[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4120 Introduced in House (IH)]

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116th CONGRESS
  1st Session
                                H. R. 4120

   To amend the Internal Revenue Code of 1986 to provide for the tax 
 treatment of first-time homeowner assistance programs established by 
                                States.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             July 30, 2019

   Mr. Lawson of Florida (for himself and Ms. Tlaib) introduced the 
 following bill; which was referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
   To amend the Internal Revenue Code of 1986 to provide for the tax 
 treatment of first-time homeowner assistance programs established by 
                                States.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``First-Time Homeowners Assistance Act 
of 2019''.

SEC. 2. QUALIFIED FIRST-TIME HOMEOWNER ASSISTANCE PROGRAM.

    (a) In General.--Part VIII of subchapter F of chapter 1 of the 
Internal Revenue Code of 1986 is amended by adding at the end the 
following new section:

``SEC. 530A. QUALIFIED FIRST-TIME HOMEOWNER ASSISTANCE PROGRAM.

    ``(a) General Rule.--A qualified first-time homeowner assistance 
program shall be exempt from taxation under this subtitle. 
Notwithstanding the preceding sentence, such program shall be subject 
to the taxes imposed by section 511 (relating to imposition of tax on 
unrelated business income of charitable organizations).
    ``(b) Qualified First-Time Homeowner Assistance Program.--For 
purposes of this section--
            ``(1) In general.--The term `qualified first-time homeowner 
        assistance program' means a program established and maintained 
        by a State, or agency or instrumentality thereof--
                    ``(A) under which a person may make contributions 
                to a first-time homeowner assistance account,
                    ``(B) under which neither contributors nor 
                beneficiaries are prohibited by reason of residency 
                within the State, and
                    ``(C) which meets the other requirements of this 
                subsection.
            ``(2) Cash contributions.--A program shall not be treated 
        as a qualified first-time homeowner assistance program unless 
        it provides that contributions--
                    ``(A) may only be made in cash,
                    ``(B) may not be made after the date on which the 
                account beneficiary attains age 40, or
                    ``(C) except in the case of rollover contributions, 
                if such contribution would result in aggregate 
                contributions for all taxable years exceeding $20,000.
            ``(3) Separate accounting.--A program shall not be treated 
        as a qualified first-time homeowner assistance program unless 
        it provides separate accounting for each designated 
        beneficiary.
            ``(4) Limited investment direction.--A program shall not be 
        treated as a qualified first-time homeowner assistance program 
        unless it provides that any contributor to, or designated 
        beneficiary under, such program may, directly or indirectly, 
        direct the investment of any contributions to the program (or 
        any earnings thereon) no more than 2 times in any calendar 
        year.
            ``(5) No pledging of interest as security.--A program shall 
        not be treated as a qualified first-time homeowner assistance 
        program if it allows any interest in the program or any portion 
        thereof to be used as security for a loan.
            ``(6) Certain restrictions disallowed.--A program shall not 
        be treated as a qualified first-time homeowner assistance 
        program unless, with respect to each first-time homeowner 
        assistance account, the program does not--
                    ``(A) prohibit the designated beneficiary from 
                acquiring or constructing a principal residence outside 
                of the State,
                    ``(B) limit any State tax preferences for 
                contributions to these accounts based on the residence 
                of the contributor or the designated beneficiary, or
                    ``(C) condition withdrawals, or limit any State tax 
                preferences for withdrawals, from these accounts from 
                being applied only with respect to residences located 
                within the State.
    ``(c) First-Time Homeowner Assistance Account.--For purposes of 
this section--
            ``(1) In general.--The term `first-time homeowner 
        assistance account' means an account established under a 
        qualified first-time homeowner assistance program for the 
        purpose of providing qualified down payment assistance to the 
        designated beneficiary of the account.
            ``(2) Qualified down payment assistance.--
                    ``(A) In general.--The term `qualified down payment 
                assistance' means a distribution--
                            ``(i) to a designated beneficiary who is a 
                        first-time homeowner of a principal residence 
                        in the United States,
                            ``(ii) under a qualified first-time 
                        homeowner assistance program in connection with 
                        the acquisition, construction, or substantial 
                        improvement of a principal residence at or 
                        before the time of such acquisition or 
                        construction, and
                            ``(iii) the amount of which, when added to 
                        all prior qualified down payment assistance 
                        under this subparagraph during any taxable 
