S 360 Session 109 (1991-1992)
S 0360 General Bill, By Wilson and M.T. Rose
A Bill to authorize the establishment of individual housing accounts; to
empower financial institutions to handle the accounts and to provide that
contributors to the accounts when used solely in connection with the purchase
of a first principal residence are tax deductible.
12/10/90 Senate Prefiled
12/10/90 Senate Referred to Committee on Banking and Insurance
01/08/91 Senate Introduced and read first time SJ-121
01/08/91 Senate Referred to Committee on Banking and Insurance SJ-12
A BILL
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
Section 34-35-10. This act may be cited as the First Purchase Family
Housing Act.
Section 34-35-20. (A) Any individual is allowed as a deduction
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 and may divide
this amount in any manner as the parties desire for income tax purposes.
No deduction may be taken for an amount on deposit in the account for
less than six months before withdrawal. Any 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.
(B) For purposes of this act, 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, Code of Laws of South Carolina, 1976, 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), subsection (C) of this section
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, any 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 subsection (C) of this section does not apply to
the distribution of any 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 act 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 act 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 gross income of the individual for the taxable year in
which it is received.
(3) Item (1) of subsection (C) of this section does not apply to
the distribution of any 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 act and no
deduction was allowed under this act 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 act, 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 gross income for the taxable year. If during a taxable
year the individual uses the account or any 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 as the Tax Commission may require.
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 as the Tax Commission
may require. The reports required by this subsection must be filed at a
time and in a manner as the Tax Commission may require. 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) of this
section for the taxable year. Any contribution which is distributed out
of the individual house purchase account and a distribution to which
item (2) of subsection (C) of this section 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 this act shall apply to individual house
purchase accounts established in tax years beginning after December 31,
1987.
SECTION 3. This act takes effect upon approval by the Governor.
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