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622
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Introduced
HOUSE
FILE
622
BY
COMMITTEE
ON
COMMERCE
(SUCCESSOR
TO
HSB
149)
A
BILL
FOR
An
Act
creating
a
catastrophic
savings
account
and
modifying
1
individual
income
taxes
for
account
holders
and
including
2
applicability
provisions.
3
BE
IT
ENACTED
BY
THE
GENERAL
ASSEMBLY
OF
THE
STATE
OF
IOWA:
4
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Section
1.
Section
422.7,
Code
2025,
is
amended
by
adding
1
the
following
new
subsection:
2
NEW
SUBSECTION
.
45.
a.
Subject
to
the
restrictions
of
this
3
subsection,
subtract
the
sum
of
the
following
amounts:
4
(1)
The
amount
of
contributions
made
by
an
account
holder
5
during
the
tax
year
to
the
account
holder’s
catastrophic
6
savings
account
under
chapter
541C,
not
to
exceed
the
following
7
aggregate
lifetime
limits:
8
(a)
For
account
holders
whose
annual
homeowner’s
property
9
and
casualty
insurance
policy
premium
paid
during
the
tax
year
10
is
less
than
one
thousand
dollars,
an
amount
not
to
exceed
two
11
thousand
dollars.
12
(b)
For
account
holders
whose
annual
homeowner’s
property
13
and
casualty
insurance
policy
premium
during
the
tax
year
is
14
equal
to
or
exceeds
one
thousand
dollars,
an
amount
not
to
15
exceed
the
lesser
of
the
following:
16
(i)
Fifteen
thousand
dollars.
17
(ii)
Twice
the
annual
homeowner’s
property
and
casualty
18
insurance
policy
premium
paid
during
the
tax
year.
19
(c)
For
account
holders
who
are
self-insured,
or
choose
not
20
to
obtain
a
homeowner’s
property
and
casualty
insurance
policy,
21
or
are
unable
to
obtain
a
homeowner’s
property
and
casualty
22
insurance
policy,
an
amount
not
exceeding
three
hundred
fifty
23
thousand
dollars,
or
the
assessed
value
of
the
home,
whichever
24
is
less.
25
(2)
To
the
extent
included,
income
from
interest
received
26
from
the
account
holder’s
catastrophic
savings
account.
27
b.
(1)
The
subtraction
in
paragraph
“a”
shall
not
be
28
allowed
if
funds
are
withdrawn
from
an
account
holder’s
29
catastrophic
savings
account
and
used
for
purposes
other
than
30
as
allowed
in
this
subsection
or
chapter
541C.
31
(2)
Add,
to
the
extent
previously
deducted
under
paragraph
32
“a”
,
the
amount
withdrawn
during
the
tax
year
from
an
33
account
holder’s
catastrophic
savings
account
in
excess
of
34
an
authorized
payment
for
qualified
catastrophic
expenses
35
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authorized
in
section
541C.3.
1
(3)
If
an
account
holder
dies,
the
amount
of
money
in
the
2
catastrophic
savings
account
shall
be
included
in
the
taxable
3
income
of
the
person
who
receives
the
account,
unless
that
4
person
is
the
surviving
spouse
of
the
account
holder.
Upon
5
the
death
of
the
surviving
spouse,
the
amount
of
money
in
6
the
account
shall
be
included
in
the
taxable
income
of
the
7
person
who
receives
the
account.
The
additional
tax
imposed
8
in
subparagraph
(5)
of
this
paragraph
does
not
apply
to
a
9
distribution
from
the
account
upon
the
death
of
the
account
10
holder
or
the
surviving
spouse.
11
(4)
Except
for
certain
deaths
described
in
subparagraph
12
(3),
if
an
account
holder
sells
their
homestead
and
does
13
not
purchase
a
new
homestead
within
six
months
of
the
sale,
14
the
account
holder
shall
include
the
amount
of
money
in
the
15
catastrophic
savings
account
as
taxable
income
in
the
year
the
16
homestead
is
sold.
17
(5)
For
any
amount
considered
a
withdrawal
required
to
be
18
added
to
net
income
pursuant
this
paragraph,
the
account
holder
19
shall
be
assessed
a
penalty
equal
to
two
and
one-half
percent
20
of
the
amount
of
the
withdrawal
in
excess
of
an
authorized
21
payment
for
qualified
catastrophic
expenses.
The
penalty
22
shall
not
apply
to
withdrawals
due
to
the
death
of
the
account
23
holder,
or
to
withdrawals
made
pursuant
to
a
garnishment,
24
levy,
or
other
order,
including
but
not
limited
to
an
order
in
25
bankruptcy
following
a
filing
for
protection
under
the
federal
26
bankruptcy
code,
11
U.S.C.