                        year, does not exceed 10 percent of the cost of 
                        acquiring, constructing, or substantially 
                        improving the principal residence of the 
                        designated beneficiary.
                    ``(B) First-time homeowner.--The term `first-time 
                homeowner' means any individual if such individual (and 
                if married, such individual's spouse) had no present 
                ownership interest in a principal residence during the 
                3-year period ending on the date of the acquisition, 
                construction, or substantial improvement of the 
                principal residence.
                    ``(C) Principal residence.--The term `principal 
                residence' has the same meaning as when used in section 
                121.
                    ``(D) Exception.--A residence may be taken into 
                account for purposes of this paragraph only if--
                            ``(i) the residence is not acquired from a 
                        person related to the person acquiring such 
                        residence (or, if married, such individual's 
                        spouse), and
                            ``(ii) the basis of the residence in the 
                        hands of the person acquiring such residence is 
                        not determined--
                                    ``(I) in whole or in part by 
                                reference to the adjusted basis of such 
                                residence in the hands of the person 
                                from whom acquired, or
                                    ``(II) under section 1014(a) 
                                (relating to property acquired from a 
                                decedent).
                    ``(E) Construction.--A residence which is 
                constructed by the taxpayer shall be treated as 
                purchased by the taxpayer on the date the taxpayer 
                first occupies such residence.
                    ``(F) Special rules relating to marriage.--
                            ``(i) Married couples must file joint 
                        return.--If the designated beneficiary is 
                        married on the date of the distribution, the 
                        distribution shall not be treated as qualified 
                        down payment assistance unless the taxpayer and 
                        the taxpayer's spouse file a joint return for 
                        the taxable year.
                            ``(ii) Marital status.--An individual 
                        legally separated from his spouse under a 
                        decree of divorce or of separate maintenance 
                        shall not be considered as married.
            ``(3) Designated beneficiary.--The term `designated 
        beneficiary' with respect to a first-time homeowner assistance 
        account means--
                    ``(A) the individual designated at the 
                establishment of the account as the beneficiary of 
                amounts paid (or to be paid) to the account, and
                    ``(B) in the case of a change in beneficiaries 
                described in subsection (d)(3)(C), the individual who 
                is the new beneficiary of the account.
            ``(4) Member of family.--The term `member of the family' 
        means, with respect to any designated beneficiary--
                    ``(A) the spouse of such beneficiary,
                    ``(B) an individual who bears a relationship to 
                such beneficiary which is described in subparagraphs 
                (A) through (G) of section 152(d)(2),
                    ``(C) the spouse of any individual described in 
                subparagraph (B), and
                    ``(D) any first cousin of such beneficiary.
    ``(d) Tax Treatment of Designated Beneficiaries and Contributors.--
            ``(1) In general.--Except as otherwise provided in this 
        subsection, no amount shall be includible in gross income of--
                    ``(A) a designated beneficiary under a qualified 
                first-time homeowner assistance program, or
                    ``(B) a contributor to such program on behalf of a 
                designated beneficiary, with respect to any 
                distribution or earnings under such program.
            ``(2) Gift tax treatment of contributions.--For purposes of 
        chapters 12 and 13--
                    ``(A) In general.--Any contribution to a qualified 
                first-time homeowner assistance program on behalf of 
                any designated beneficiary--
                            ``(i) shall be treated as a completed gift 
                        to such beneficiary which is not a future 
                        interest in property, and
                            ``(ii) shall not be treated as a qualified 
                        transfer under section 2503(e).
                    ``(B) Treatment of excess contributions for gift 
                tax purposes.--If the aggregate amount of contributions 
                described in subparagraph (A) during the calendar year 
                by a donor exceeds the limitation for such year under 
                section 2503(b), such aggregate amount shall, at the 
                election of the donor, be taken into account for 
                purposes of such section ratably over the 5-year period 
                beginning with such calendar year.
            ``(3) Distributions.--
                    ``(A) In general.--Any distribution under a 
                qualified first-time homeowner assistance program shall 
