability and integrity of the financial organization;
    34    (b) the safety of the investment instrument being offered;
    35    (c) the ability of the investment instrument to track increasing costs
    36  of residential housing;
    37    (d) the ability of the financial organization to satisfy recordkeeping
    38  and reporting requirements;
    39    (e) the financial organization's plan for promoting  the  program  and
    40  the investment it is willing to make to promote the program;
    41    (f)  the  fees,  if any, proposed to be charged to persons for opening
    42  accounts;
    43    (g) the minimum initial deposit and  minimum  contributions  that  the
    44  financial organization will require;
    45    (h)  the  ability  of banking organizations to accept electronic with-
    46  drawals, including payroll deduction plans; and
    47    (i) other benefits to the state  or  its  residents  included  in  the
    48  proposal, including fees payable to the state to cover expenses of oper-
    49  ation of the program.
    50    3.  The  comptroller may enter into a contract with a financial organ-
    51  ization. Such financial organization management may provide one or  more
    52  types of investment instrument.
    53    4. The comptroller may select more than one financial organization for
    54  the program.
    55    5.  A management contract shall include, at a minimum, terms requiring
    56  the financial organization to:

        A. 5616--B                          5
 
     1    (a) take any action required to keep the program  in  compliance  with
     2  requirements  of  section  twelve hundred fifty-five of this article and
     3  any actions not contrary to its contract to manage the program to quali-
     4  fy as a "first  home  savings  account"  under  paragraph  forty-two  of
     5  subsection (c) of section six hundred twelve of the tax law;
     6    (b)  keep  adequate  records of each account, keep each account segre-
     7  gated from each other account, and  provide  the  comptroller  with  the
     8  information  necessary  to  prepare  the  statements required by section
     9  twelve hundred fifty-five of this article;
    10    (c) compile and total information contained in statements required  to
    11  be  prepared under section twelve hundred fifty-five of this article and
    12  provide such compilations to the comptroller;
    13    (d) if there is more than one program manager, provide the comptroller
    14  with such information necessary to  determine  compliance  with  section
    15  twelve hundred fifty-five of this article;
    16    (e)  provide  the  comptroller or his designee access to the books and
    17  records of the program manager to the extent needed to determine compli-
    18  ance with the contract;
    19    (f) hold all accounts for the benefit of the account owner;
    20    (g) be audited at  least  annually  by  a  firm  of  certified  public
    21  accountants selected by the program manager and that the results of such
    22  audit be provided to the comptroller;
    23    (h)  provide the comptroller with copies of all regulatory filings and
    24  reports made by it during the term of the management contract  or  while
    25  it  is  holding any accounts, other than confidential filings or reports
    26  that will not become part of the program. The program manager shall make
    27  available for review by the comptroller  the  results  of  any  periodic
    28  examination  of  such manager by any state or federal banking, insurance
    29  or securities commission, except to  the  extent  that  such  report  or
    30  reports  may  not be disclosed under applicable law or the rules of such
    31  commission; and
    32    (i) ensure that any description of the program, whether in writing  or
    33  through  the  use of any media, is consistent with the marketing plan as
    34  developed pursuant to the provisions of section  twelve  hundred  fifty-
    35  three of this article.
    36    6. The comptroller may provide that an audit shall be conducted of the
    37  operations  and financial position of the program depository and manager
    38  at any time if the comptroller has any reason to be concerned about  the
    39  financial  position,  the  recordkeeping  practices,  or  the  status of
    40  accounts of such program depository and manager.
    41    7. During the term of any contract with a program manager,  the  comp-
    42  troller shall conduct an examination of such manager and its handling of
    43  accounts.  Such  examination  shall  be conducted at least biennially if
    44  such manager is not otherwise subject to  periodic  examination  by  the
    45  superintendent  of  financial  services,  the  federal deposit insurance
    46  corporation or other similar entity.
    47    8. (a) If selection of a financial organization as a  program  manager
    48  or depository is not renewed, after the end of its term:
    49    (i) accounts previously established and held in investment instruments
    50  at such financial organization may be terminated;
    51    (ii) additional contributions may be made to such accounts;
    52    (iii)  no new accounts may be placed with such financial organization;
    53  and
    54    (iv) existing accounts held by such depository shall remain subject to
    55  all oversight and reporting requirements established by the comptroller.

