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AB-1317 Personal income taxes: gross income exclusion: homeownership savings accounts.(2019-2020)



SECTION 1.

 Section 17141.5 is added to the Revenue and Taxation Code, to read:

17141.5.
 (a) For taxable years beginning on or after January 1, 2020, and before January 1, 2025, gross income does not include any income earned during the taxable year on moneys contributed to a homeownership savings account.
(b) For purposes of this section:
(1) “Homeownership savings account” means a trust that meets all of the following requirements:
(A) Is designated as a homeownership savings account by the trustee for the benefit of any qualified taxpayer.
(B) Is established by a qualified taxpayer where the written governing instrument creating the account provides for the following:
(i) All contributions to the account are required to be in cash, including any refunds of taxes paid, and can be made by any person, including, but not limited to, contributions from relatives, employers, or crowdfunding internet websites.
(ii) The account is established to pay, pursuant to the requirements and limitations of this section, for qualified homeownership savings expenses of the qualified taxpayer who is the beneficiary of the account.
(C) Is, except as otherwise required or authorized by this section, subject to the same requirements and limitations as an individual retirement account established under Section 408 of the Internal Revenue Code, relating to individual retirement accounts, and any regulations adopted thereunder.
(D) Is the only homeownership savings account established by the qualified taxpayer who established the account.
(E) The balance of the homeownership savings account does not exceed the maximum balance established for the account. The maximum balance of a homeownership savings account shall be 20 percent of the median home price within the state in September of the prior year, as determined by the Department of Housing and Community Development and posted on its internet website. The Department of Housing and Community Development shall post the annual median home price on or before January 1, 2020, and each January 1 thereafter.
(F) Is established by a qualified taxpayer whose gross income, for the taxable year in which the account is established, does not exceed 80 percent of the area median income of a city and county. A qualified taxpayer shall contribute to a homeownership savings account only in the taxable years in which the qualified taxpayer’s gross income does not exceed 80 percent of the area median income of a city and county.
(G) Is closed once the purchase of a principal residence within the meaning of Section 121 of the Internal Revenue Code, relating to exclusion of gain from sale of principal residence, is complete.
(2) “Qualified homeownership savings expenses” means the downpayment and closing costs paid or incurred in connection with the purchase of a qualified taxpayer’s principal residence within the meaning of Section 121 of the Internal Revenue Code, relating to exclusion of gain from sale of principal residence, in this state for use by the qualified taxpayer who is the beneficiary of the homeownership savings account.
(3) “Qualified taxpayer” means any individual, individual’s spouse, or individuals who are spouses filing jointly, who have never had an ownership interest in a principal residence within the meaning of Section 121 of the Internal Revenue Code, relating to exclusion of gain from sale of principal residence.
(4) “Trustee” shall have the same meaning as that term has under Section 408 of the Internal Revenue Code, relating to individual retirement accounts, and any regulations adopted thereunder.
(c) This section shall remain in effect only until December 1, 2025, and as of that date is repealed.
SEC. 2.
 It is the intent of the Legislature to apply the requirements of Section 41 of the Revenue and Taxation Code to this act. With respect to Section 17141.5 of the Revenue and Taxation Code, as added by this act, the Legislature finds and declares the following:
(a) The specific goals, purposes, and objectives of the tax exclusion allowed by Section 17141.5 of the Revenue and Taxation Code, as added by this act, are as follows:
(1) Create a homeownership savings account to help first-time homebuyers save money to make a down payment or pay for closing costs on a new home.
(2) Increase the number of homeowners in California.
(b) Detailed performance indicators for the Legislature to use in determining whether the tax exclusion allowed by Section 17141.5 of the Revenue and Taxation Code, as added by this act, meets the goals, purposes, and objectives described in subdivision (a) are as follows:
(1) The number of first-time homebuyers taking advantage of the tax exclusion.
(2) The homeownership rates in California.
(c) The data collection requirements for the tax exclusion allowed by Section 17141.5 of the Revenue and Taxation Code, as added by this act, are as follows:
(1) On or before December 1, 2025, the Legislative Analyst shall submit a report to the Legislature on the effectiveness of the tax exclusion allowed by Section 17141.5 of the Revenue and Taxation Code, as added by this act. The report shall include, but is not limited to, an analysis of the number of first-time homebuyers taking advantage of the exclusion and the impact of the tax exclusion on the homeownership rates in California. The report shall be submitted in compliance with Section 9795 of the Government Code.
(2) The Legislative Analyst may request information from the Franchise Tax Board for the purposes of this subdivision.
(3) The Franchise Tax Board shall provide any data requested by the Legislative Analyst pursuant to this subdivision.
SEC. 3.
 This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.