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Senate
File
2326
-
Introduced
SENATE
FILE
2326
BY
TRONE
GARRIOTT
A
BILL
FOR
An
Act
modifying
first-time
homebuyers
savings
accounts,
and
1
including
retroactive
applicability
provisions.
2
BE
IT
ENACTED
BY
THE
GENERAL
ASSEMBLY
OF
THE
STATE
OF
IOWA:
3
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Section
1.
Section
422.7,
subsection
27,
paragraph
a,
1
subparagraph
(1),
unnumbered
paragraph
1,
Code
2026,
is
amended
2
to
read
as
follows:
3
The
Except
for
an
employer
account
holder,
the
amount
of
4
contributions
made
by
an
account
holder
during
the
tax
year
to
5
the
account
holder’s
first-time
homebuyer
savings
accounts,
not
6
to
exceed
the
following
annual
limit:
7
Sec.
2.
Section
422.7,
Code
2026,
is
amended
by
adding
the
8
following
new
subsection:
9
NEW
SUBSECTION
.
27A.
Subtract,
to
the
extent
included,
the
10
amount
of
funds
withdrawn
from
a
first-time
homebuyer
savings
11
account
that
were
contributed
by
an
employer
on
behalf
of
the
12
taxpayer
pursuant
to
chapter
541B,
plus
any
interest
that
has
13
accrued
on
such
contribution,
that
were
used
for
the
payment
14
or
reimbursement
of
the
taxpayer’s
eligible
home
costs
in
15
connection
with
a
qualified
home
purchase
in
accordance
with
16
chapter
541B.
17
Sec.
3.
Section
422.35,
Code
2026,
is
amended
by
adding
the
18
following
new
subsection:
19
NEW
SUBSECTION
.
15.
a.
Subject
to
the
restrictions
in
20
paragraph
“b”
,
subtract,
to
the
extent
included,
income
from
21
interest
received
from
the
taxpayer’s
first-time
homebuyer
22
savings
accounts
established
pursuant
to
chapter
541B.
23
b.
The
subtraction
in
paragraph
“a”
shall
not
be
allowed
to
24
a
taxpayer
upon
one
of
the
following
dates,
whichever
occurs
25
first:
26
(1)
January
1
of
the
tenth
calendar
year
after
the
calendar
27
year
during
which
the
taxpayer
first
opened
a
first-time
28
homebuyer
savings
account
for
the
designated
beneficiary.
29
(2)
The
date
on
which
funds
within
the
taxpayer’s
first-time
30
homebuyer
savings
account
are
withdrawn
for
purposes
other
than
31
the
payment
or
reimbursement
of
the
designated
beneficiary’s
32
eligible
home
costs
in
connection
with
a
qualified
home
33
purchase.
Any
amount
transferred
between
different
first-time
34
homebuyer
savings
accounts
of
the
taxpayer
shall
not
be
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considered
a
withdrawal
for
purposes
of
this
subparagraph
as
1
long
as
the
designated
beneficiary
does
not
change.
2
c.
(1)
Add,
to
the
extent
previously
excluded
under
3
paragraph
“a”
,
the
amount
withdrawn
during
the
tax
year
from
the
4
taxpayer’s
first-time
homebuyer
savings
account
for
purposes
5
other
than
the
payment
or
reimbursement
of
the
designated
6
beneficiary’s
eligible
home
costs
in
connection
with
a
7
qualified
home
purchase.
8
(2)
For
purposes
of
this
paragraph
“c”
,
any
amount
remaining
9
in
the
taxpayer’s
first-time
homebuyer
savings
account
on
10
January
1
of
the
tenth
calendar
year
after
the
calendar
year
11
during
which
the
taxpayer
first
opened
a
first-time
homebuyer
12
savings
account
shall
be
considered
immediately
withdrawn
under
13
subparagraph
(1).
14
(3)
For
purposes
of
this
paragraph
“c”
,
the
transfer
of
15
amounts
between
different
first-time
homebuyer
accounts
of
the
16
taxpayer
by
a
person
other
than
the
taxpayer
shall
not
cause
17
such
transfer
to
be
considered
a
withdrawal
under
subparagraph
18
(1)
as
long
as
the
designated
beneficiary
does
not
change.
19
d.
For
any
amount
considered
a
withdrawal
required
to
be
20
added
to
net
income
pursuant
to
paragraph
“c”
,
the
taxpayer
21
shall
be
assessed
a
penalty
equal
to
ten
percent
of
the
amount
22
of
the
withdrawal.
The
penalty
shall
not
apply
to
withdrawals
23
made
by
reason
of
the
death
of
the
designated
beneficiary,
24
change
of
employment
status
with
the
designated
beneficiary,
or
25
to
withdrawals
made
pursuant
to
a
garnishment,
levy,
or
other
26
order,
including
but
not
limited
to
an
order
in
bankruptcy
27
following
a
filing
for
protection
under
the
federal
bankruptcy
28
code,
11
U.S.C.
§101
et
seq.
29
e.
For
purposes
of
this
subsection,
“designated
30
beneficiary”
,
“eligible
home
costs”
,
“first-time
homebuyer
31
savings
account”
,
and
“qualified
home
purchase”
mean
the
same
as
32
defined
in
section
541B.2.
33
Sec.
4.
Section
541B.2,
subsection
1,
Code
2026,
is
amended
34
to
read
as
follows:
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1.