        A. 5616--B                          6
 
     1    (b) If the  comptroller  terminates  a  financial  organization  as  a
     2  program  manager or depository, he or she shall take custody of accounts
     3  held by such financial organization and shall seek to promptly  transfer
     4  such  accounts  to  another financial organization that is selected as a
     5  program manager or depository and into investment instruments as similar
     6  to the original instruments as possible.
     7    9. The comptroller may enter into such contracts as it deems necessary
     8  and proper for the implementation of the program.
     9    §  1255.  Program  requirements;  first home savings account. 1. First
    10  home savings accounts established pursuant to  the  provisions  of  this
    11  article shall be governed by the provisions of this section.
    12    2.  A  first  home  savings  account  may  be opened by any person who
    13  desires to save money for  the  payment  of  the  qualified  first  home
    14  purchase  expenses  of  the  account owner or designated beneficiary. An
    15  account owner may designate another person as  successor  owner  of  the
    16  account  in  the  event of the death of the original account owner. Such
    17  person who opens an account or any successor owner shall  be  considered
    18  the account owner.
    19    (a) An application for such account shall be in the form prescribed by
    20  the program and contain the following:
    21    (i) the name, address and social security number or employer identifi-
    22  cation number of the account owner;
    23    (ii) the designation of a designated beneficiary;
    24    (iii)  the name, address, and social security number of the designated
    25  beneficiary; and
    26    (iv) such other information as the program may require.
    27    (b) The comptroller and the corporation may establish  a  nominal  fee
    28  for such application.
    29    3.  Any person, including the account owner, may make contributions to
    30  the account after the account is opened.
    31    4. Contributions to accounts may be made only in cash.
    32    5. An account owner may withdraw all or part of the  balance  from  an
    33  account  as  authorized  under  rules  governing the program. Such rules
    34  shall include provisions that will generally enable the determination as
    35  to whether a withdrawal is a  nonqualified  withdrawal  or  a  qualified
    36  withdrawal.
    37    6.  (a)  An  account owner may change the designated beneficiary of an
    38  account in accordance with procedures established by the  memorandum  of
    39  understating  pursuant  to  the  provisions  of  section  twelve hundred
    40  fifty-three of this article.
    41    (b) An account owner may transfer all or a portion of  an  account  to
    42  another first home savings account.
    43    (c)  Changes  in  designated  beneficiaries  and  transfers under this
    44  subdivision shall not be permitted to the extent that they  would  cause
    45  all  accounts for the same beneficiary to exceed the permitted aggregate
    46  maximum account balance.
    47    7. The program shall provide separate accounting for  each  designated
    48  beneficiary.
    49    8.  No account owner or designated beneficiary of any account shall be
    50  permitted to direct the investment of any contributions to an account or
    51  the earnings thereon more than two times in any calendar year.
    52    9. Neither an account owner nor a designated beneficiary  may  use  an
    53  interest in an account as security for a loan. Any pledge of an interest
    54  in an account shall be of no force and effect.
    55    10.  The  comptroller shall promulgate rules or regulations to prevent
    56  contributions on behalf of a designated  beneficiary  in  excess  of  an

