S 269 Session 110 (1993-1994)
S 0269 General Bill, By Wilson, Cork, Courson, Gregory, L.E. Richter, M.T. Rose,
Russell, Ryberg and Thomas
A Bill to amend Title 34, Code of Laws of South Carolina, 1976, relating to
banking, financial institutions, and money, by adding Chapter 35, the First
Purchase Family Housing Act, so as to authorize the establishment of
individual housing accounts; to empower financial institutions to handle the
accounts and to provide that contributions to the accounts when used solely in
connection with the purchase of a first principal residence are tax
deductible.
01/26/93 Senate Introduced and read first time SJ-18
01/26/93 Senate Referred to Committee on Banking and Insurance SJ-18
A BILL
TO AMEND TITLE 34, CODE OF LAWS OF SOUTH CAROLINA,
RELATING TO BANKING, FINANCIAL INSTITUTIONS, AND
MONEY, BY ADDING CHAPTER 35, THE FIRST PURCHASE
FAMILY HOUSING ACT, SO AS TO AUTHORIZE THE
ESTABLISHMENT OF INDIVIDUAL HOUSING ACCOUNTS; TO
EMPOWER FINANCIAL INSTITUTIONS TO HANDLE THE
ACCOUNTS AND TO PROVIDE THAT CONTRIBUTIONS TO
THE ACCOUNTS WHEN USED SOLELY IN CONNECTION
WITH THE PURCHASE OF A FIRST PRINCIPAL RESIDENCE
ARE TAX DEDUCTIBLE.
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:
"CHAPTER 35
First Purchase Family Housing Act
Section 34-35-10. This chapter may be cited as the First Purchase
Family Housing Act.
Section 34-35-20. (A) An individual is allowed as a deduction
from South Carolina taxable income as defined in Chapter 7 of Title
12 annually an amount, not to exceed five thousand dollars, deposited
into a first time house purchase 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. A married couple may deduct up to ten thousand dollars.
No deduction may be taken 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 taxable year may be taken as
a deduction only for the next succeeding taxable year.
(B) For purposes of this chapter, the term `individual house
purchase 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 five thousand dollars for a trust established for an individual
or ten thousand dollars for a trust established for a married couple.
(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 any agency of this State or any 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
subsection. Funds held in the trust may be commingled for purposes
of investment, but individual records must be maintained by the
trustee for each individual house purchase 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.
(5) Except as provided in item (2) of this subsection or
subsection (D) in the case of a disability or death, the trustee shall
distribute no part of the funds in the account unless it:
(a) 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;
(b) notify the Tax Commission on forms prescribed by the
Tax Commission of the amount withdrawn within ten days after the
date of withdrawal.
(C)(1) Except as otherwise provided in this subsection, an amount
paid or distributed out of an individual house purchase account must
be included in gross 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 subsection does not apply to the distribution
of a contribution paid during a taxable year to an individual house
purchase 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 income tax 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
income attributable to the excess contribution. This net income must
be included in the South Carolina taxable income of the individual for
the taxable year in which it is received.
(3) Item (1) of this subsection does not apply to the distribution
of a contribution paid during a taxable year to an individual house
purchase 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
house purchase 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
house purchase 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.
(D) If a distribution from an individual house purchase 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 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 South Carolina taxable
income for the taxable year. If during a taxable year the individual
uses the account or a portion of the account as security for a loan, the
portion 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. Upon 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 must remain as the individual house purchase account of
the surviving spouse.
(E) The trustee of an individual house purchase 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 as the Tax Commission requires. A person
who fails to file a required report is subject to a penalty of ten dollars
for each instance of failure to file.
(F) In the case of an individual house purchase account, the term
`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 item (1) of subsection (B) for the
taxable year. A contribution which is distributed out of the individual
house purchase account and a distribution to which item (2) of
subsection (C) applies must be treated as an amount not contributed.
There is imposed for each taxable year a tax not to exceed six
percent of the value of the amount of the excess contributions to an
individual's individual house purchase account."
SECTION 2. The provisions of Chapter 35 of Title 34 of the 1976
Code apply to individual house purchase accounts established in
taxable years beginning after 1993.
SECTION 3. This act takes effect upon approval by the Governor.
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