§101
et
seq.
27
(6)
For
purposes
of
this
paragraph,
the
transfer
of
amounts
28
in
order
to
change
catastrophic
savings
account
institutions
29
by
the
account
holder
shall
not
cause
such
transfer
to
be
30
considered
a
withdrawal
to
be
added
to
net
income
pursuant
this
31
paragraph.
32
c.
Add,
to
the
extent
deducted
for
federal
tax
purposes,
33
interest,
taxes,
and
other
miscellaneous
expenses
to
the
extent
34
such
amounts
are
qualified
catastrophic
expenses
in
connection
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with
a
catastrophic
loss
that
were
paid
or
reimbursed
from
1
funds
in
the
catastrophic
savings
account.
2
d.
For
purposes
of
this
subsection:
3
(1)
“Account
holder”
means
the
same
as
defined
in
section
4
541C.2,
regardless
of
filing
status.
5
(2)
“Catastrophic
savings
account”
means
the
same
as
defined
6
in
section
541C.2.
7
(3)
“Qualified
catastrophic
expense”
means
the
same
as
8
defined
in
section
541C.2.
9
Sec.
2.
NEW
SECTION
.
541C.1
Short
title.
10
This
chapter
may
be
cited
as
the
“Catastrophic
Savings
11
Account
Act”
.
12
Sec.
3.
NEW
SECTION
.
541C.2
Definitions.
13
As
used
in
this
chapter,
unless
the
context
otherwise
14
requires:
15
1.
“Account
holder”
means
an
individual
who
is
a
resident
16
and
who
establishes,
either
individually
or
jointly
with
the
17
individual’s
spouse,
a
catastrophic
savings
account
pursuant
18
to
section
541C.3.
19
2.
“Catastrophic
event”
means
windstorms,
cyclones,
20
earthquakes,
ice
storms,
tornadoes,
high
winds,
flood,
hail
21
and
force
majeure,
and
similar
perils
not
normally
among
those
22
covered
under
most
property
casualty
insurance
policies,
but
23
obtainable
through
the
purchase
of
wind,
wind
and
hail,
flood,
24
or
storm
or
windstorm
coverage,
or
any
combination
of
those
25
coverages.
The
term
“catastrophic
event”
also
includes
any
26
event
for
which
a
major
disaster
has
been
declared
to
exist
by
27
the
president
of
the
United
States
or
for
which
the
governor
28
has
proclaimed
a
state
of
disaster
emergency.
29
3.
“Catastrophic
savings
account”
or
“savings
account”
means
30
an
account
that
meets
the
requirements
of
sections
541C.3
and
31
541C.4
and
that
was
established
for
the
purpose
of
paying
or
32
reimbursing
a
designated
beneficiary’s
qualified
catastrophic
33
expenses.
34
4.
“Department”
means
the
department
of
revenue.
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5.
“Designated
beneficiary”
means
an
individual
meeting
the
1
requirements
of
section
541C.3,
subsection
2,
and
designated
2
by
an
account
holder
as
beneficiary
of
the
account
holder’s
3
catastrophic
savings
account
pursuant
to
section
541C.3,
4
subsection
2.
5
6.
“Financial
institution”
means
the
same
as
defined
in
6
section
537.1301.
7
7.
“Homestead”
means
the
same
as
defined
in
section
425.11.
8
8.
“Individual”
means
a
natural
person.
9
9.
“Qualified
catastrophic
expense”
means
the
payment
of
a
10
homeowner’s
property
and
casualty
insurance
policy
deductible
11
under
an
insurance
policy
covering
the
account
holder’s
12
homestead,
if
the
policy
covers
flood,
windstorm,
or
another
13
catastrophic
event,
or
the
equivalent
of
such
payments
by
an
14
uninsured
account
holder.
15
10.
“Resident”
means
the
same
as
defined
in
section
422.4.
16
Sec.
4.
NEW
SECTION
.
541C.3
Catastrophic
savings
account.
17
1.
a.
Beginning
January
1,
2026,
an
individual
may
open
an
18
interest-bearing
savings
account
with
a
financial
institution
19
and
designate
the
entire
account
as
a
catastrophic
savings
20
account
for
the
purpose
of
paying
qualified
catastrophic
21
expenses.
The
savings
account
designation
shall
be
made
22
no
later
than
April
30
of
the
year
following
the
tax
year
23
during
which
the
account
is
opened,
on
forms
provided
by
the
24
department.