        A. 5616--B                          7
 
     1  amount  that  would cause the aggregate account balance for all accounts
     2  for a designated beneficiary to exceed a  maximum  account  balance,  as
     3  established from time to time by the comptroller.
     4    11.  Contributions to a first home savings account shall be limited to
     5  one hundred thousand dollars per account. This  amount  shall  not  take
     6  into consideration any gain or loss to the principal investment into the
     7  account.
     8    12.  In the event that an individual makes a "nonqualified withdrawal"
     9  of monies from the first home savings account such individual shall have
    10  the entire account taxed, including  any  interest,  as  though  it  was
    11  income  at  the  account  owner's  federal tax rate in the tax years the
    12  monies were withdrawn, and incur an additional ten percent state penalty
    13  on the amount of earnings. In the event  account  owners  or  designated
    14  beneficiary  does not use the qualified residential housing as a primary
    15  residence for a period of not less than two years after the purchase  of
    16  such  housing,  the  account  owner shall have the entire account taxed,
    17  including any interest, as though it was ordinary income at the  account
    18  owner's  federal tax rate in the tax years the monies were withdrawn and
    19  incur an additional ten percent state penalty on the amount of earnings.
    20  For purposes of this article, the two year period  shall  begin  at  the
    21  time  title  is  transferred  to  the first time home buyer. The penalty
    22  shall be in addition to any taxes due pursuant to a non-qualified  with-
    23  drawal from a first home savings account.
    24    13.  Penalties may be waived by the commissioner if the individual can
    25  show proof that the reason the individual  did  not  use  the  qualified
    26  residential  housing as a primary residence for a period of two years or
    27  more after the purchase or construction was due to either:
    28    (a) an employment relocation outside the  state  and  such  relocation
    29  required the individual to become a resident of another state;
    30    (b) an unforeseeable emergency;
    31    (c) an absence due to qualifying military service; or
    32    (d) death.
    33    For  purposes  of this subdivision, an "unforeseeable emergency" shall
    34  mean a severe financial hardship resulting  from  illness,  accident  or
    35  property  loss  to the account owner, or his or her dependents resulting
    36  in circumstances beyond their control. The circumstances that constitute
    37  an unforeseeable financial emergency will depend on the  facts  of  each
    38  case,  however,  withdrawal  of  account  funds may not be made, without
    39  penalty, to the extent that such hardship  is  or  may  be  relieved  by
    40  either:
    41    (i) reimbursement or compensation by insurance or otherwise; or
    42    (ii)  liquidation  of the individual's assets to the extent the liqui-
    43  dation of such assets would not itself cause severe financial hardship.
    44    14. The commissioner and the comptroller are  directed  to  promulgate
    45  all  rules and regulations necessary to implement the provisions of this
    46  subsection and are hereby directed to establish, supervise and  regulate
    47  first home savings accounts authorized to be created by this section.
    48    15. (a) If there is any distribution from a first home savings account
    49  to any individual or for the benefit of any individual during a calendar
    50  year,  such  distribution  shall  be  reported  to  the Internal Revenue
    51  Service and the  account  owner,  the  designated  beneficiary,  or  the
    52  distributee to the extent required by federal law or regulation.
    53    (b)  Statements  shall be provided to each account owner at least once
    54  each year within sixty days after the end of the twelve month period  to
    55  which  they  relate. The statement shall identify the contributions made
    56  during a preceding twelve month period, the total contributions made  to

        A. 5616--B                          8
 
     1  the  account  through the end of the period, the value of the account at
     2  the end of such period, distributions made during such  period  and  any
     3  other  information  that the comptroller shall require to be reported to
     4  the account owner.
     5    (c)  Statements and information relating to accounts shall be prepared
     6  and filed to the extent required by federal and state tax laws.
     7    16. An annual fee may be imposed upon the account owner for the  main-
     8  tenance of the account.
     9    17. The program shall disclose the following information in writing to
    10  each account owner of a first home savings account:
    11    (a)  the  terms  and  conditions for establishing a first home savings
    12  account;
    13    (b) any restrictions on the substitution of beneficiaries;
    14    (c) the person or entity entitled to terminate the first home  savings
    15  agreement;
    16    (d) the period of time during which a beneficiary may receive benefits
    17  under the first home savings agreement;
    18    (e)  the  terms  and  conditions  under  which  money may be wholly or
    19  partially withdrawn from the program, including, but not limited to, any
    20  reasonable charges and fees that may be imposed for withdrawal;
    21    (f) the probable tax consequences associated with contributions to and
    22  distributions from accounts; and
    23    (g) all other rights and obligations pursuant to  first  home  savings
    24  agreements,  and  any  other  terms,  conditions,  and provisions deemed
    25  necessary and appropriate by the terms of the memorandum of  understand-
    26  ing  entered into pursuant to section twelve hundred fifty-three of this
    27  article.
    28    18. First home savings agreements shall be subject  to  section  four-
    29  teen-c of the banking law and the "truth-in-savings" regulations promul-
    30  gated thereunder.
    31    19.  Nothing  in  this  article or in any first home savings agreement
    32  entered into pursuant to this article shall be construed as a  guarantee
    33  by the state that the account owner or designated beneficiary will qual-
    34  ify for the purchase of a home.
    35    20.  To establish that an account owner or designated beneficiary is a
    36  first time home buyer, the individual shall complete a form  promulgated
    37  by the comptroller certifying, under the penalties of perjury, that such
    38  individual is a first time home buyer.
    39    21. An individual must not intend to use any portion of the real prop-
    40  erty  purchased using the first home savings account funds in a trade or
    41  business, or as a vacation home or as an investment, except as an  owner
    42  occupied multiple dwelling with no more than two rental units.
    43    22. Monies withdrawn from first home savings accounts and any interest
    44  which  has  accrued  shall  not  be  considered as taxable income to the
    45  account owner for state personal income taxation purposes,  so  long  as
    46  the  monies  are applied for the purchase or construction of a qualified
    47  first home purchase by the account owner or  designated  beneficiary  of
    48  the account.
    49    § 1256. Program limitations; first home savings account. 1. Nothing in
    50  this article shall be construed to:
    51    (a)  give any designated beneficiary any rights or legal interest with
    52  respect to an account unless the designated beneficiary is  the  account
    53  owner;
    54    (b) guarantee that the account owner or designated beneficiary will be
    55  financially qualified to purchase a home;