                be includible in the gross income of the distributee in 
                the manner as provided under section 72 to the extent 
                not excluded from gross income under this paragraph.
                    ``(B) Distributions for qualified down payment 
                assistance.--For purposes of this paragraph, if--
                            ``(i) distributions under a qualified 
                        first-time homeowner assistance program do not 
                        exceed the qualified down payment assistance, 
                        no amount shall be includible in gross income, 
                        and
                            ``(ii) in any other case, the amount 
                        otherwise includible in gross income shall be 
                        reduced by an amount which bears the same ratio 
                        to such amount as such assistance bear to such 
                        distributions.
                    ``(C) Change in beneficiaries or programs.--
                            ``(i) Rollovers.--Subparagraph (A) shall 
                        not apply to that portion of any distribution 
                        which, within 60 days of such distribution, is 
                        transferred--
                                    ``(I) to another qualified 
                                distribution under a qualified first-
                                time homeowner assistance program or 
                                the benefit of the designated 
                                beneficiary, or
                                    ``(II) to the credit of another 
                                designated beneficiary under a 
                                qualified distribution under a 
                                qualified first-time homeowner 
                                assistance program who is a member of 
                                the family of the designated 
                                beneficiary with respect to which the 
                                distribution was made.
                            ``(ii) Change in designated 
                        beneficiaries.--Any change in the designated 
                        beneficiary of an interest in a qualified 
                        distribution under a qualified first-time 
                        homeowner assistance program shall not be 
                        treated as a distribution for purposes of 
                        subparagraph (A) if the new beneficiary is a 
                        member of the family of the old beneficiary.
                            ``(iii) Limitation on certain rollovers.--
                        Clause (i)(I) shall not apply to any transfer 
                        if such transfer occurs within 12 months from 
                        the date of a previous transfer to any 
                        qualified distribution under a qualified first-
                        time homeowner assistance program for the 
                        benefit of the designated beneficiary.
            ``(4) Estate tax treatment.--
                    ``(A) In general.--No amount shall be includible in 
                the gross estate of any individual for purposes of 
                chapter 11 by reason of an interest in a qualified 
                distribution under a qualified first-time homeowner 
                assistance program.
                    ``(B) Amounts includible in estate of designated 
                beneficiary in certain cases.--Subparagraph (A) shall 
                not apply to amounts distributed on account of the 
                death of a beneficiary.
                    ``(C) Amounts includible in estate of donor making 
                excess contributions.--In the case of a donor who makes 
                the election described in paragraph (2)(B) and who dies 
                before the close of the 5-year period referred to in 
                such paragraph, notwithstanding subparagraph (A), the 
                gross estate of the donor shall include the portion of 
                such contributions properly allocable to periods after 
                the date of death of the donor.
            ``(5) Other gift tax rules.--For purposes of chapters 12 
        and 13--
                    ``(A) Treatment of distributions.--Except as 
                provided in subparagraph (B), in no event shall a 
                distribution from a qualified distribution under a 
                qualified first-time homeowner assistance program be 
                treated as a taxable gift.
                    ``(B) Treatment of designation of new 
                beneficiary.--The taxes imposed by chapters 12 and 13 
                shall apply to a transfer by reason of a change in the 
                designated beneficiary under the program (or a rollover 
                to the account of a new beneficiary) unless the new 
                beneficiary is--
                            ``(i) assigned to the same generation as 
                        (or a higher generation than) the old 
                        beneficiary (determined in accordance with 
                        section 2651), and
                            ``(ii) a member of the family of the old 
                        beneficiary.
            ``(6) Additional tax for distributions not used for 
        qualified downpayment assistance.--
                    ``(A) In general.--The tax imposed by this chapter 
                for any taxable year on any taxpayer who receives a 
                payment or distribution from a qualified first-time 
                homeowner assistance program which is includible in 
                gross income shall be increased by 10 percent of the 
                amount which is so includible.
                    ``(B) Exceptions.--Subparagraph (A) shall not apply 