25
b.
An
account
holder
shall
not
establish
more
than
one
26
savings
account.
27
2.
a.
The
account
holder
shall
designate
one
individual
28
as
beneficiary
of
the
savings
account.
The
designation
shall
29
be
made
on
forms
provided
by
the
department
and
no
later
than
30
April
30
of
the
year
following
the
tax
year
during
which
31
the
account
is
opened.
The
account
holder
may
change
the
32
designated
beneficiary
of
the
savings
account
at
any
time.
33
b.
The
account
holder
and
designated
beneficiary
of
a
34
savings
account
may
be
the
same
individual.
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Sec.
5.
NEW
SECTION
.
541C.4
Account
administration
——
1
account
holder
responsibilities.
2
1.
a.
Contributions
to
an
account
may
be
made
by
any
person
3
in
the
form
of
cash.
The
aggregate
lifetime
contribution
4
limitations
that
may
be
made
to
a
savings
account
are
as
5
follows:
6
(1)
For
account
holders
whose
annual
homeowner’s
property
7
and
casualty
insurance
policy
premium
paid
during
the
tax
year
8
is
less
than
one
thousand
dollars,
an
amount
not
to
exceed
two
9
thousand
dollars.
10
(2)
For
account
holders
whose
annual
homeowner’s
property
11
and
casualty
insurance
policy
premium
during
the
tax
year
is
12
equal
to
or
exceeds
one
thousand
dollars,
an
amount
not
to
13
exceed
the
lesser
of
the
following:
14
(a)
Fifteen
thousand
dollars.
15
(b)
Twice
the
annual
homeowner’s
property
and
casualty
16
insurance
policy
premium
paid
during
the
tax
year.
17
(3)
For
account
holders
who
are
self-insured,
or
choose
not
18
to
obtain
a
homeowner’s
property
and
casualty
insurance
policy,
19
or
are
unable
to
a
obtain
homeowner’s
property
and
casualty
20
insurance
policy,
an
amount
not
exceeding
three
hundred
fifty
21
thousand
dollars,
or
the
assessed
value
of
the
home,
whichever
22
is
less.
23
b.
Interest
accrued
in
the
savings
account
shall
not
be
24
counted
for
purposes
of
calculating
the
aggregate
lifetime
25
contribution
limitations.
26
c.
The
aggregate
lifetime
contribution
limitations
of
an
27
account
holder
may
increase
if
an
account
holder’s
homeowner’s
28
property
and
casualty
homeowner’s
insurance
policy
premium
29
increases
as
provided
in
paragraph
“a”
,
but
once
an
aggregate
30
lifetime
limitation
is
achieved
in
paragraph
“a”
the
aggregate
31
lifetime
limitation
is
not
required
to
decrease.
32
2.
The
account
holder
shall
not
use
funds
held
in
a
savings
33
account
to
pay
expenses,
if
any,
of
administering
the
account,
34
except
that
all
fees
and
charges
assessed
by
the
financial
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institution
may
be
deducted
from
the
account
by
the
financial
1
institution
where
the
account
is
held.
2
3.
The
account
holder
shall
submit
the
following
3
information
to
the
department:
4
a.
An
annual
report
for
the
savings
account
on
forms
5
furnished
by
the
department.
The
report
shall
be
included
with
6
the
Iowa
income
tax
return
of
the
account
holder.
7
b.
A
copy
of
the
federal
internal
revenue
service
form
8
1099,
or
other
similar
federal
internal
revenue
service
income
9
reporting
form,
if
any,
issued
for
the
savings
account
to
the
10
account
holder
by
the
financial
institution
where
the
account
11
is
held.
The
form
shall
be
included
with
the
Iowa
income
tax
12
return
of
the
account
holder.
13
c.
Upon
a
withdrawal
of
funds
from
a
catastrophic
savings
14
account,
a
transaction
report
on
forms
furnished
by
the
15
department.
16
4.
The
account
holder
may
withdraw
funds
from
a
savings
17
account
at
any
time.
18
Sec.
6.
NEW
SECTION
.
541C.5
Financial
institution
19
protections.
20
This
chapter
shall
not
be
construed
to
require
a
financial
21
institution
to
do
any
of
the
following,
or
to
be
responsible
or
22
liable
for
any
of
the
following:
23
1.
Designate
or
label
within
the
financial
institution’s
24
account
contracts,
systems,
or
in
any
other
manner,
an
account
25
as
a
savings
account.
26
2.
Ascertain
or
verify
the
purpose
of
a
withdrawal
of
funds
27
from
a
savings
account,
or
track
the
destination
or
use
of
the
28
withdrawn
funds.