        A. 5616--B                          9
 
     1    (c)  create state residency for an individual merely because the indi-
     2  vidual is a designated beneficiary; or
     3    (d)  guarantee  that  amounts  saved  pursuant  to the program will be
     4  sufficient to cover the down payment or closing costs  pursuant  to  the
     5  purchase of a qualified first home.
     6    2.  (a) Nothing in this article shall create or be construed to create
     7  any obligation of the comptroller, the state, or any agency  or  instru-
     8  mentality of the state to guarantee for the benefit of the account owner
     9  or designated beneficiary with respect to:
    10    (i) the rate of interest or other return on any account; and
    11    (ii) the payment of interest or other return on any account.
    12    (b)  The  comptroller  by  rule or regulation shall provide that every
    13  contract, application, deposit slip or other similar document  that  may
    14  be used in connection with a contribution to an account clearly indicate
    15  that  the  account is not insured by the state and neither the principal
    16  deposited nor the investment return is guaranteed by the state.
    17    § 2. Subsection (b) of section 612 of the tax law is amended by adding
    18  a new paragraph 42 to read as follows:
    19    (42) (A) Excess distributions received during the taxable  year  by  a
    20  distributee  of  a  first home savings account established under the New
    21  York state first home savings program provided for under  article  twen-
    22  ty-eight  of  the private housing finance law, to the extent such excess
    23  distributions are deemed attributable to  the  deductible  contributions
    24  under paragraph forty-two of subsection (c) of this section.
    25    (B)  (i) The term "excess distributions" means distributions which are
    26  not:
    27    (I) qualified withdrawals within the meaning  of  subdivision  ten  of
    28  section twelve hundred fifty-two of the private housing finance law;
    29    (II)  withdrawals  made  as a result of the death or disability of the
    30  designated beneficiary within  the  meaning  of  subdivision  eleven  of
    31  section twelve hundred fifty-two of such law; or
    32    (III)  transfers  described  in  paragraph  (b)  of subdivision six of
    33  section twelve hundred fifty-five of such law.
    34    (ii) Excess distributions shall be deemed attributable  to  deductible
    35  contributions  to the extent the amount of any such excess distribution,
    36  when added to  all  previous  excess  distributions  from  the  account,
    37  exceeds the aggregate of all nondeductible contributions to the account.
    38    § 3. Subsection (c) of section 612 of the tax law is amended by adding
    39  two new paragraphs 42 and 43 to read as follows:
    40    (42) Contributions made during the taxable year by an account owner to
    41  a  first home savings account established under the New York state first
    42  home savings program provided for  under  article  twenty-eight  of  the
    43  private  housing  finance  law, to the extent not deductible or eligible
    44  for credit for federal  income  tax  purposes,  provided,  however,  the
    45  exclusion  provided for in this paragraph shall not exceed five thousand
    46  dollars for an individual or head of household, and for married  couples
    47  who  file  joint  tax  returns,  shall  not exceed ten thousand dollars;
    48  provided, further that such exclusion shall be  available  only  to  the
    49  account owner and not to any other person.
    50    (43) Distributions from a first home savings account established under
    51  the New York state first home savings program provided for under article
    52  twenty-eight  of the private housing finance law, to the extent includi-
    53  ble in gross income for federal income tax purposes.
    54    § 4. This act shall take effect on the one hundred eightieth day after
    55  it shall have become a law, and shall apply to taxable years  commencing
    56  on  or  after  the first of January next succeeding the date on which it

        A. 5616--B                         10
 
     1  shall have become law; provided, however,  that  effective  immediately,
     2  the commissioner of taxation and finance and the comptroller are author-
     3  ized  and  directed  to promulgate any rules or regulations necessary to
     4  implement  the provisions of this act on its effective date on or before
     5  such date.
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