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AB-2115 Personal income taxes: gross income exclusion: homeownership savings accounts. (2019-2020)

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Date Published: 02/06/2020 09:00 PM
AB2115:v99#DOCUMENT


CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill
No. 2115


Introduced by Assembly Member Brough

February 06, 2020


An act to add and repeal Section 17141.5 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.


LEGISLATIVE COUNSEL'S DIGEST


AB 2115, as introduced, Brough. Personal income taxes: gross income exclusion: homeownership savings accounts.
The Personal Income Tax Law, in modified conformity with federal income tax laws, allows various exclusions from gross income.
This bill, on or after January 1, 2020, and before January 1, 2025, would exclude from gross income any income earned on the moneys contributed to a homeownership savings account, subject to specified restrictions, including that the account is designated as a homeownership savings account by the trustee for the benefit of a qualified taxpayer, as defined, and that the account is closed once the purchase of the qualified taxpayer’s principal residence is complete. The bill would apply only to a qualified taxpayer who, among other things, resides in the County of Los Angeles, the County of Orange, or the County of San Diego, and would require that qualified homeownership savings expenses be paid or incurred in connection with the purchase of a principal residence in one of those counties.
This bill would make legislative findings and declarations as to the necessity of a special statute for Counties of Los Angeles, Orange, and San Diego.
This bill would take effect immediately as a tax levy.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


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, 2021, and before January 1, 2026, 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 county that the qualified taxpayer resides 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, 2021, 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 the County of Los Angeles, the County of Orange, or the County of San Diego 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. “Qualified taxpayer” includes only an individual, individual’s spouse, or individuals who are spouses filing jointly who reside in the County of Los Angeles, the County of Orange, or the County of San Diego and have filed taxes while residing in that county for at least one year.
(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, 2026, and as of that date is repealed.

SEC. 2.

 For purposes of company with the requirements of Section 41 of the Revenue and Taxation Code, with respect to Section 17141.5 of the Revenue and Taxation Code, as added by this act, hereafter “exclusion,” the Legislature finds and declares the following:
(a) The specific goals, purposes, and objectives of the exclusion are as follows:
(1) Create a homeownership savings account to help first-time homebuyers in high-cost areas in the state 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 exclusion meets the goals, purposes, and objectives described in subdivision (a) are as follows:
(1) The number of first-time homebuyers taking advantage of the exclusion.
(2) The homeownership rates in California.
(c) The data collection requirements for the exclusion are as follows:
(1) On or before December 1, 2026, the Legislative Analyst shall submit a report to the Legislature on the effectiveness of the exclusion. 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 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) Notwithstanding Section 19542, the Franchise Tax Board shall provide any data requested by the Legislative Analyst pursuant to this subdivision.

SEC. 3.

 The Legislature finds and declares that a special statute is necessary and that a general statute cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because the high cost of homes in the Counties of Los Angeles, Orange, and San Diego impose a unique hardship on first-time homebuyers in those counties.

SEC. 4.

 This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.