“Account
holder”
means
an
individual
who
establishes
,
1
either
individually
or
jointly
with
the
individual’s
spouse,
2
or
an
employer,
who
establishes
a
first-time
homebuyer
savings
3
account
pursuant
to
section
541B.3
.
4
Sec.
5.
Section
541B.3,
subsection
1,
Code
2026,
is
amended
5
by
adding
the
following
new
paragraph:
6
NEW
PARAGRAPH
.
d.
An
employer
may
open
an
interest-bearing
7
savings
account
with
a
financial
institution
and
designate
the
8
entire
account
as
a
first-time
homebuyer
savings
account
for
9
the
purpose
of
paying
or
reimbursing
the
eligible
home
costs
10
in
connection
with
a
qualified
home
purchase
of
an
employee
11
who
is
the
designated
beneficiary.
The
first-time
homebuyer
12
savings
account
designation
shall
be
made
on
forms
provided
13
by
the
department
and
shall
be
submitted
on
or
before
the
14
date
prescribed
in
section
422.21
for
making
and
filing
an
15
individual
income
tax
return,
excluding
extensions,
or
the
16
date
for
making
and
filing
an
individual
income
tax
return
17
determined
by
the
director
pursuant
to
an
order
issued
under
18
section
421.17,
subsection
30,
applicable
to
the
tax
year
in
19
which
the
account
is
opened.
20
Sec.
6.
Section
541B.3,
subsection
2,
paragraph
a,
Code
21
2026,
is
amended
to
read
as
follows:
22
a.
The
account
holder
shall
designate
one
individual
as
23
beneficiary
of
the
first-time
homebuyer
savings
account.
The
24
designation
shall
be
made
on
forms
provided
by
the
department
25
and
shall
be
submitted
on
or
before
the
date
prescribed
in
26
section
422.21
for
making
and
filing
an
individual
income
tax
27
return,
excluding
extensions,
or
the
date
for
making
and
filing
28
an
individual
income
tax
return
determined
by
the
director
29
pursuant
to
an
order
issued
under
section
421.17,
subsection
30
30
,
applicable
to
the
tax
year
in
which
the
designation
is
31
made.
The
account
holder
may
change
the
designated
beneficiary
32
of
the
first-time
homebuyer
savings
account
at
any
time
,
except
33
an
employer
account
holder
shall
only
change
the
designated
34
beneficiary
if
the
employment
status
of
the
designated
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beneficiary
changes
with
the
employer
account
holder
.
1
Sec.
7.
RETROACTIVE
APPLICABILITY.
This
Act
applies
2
retroactively
to
January
1,
2026,
for
tax
years
beginning
on
3
or
after
that
date.
4
EXPLANATION
5
The
inclusion
of
this
explanation
does
not
constitute
agreement
with
6
the
explanation’s
substance
by
the
members
of
the
general
assembly.
7
Currently,
individuals
may
open
an
interest-bearing
savings
8
account
and
designate
the
account
as
a
first-time
homebuyer
9
savings
account
(account)
for
the
purpose
of
financing
10
the
purchase
of
a
single-family
residence
in
this
state
11
by
a
first-time
homebuyer.
The
account
may
be
established
12
individually,
or
jointly
with
a
spouse
if
the
married
couple
13
files
a
joint
Iowa
income
tax
return.
The
contributions
to
14
the
account
are
deductible
from
the
individual
income
tax.
15
Currently,
contributions
are
deductible
in
the
amount
of
$4,744
16
for
married
persons,
and
$2,372
for
individuals,
and
any
17
interest
in
the
account
accrues
state
tax
free.
18
This
bill
modifies
the
account
by
allowing
an
employer
19
(employer
account
holder)
to
open
an
account
on
behalf
of
an
20
employee
and
make
contributions
to
the
account
on
behalf
of
an
21
employee
who
is
a
first-time
homebuyer.
22
The
bill
specifies
the
amount
of
funds
withdrawn
from
the
23
account
that
are
contributed
by
the
employer
account
holder
24
that
are
used
by
an
individual
taxpayer
to
purchase
a
home
as
25
a
first-time
homebuyer
are
deductible
against
the
individual
26
income
tax
by
the
individual
taxpayer.
27
Unlike
individual
account
holders,
the
bill
prohibits
an
28
employer
account
holder
from
taking
a
deduction
against
income
29
taxes
for
any
contributions
made
to
the
account.
30
In
the
same
manner
as
individual
account
holders,
the
bill
31
assesses
a
penalty
against
an
employer
account
holder
in
the
32
amount
of
10
percent
of
any
withdrawal
amount
if
the
amount
33
is
withdrawn
for
a
purpose
other
than
for
a
purchase
by
a
34
first-time
homebuyer.
The
penalty
is
not
assessed
upon
death
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of
the
first-time
homebuyer,
change
of
employment
status
with
1
the
first-time
homebuyer
and
the
employer
account
holder,
or
2
upon
withdrawals
made
pursuant
to
a
garnishment,
levy,
or
3
bankruptcy.
4
The
bill
and
current
law
require
the
account
to
be
closed
5
after
a
period
of
10
years,
and
the
account
is
subject
to
6
penalties
and
tax
if
the
moneys
in
the
account
are
not
used
in
7
the
purchase
of
a
home
by
a
first-time
homebuyer
within
the
8
10-year
period.
9
The
bill
applies
retroactively
to
tax
years
beginning
on
or
10
after
January
1,
2026.
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