29
3.
Allocate
funds
in
a
savings
account
to
a
designated
30
beneficiary
or
among
joint
account
holders.
31
4.
Report
any
information
to
the
department
or
any
other
32
governmental
agency.
33
5.
Determine
or
ensure
that
an
account
satisfies
the
34
requirements
to
be
a
savings
account.
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6.
Determine
or
ensure
that
funds
withdrawn
from
a
savings
1
account
are
used
for
the
payment
of
qualified
catastrophic
2
expenses.
3
7.
Report
or
remit
taxes
or
penalties
related
to
the
4
ownership
or
use
of
a
savings
account.
5
8.
Include
the
name
of
a
beneficiary
in
the
title
of
a
6
savings
account,
or
document
the
change
of
any
beneficiary
to
7
a
savings
account.
8
Sec.
7.
NEW
SECTION
.
541C.6
Tax
considerations.
9
The
state
income
tax
treatment
of
a
savings
account
shall
be
10
as
provided
in
section
422.7,
subsection
45.
11
Sec.
8.
NEW
SECTION
.
541C.7
Rules
and
forms.
12
1.
The
department
shall
adopt
rules
to
implement
and
13
administer
this
chapter.
14
2.
The
department
shall
create
and
make
available
forms
15
to
be
used
in
complying
with
this
chapter,
including
but
not
16
limited
to
the
following:
17
a.
A
form
for
designating
an
account
as
a
savings
account
18
pursuant
to
section
541C.3,
subsection
1,
paragraph
“a”
.
19
b.
A
form
for
designating
an
individual
as
beneficiary
of
20
a
savings
account
pursuant
to
section
541C.3,
subsection
2,
21
paragraph
“a”
.
22
c.
A
savings
account
annual
report
as
required
in
section
23
541C.4,
subsection
3,
paragraph
“a”
.
The
report
shall
require,
24
at
a
minimum,
a
list
of
transactions
occurring
on
the
account
25
during
the
tax
year,
and
shall
identify
any
supporting
26
documentation
to
be
included
with
the
report
or
maintained
by
27
the
taxpayer.
28
d.
A
transaction
report
as
required
in
section
541C.4,
29
subsection
3,
paragraph
“c”
,
which
report
shall
require,
at
a
30
minimum,
information
regarding
the
eligible
home
costs
to
which
31
any
withdrawn
funds
were
applied
in
connection
with
a
qualified
32
home
purchase,
and
information
regarding
the
amount
of
funds
33
remaining,
if
any,
in
a
catastrophic
savings
account.
34
Sec.
9.
APPLICABILITY.
This
Act
applies
to
tax
years
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beginning
on
or
after
January
1,
2026.
1
EXPLANATION
2
The
inclusion
of
this
explanation
does
not
constitute
agreement
with
3
the
explanation’s
substance
by
the
members
of
the
general
assembly.
4
This
bill
allows
individuals
who
are
residents,
on
or
after
5
January
1,
2026,
to
open
an
interest-bearing
savings
account
6
with
a
state
or
federally
chartered
bank,
savings
and
loan
7
association,
credit
union,
or
trust
company
in
this
state
8
and
designate
the
account
as
a
catastrophic
savings
account
9
(account)
for
the
purpose
of
financing
the
payment
of
qualified
10
catastrophic
expenses.
11
“Qualified
catastrophic
expense”
is
defined
in
the
bill
12
to
mean
the
payment
of
a
homeowner’s
property
and
casualty
13
insurance
deductible
under
an
insurance
policy
covering
14
the
account
holder’s
homestead,
if
the
policy
covers
flood,
15
windstorm,
or
another
catastrophic
event,
or
the
equivalent
of
16
such
payments
by
an
uninsured
account
holder.
The
bill
further
17
defines
“catastrophic
event”.
18
The
account
may
be
established
individually,
or
jointly
19
with
a
spouse
if
the
married
couple
files
a
joint
Iowa
income
20
tax
return.
In
order
to
properly
establish
the
account,
the
21
bill
requires
the
account
holder
to
submit
certain
forms
to
22
the
department
of
revenue
(department)
designating
the
account
23
as
a
catastrophic
savings
account
(account),
and
designating
24
one
beneficiary
of
the
account
(designated
beneficiary).
These
25
designation
forms
must
be
submitted
no
later
than
April
30
of
26
the
year
following
the
tax
year
during
which
the
account
is
27
opened.
An
individual
may
not
establish
more
than
one
account.
28
The
account
holder
may
change
the
designated
beneficiary
at
any
29
time,
and
may
designate
himself
or
herself
as
the
beneficiary.
