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S.F. No. 888 - First time homebuyer savings account program and credit
 
Author: Senator Karin Housley
 
Prepared By: Nora Pollock, Senate Counsel (651/297-8066)
 
Date: March 13, 2017



 

 

Section

Provision

1

Requires amounts of the first-time home buyer savings account specified in section 10 to be added back for purposes of calculating Minnesota taxable income.
 

2

Allows a subtraction of $15,000 for married joint filers or $7,500 for all other filers from federal taxable income for purposes of Minnesota taxable income for contributions to and earnings on a first-time home buyer savings account. The subtraction amount is phased out for married joint filers earning in excess of $250,000 and for all other filers earning in excess of $125,000. The income thresholds are adjusted annually for inflation. 
 

3

Requires payment of additional penalty tax on amounts withdrawn and not used for eligible costs and for any amounts remaining in the account after ten years from when the account was opened.
 

4

Provides a corresponding subtraction for purposes of calculating alternative minimum tax.
 

5

Adds a new chapter to Minnesota Statutes for the First-Time Home Buyer Savings Account program.
 

6

Establishes definitions for the program.
 

7

Provides requirements for designation of first-time home buyer savings accounts. Authorizes an individual to establish a first-time home buyer savings account. The individual must designate a beneficiary of the account. No more than one qualified beneficiary may be designated per account, but a married couple qualifies as one qualified beneficiary. Requires the commissioner of revenue to establish a process for account holders to notify the state of the account, account holder or holders, transfers to and from the account, and the designated qualified beneficiary of each account.

Allows an individual to jointly own a first-time home buyer account with another person if the holders of the account file a joint tax return. An individual may have more than one account but may not have multiple accounts that designate the same beneficiary. An individual may be the designated beneficiary on more than one account.

Requires that only cash may be contributed to an account and allows individuals other than the account holder to contribute to the account. There is no limit to the amount of contributions made to or retained in a first-time home buyer account.
 

8

Requires the account holder to not use funds in a first-time home buyer savings account to pay administrative expenses, except for a service fee. Requires the account holder to submit to the commissioner a list of transactions and eligible costs for which funds were expended. Allows transfer of funds to another first-time home buyer account at the same or a different financial institution.
 

9

States that financial institutions are not required to take action or ensure compliance by account holders or beneficiaries.
 

10

Allows a subtraction for account holders from federal taxable income for purposes of calculating Minnesota taxable income, up to $10,000 for married joint filers and $5,000 for all other filers, plus interest or dividends earned on the first-time home buyer savings account during the taxable year. The subtraction is allowed in the year a contribution for ten years following and including the year the account was established, but the total of amounts subtracted must not exceed $50,000. 

Requires account holders to add back the following to federal taxable income for purposes of calculating Minnesota taxable income:

  • Any amount withdrawn and not used to pay eligible costs (down payment, closing costs, new construction) or not transferred to another first-time home buyer account; and
  • Any amount remaining in the account after the end of the tenth year after the taxable year the account was established.

A ten percent tax is also imposed on the amount required to be added back. The tax is not imposed on withdrawals due to the account holder or beneficiary’s death or disability, or disbursement of assets under bankruptcy.
 

11

Provides an appropriation to the commissioner of revenue for administering the program.
 

12

Provides an unspecified statement of intent for the tax expenditure of the program.

 

 
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