S 117 Session 112 (1997-1998)
S 0117 General Bill, By Wilson
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.
01/14/97 Senate Introduced and read first time SJ-122
01/14/97 Senate Referred to Committee on Banking and Insurance SJ-122
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 6 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) notifies the Department of Revenue on forms prescribed
by the department 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 department 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 department and to the individual
for whom the account is maintained with respect to contributions,
distributions, and other matters the department requires. The reports
required by this subsection must be filed at the time and in the
manner as the department 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 1996.
SECTION 3. This act takes effect upon approval by the Governor.
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