30
Contributions
to
an
account
may
be
made
in
the
form
of
31
cash
by
any
person.
Account
funds
shall
not
be
used
to
pay
32
expenses,
if
any,
of
administering
the
account,
except
that
33
fees
and
charges
may
be
deducted
from
the
account
by
the
34
financial
institution
where
the
account
is
held.
The
bill
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requires
an
account
holder
to
submit
certain
reports
to
the
1
department,
including
an
annual
report
for
the
account,
a
2
transaction
report
upon
a
withdrawal
of
funds
from
the
account,
3
and
a
copy
of
any
federal
internal
revenue
service
form
1099
or
4
other
similar
income
statement
issued
for
the
account.
5
The
bill
provides
protection
to
financial
institutions
from
6
being
required
to
perform,
and
from
being
responsible
or
liable
7
for,
certain
activities
as
described
in
the
bill
with
respect
8
to
accounts.
The
bill
requires
the
department
to
create
the
9
forms
required
to
be
filed
by
account
holders,
and
to
adopt
10
rules
to
implement
and
administer
the
bill.
11
The
bill
provides
two
individual
income
tax
incentives
12
relating
to
the
accounts.
First,
an
account
holder
is
allowed
13
to
deduct
from
the
individual
income
tax
up
to
the
aggregate
14
lifetime
contribution
limit
amount.
Second,
the
bill
exempts
15
from
the
individual
income
tax
any
interest
received
from
the
16
account
holder’s
accounts.
For
account
holders
whose
annual
17
homeowner’s
property
and
casualty
insurance
policy
(policy)
18
premium
paid
during
the
tax
year
is
less
than
$1,000,
the
19
aggregate
lifetime
limit
shall
not
exceed
$2,000.
For
an
20
account
holder
whose
annual
policy
premium
during
the
tax
year
21
is
equal
to
or
exceeds
$1,000,
the
aggregate
lifetime
limit
22
shall
not
exceed
the
lesser
of
$15,000
or
twice
the
annual
23
policy
premium.
For
account
holders
who
self-insure
or
who
are
24
unable
to
obtain
a
policy,
the
aggregate
lifetime
limit
shall
25
not
exceed
the
lesser
of
$350,000
or
the
assessed
value
of
the
26
home.
The
aggregate
lifetime
contribution
limitations
of
an
27
account
holder
may
increase
if
an
account
holder’s
homeowner’s
28
property
and
casualty
homeowner’s
insurance
policy
premium
29
increases,
but
are
not
required
to
decrease.
30
The
bill
requires
an
account
holder
to
add
to
net
income
31
for
purposes
of
calculating
the
individual
income
tax
any
32
payment
from
the
account
that
is
not
for
qualified
catastrophic
33
expenses
(nonqualified
withdrawal),
but
amounts
transferred
34
between
different
accounts
of
the
same
account
holder
by
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a
person
other
than
the
account
holder
are
not
considered
1
nonqualified
withdrawals.
Nonqualified
withdrawals
required
2
to
be
added
to
net
income
are
also
subject
to
a
penalty
equal
3
to
2.5
percent
of
the
nonqualified
withdrawal,
unless
the
4
withdrawal
was
made
by
reason
of
the
death
of
the
account
5
holder,
or
was
made
pursuant
to
a
garnishment,
levy,
or
other
6
order,
including
an
order
in
bankruptcy
following
a
filing
for
7
protection
under
the
federal
bankruptcy
code.
If
an
account
8
holder
dies,
the
amount
of
money
in
the
account
shall
be
9
included
in
the
taxable
income
of
the
person
who
receives
the
10
account,
unless
that
person
is
the
surviving
spouse
of
the
11
account
holder.
Upon
the
death
of
the
surviving
spouse,
the
12
amount
of
money
in
the
account
shall
be
included
in
the
taxable
13
income
of
the
person
who
receives
the
account.
Upon
the
sale
14
of
the
homestead
without
the
purchase
of
a
new
homestead
within
15
six
months
of
the
sale,
the
bill
also
requires
the
amount
of
16
money
in
the
account
to
be
included
in
the
taxable
income
of
17
the
account
holder.
18
Finally,
the
bill
prohibits
the
amount
of
qualified
19
catastrophic
expenses
that
are
paid
or
reimbursed
from
funds
in
20
an
account
from
being
allowed
as
an
itemized
deduction
for
Iowa
21
individual
income
tax
purposes.
22
The
tax
provisions
of
the
bill
apply
to
tax
years
beginning
23
on
or
after
January
1,
2026.
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