H 3023 Session 110 (1993-1994)
H 3023 General Bill, By Sheheen
A Bill 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.
01/12/93 House Introduced and read first time HJ-22
01/12/93 House Referred to Committee on Ways and Means HJ-23
A BILL
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:
"CHAPTER 35
First Home Purchase Savings Act
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.
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