Current Status Introducing Body:House Bill Number:3023 Primary Sponsor:Sheheen Committee Number:30 Type of Legislation:GB Subject:First Home Purchase Savings Act Residing Body:House Current Committee:Ways and Means Computer Document Number:JIC/6800.HC Introduced Date:19930112 Last History Body:House Last History Date:19930112 Last History Type:Introduced, read first time, referred to Committee Scope of Legislation:Statewide All Sponsors:Sheheen Type of Legislation:General Bill
Bill Body Date Action Description CMN Leg Involved
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3023 House 19930112 Introduced, read first time, 30
referred to Committee
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TO AMEND TITLE 34, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO FINANCIAL INSTITUTIONS, BY ADDING CHAPTER 35, THE FIRST HOME PURCHASE SAVINGS ACT, SO AS TO ALLOW DEDUCTIONS FOR PURPOSES OF THE STATE INDIVIDUAL INCOME TAX FOR CONTRIBUTIONS TO AND EARNINGS ON ACCOUNTS ESTABLISHED IN VARIOUS FINANCIAL INSTITUTIONS FOR TAXPAYERS TO SAVE FOR THE PURCHASE OF A FIRST HOUSE AND TO AMEND SECTION 12-7-435, AS AMENDED, RELATING TO DEDUCTIONS FROM SOUTH CAROLINA TAXABLE INCOME, SO AS TO ALLOW THE DEDUCTIONS ESTABLISHED BY THE FIRST HOME PURCHASE SAVINGS ACT.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Title 34 of the 1976 Code is amended by adding:
Section 34-35-10. This chapter may be cited as the First Home Purchase Savings Act.
Section 34-35-20. (A) There is allowed as a deduction from South Carolina taxable income of individuals an amount not to exceed two thousand dollars, or three thousand dollars five hundred, in the case of a joint return paid in cash during the taxable year by an individual taxpayer to an individual housing account established for his benefit to provide funding for the purchase of his first principal residence together with all interest paid or accrued within the taxable year on the account. No deduction is allowed for an amount on deposit in the account for less than six months before withdrawal. An amount deposited less than six months before the close of the taxpayer's taxable year may be taken as a deduction only for the next succeeding taxable year.
The total of amounts paid in cash allowable as a deduction under this item for all taxable years may not exceed twelve thousand dollars.
Section 34-35-30. For purposes of this chapter, `individual housing account' means a trust created or organized for the exclusive benefit of an individual or, in the case of a married individual, for the exclusive benefit of the individual and his spouse jointly but only if the written governing instrument creating the trust meets the following requirements:
(1) Contributions may not be accepted for the taxable year in excess of two thousand dollars for a trust established for an individual or three thousand five hundred dollars for a trust established for a married couple or in excess of twelve thousand dollars for all taxable years, exclusive of interest paid or accrued.
(2) The trustee is a bank or building and loan association, as defined in Section 34-1-10, or a credit union chartered or supervised under federal law or the laws of this State whose accounts are insured by the Federal Deposit Insurance Corporation, the Federal Savings and Loan Insurance Corporation, the National Credit Union Administration, or an agency of this State or a federal agency established for the purpose of insuring accounts in these financial institutions. The financial institution must actively make residential real estate mortgage loans in this State.
(3) The assets of the trust may be invested only in savings or time deposits in amounts fully insured as prescribed in item (2) of this section. Funds held in the trust may be commingled for purposes of investment but individual records must be maintained by the trustee for each individual housing account holder which show all transactions in detail.
(4) The entire interest of an individual or married couple for whose benefit the trust is maintained must be distributed to him, or them, not later than one hundred twenty months after the date on which the first contribution is made to the trust.
Section 34-35-40. Except as provided in Sections 34-35-50 or 34-35-60, in the case of a disability or death, the trustee shall distribute no part of the funds in the account unless it:
(1) certifies that the money is to be used for the purchase of a residence located in this State, and it provides that the instrument of payment is payable to the mortgagor, construction contractor, or other vendor of the property purchased;
(2) notifies the Tax Commission on forms prescribed by it of the amount withdrawn within ten days after the date of withdrawal.
Section 34-35-50 (1) Except as otherwise provided in this section, an amount paid or distributed out of an individual housing account must be included in South Carolina taxable income by the payee or distributee for the taxable year in which the payment or distribution is received, unless the amount is used exclusively in connection with the first purchase of a principal residence in this State for the payee or distributee.
(2) Item (1) of this section does not apply to the distribution of a contribution paid during a taxable year to an individual housing account to the extent that the contribution exceeds the amount allowable as a deduction under this chapter if:
(a) the distribution is received on or before the day prescribed by law including extensions of time for filing the individual's return for the taxable year;
(b) no deduction is allowed under this chapter with respect to the excess contribution;
(c) the distribution is accompanied by the amount of net interest income attributable to the excess contribution. This income must be included in the taxable income of the individual for the taxable year in which it is received.
(3) Item (1) of this section does not apply to the distribution of a contribution paid during a taxable year to an individual housing account to the extent that the contribution exceeds the amount allowable as a deduction under this chapter and no deduction was allowed under this chapter with respect to the excess contribution.
(4) The transfer of an individual's interest in an individual housing account to his former spouse under a dissolution of marriage decree or under a written instrument incident to a dissolution of marriage is not considered a taxable transfer made by the individual and the interest, at the time of the transfer, is treated as an individual housing account of the transferee and not of the transferor. After the transfer, the account is treated, for purposes of this chapter, as maintained for the benefit of the spouse.
Section 34-35-60. If a distribution from an individual housing account to an individual for whose benefit the account was established is made and not used in connection with the first purchase of a principal residence in this State for the individual, the individual income tax liability of the individual for the taxable year in which the distribution is received must be increased by an amount equal to ten percent of the amount of the distribution which is includable in his taxable income for the taxable year. If during a taxable year the individual uses the account as security for a loan, the portion so used is treated as distributed to that individual. The liability may not be imposed if the payment or distribution is attributable to the taxpayer dying or becoming disabled. An individual is not considered disabled unless he furnishes proof of the disability in the form and manner the Tax Commission requires. On the death of an individual for whose benefit the account had been established, the funds in the account are payable to the estate of the individual. If the account was held jointly by the decedent and a spouse of the decedent, the account shall remain as the individual housing account of the surviving spouse.
Section 34-35-70. The trustee of an individual housing account shall make reports regarding the account to the Tax Commission and to the individual for whom the account is maintained with respect to contributions, distributions, and other matters the Tax Commission requires. The reports required by this subsection must be filed at the time and in the manner the Tax Commission requires. A person who fails to file a required report is subject to a penalty of twenty dollars for each instance of failure to file.
Section 34-35-80. (A) In the case of an individual housing account, `excess contributions' means the amount by which the amount contributed for the taxable year to the account exceeds the amount allowable as a contribution under Section 34-35-30(1) for the taxable year. A contribution which is distributed out of the individual housing account and a distribution to which Section 34-35-50(2) applies must be treated as an amount not contributed.
(B) There is imposed for each taxable year a tax equal to six percent of the value of the amount of the excess contributions to an individual's individual housing account."
SECTION 2. Section 12-7-435 of the 1976 Code, as last amended by Act 171 of 1991, is further amended by adding an appropriately lettered item to read:
"( ) amounts allowed under Chapter 35 of Title 34, the First Home Purchase Savings Housing Act".
SECTION 3. Upon approval by the Governor, this act is effective for taxable years beginning after 1992.