                if the payment or distribution is--
                            ``(i) made to a beneficiary (or to the 
                        estate of the designated beneficiary) on or 
                        after the death of the designated beneficiary,
                            ``(ii) attributable to the designated 
                        beneficiary's being disabled (within the 
                        meaning of section 72(m)(7)), or
                            ``(iii) an amount which is includible in 
                        gross income solely by application of paragraph 
                        (2)(C)(i)(II) for the taxable year.
                    ``(C) Contributions returned before certain date.--
                Subparagraph (A) shall not apply to the distribution of 
                any contribution made during a taxable year on behalf 
                of the designated beneficiary if--
                            ``(i) such distribution is made before the 
                        first day of the sixth month of the taxable 
                        year following the taxable year, and
                            ``(ii) such distribution is accompanied by 
                        the amount of net income attributable to such 
                        excess contribution.
                Any net income described in clause (ii) shall be 
                included in gross income for the taxable year in which 
                such excess contribution was made.
    ``(e) Reports.--Each officer or employee having control of the 
qualified distribution under a qualified first-time homeowner 
assistance program or their designee shall make such reports regarding 
such program to the Secretary and to designated beneficiaries with 
respect to contributions, distributions, and such other matters as the 
Secretary may require. The reports required by this subsection shall be 
filed at such time and in such manner and furnished to such individuals 
at such time and in such manner as may be required by the Secretary.
    ``(f) Regulations.--Notwithstanding any other provision of this 
section, the Secretary shall prescribe such regulations as may be 
necessary or appropriate to carry out the purposes of this section and 
to prevent abuse of such purposes, including regulations under chapters 
11, 12, and 13 of this title.''.
    (b) Conforming Amendments.--
            (1) Tax on excess contributions.--
                    (A) In general.--Subsection (a) of section 4973 of 
                such Code is amended by striking ``or'' at the end of 
                paragraph (5), by inserting ``or'' at the end of 
                paragraph (6), and by inserting after paragraph (6) the 
                following new paragraph:
            ``(7) a first-time homeowner assistance account (as defined 
        in section 530A),''.
                    (B) Excess contribution.--Section 4973 of such Code 
                is amended by adding at the end the following new 
                subsection:
    ``(i) Excess Contributions to First-Time Homeowner Assistance 
Account.--For purposes of this section--
            ``(1) In general.--In the case of a first-time homeowner 
        assistance account (as defined in section 530A) (within the 
        meaning of section 529A), the term `excess contributions' means 
        the amount by which the amount contributed for the taxable year 
        to such account (other than contributions under section 
        530A(d)(3)(C)) exceeds the contribution limit under section 
        530A(b)(2)(C).
            ``(2) Special rule.--For purposes of this subsection, any 
        contribution which is distributed out of the first-time 
        homeowner assistance account (as so defined) in a distribution 
        to which the last sentence of section 530A(d)(6)(C) applies 
        shall be treated as an amount not contributed.''.
            (2) Section 26(b)(2) is amended by striking ``and'' at the 
        end of subparagraph (X), by striking the period at the end of 
        subparagraph (Y) and inserting ``, and'', and by inserting 
        after subparagraph (Y) the following:
                    ``(Z) section 530A(d)(3)(A) (relating to additional 
                tax on first-time homeowner assistance account 
                distributions not used for qualified homeowner 
                assistance).''.
            (3) Penalty for failure to file reports.--Section 
        6693(a)(2) of such Code is amended by striking ``and'' at the 
        end of subparagraph (E), by striking the period at the end of 
        subparagraph (F) and inserting ``, and'', and by inserting 
        after subparagraph (F) the following:
                    ``(G) section 530A(e) (relating to qualified first-
                time homeowner assistance program), and''.
            (4) Section 877A of such Code is amended--
                    (A) in subsection (e)(2) by inserting ``a qualified 
                first-time homeowner assistance program (as defined in 
                section 530A),'' after ``530),'', and
                    (B) in subsection (g)(6) by inserting 
                ``530A(c)(3),'' after ``529(c)(3),''.
            (5) Section 4965(c) of such Code is amended by striking 
        ``or'' at the end of paragraph (7), by striking the period at 
        the end of paragraph (8) and inserting ``, or'', and by 
        inserting after paragraph (8) the following new paragraph:
            ``(9) a program described in section 530A.''.
    (c) Clerical Amendment.--The table of sections for part VIII of 
subchapter F of chapter 1 of such Code is amended by adding at the end 
the following new item:

``Sec. 530A. Qualified first-time homeowner assistance program.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.
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