H.F. 2228 Section 1. NEW SECTION . 12G.1 Definitions. 1 As used in this chapter, unless the context otherwise 2 requires: 3 1. “Acquisition indebtedness” has the same meaning as 4 defined in section 163 of the Internal Revenue Code. 5 2. “Administrative fund” means the administrative fund 6 established under section 12G.4. 7 3. “Beneficiary” means an individual designated in a 8 participation agreement as the intended recipient of advance 9 payments of home ownership acquisition costs made on behalf of 10 the individual to the trust. 11 4. “Benefits” means the payment by the trust of home 12 ownership acquisition costs on behalf of a beneficiary for the 13 purchase of the beneficiary’s first home. 14 5. “First home” means the first real estate purchased by an 15 individual that meets the requirements of a principal residence 16 as that term is defined in section 121 of the Internal Revenue 17 Code. 18 6. “Home acquisition costs” means the certified costs 19 incurred by an individual in the purchase of a first home 20 including the amount of down payment required to secure a 21 mortgage or other instrument of indebtedness, the amount of 22 acquisition indebtedness, and the transaction costs incurred in 23 the purchase of the first home. 24 7. “Internal Revenue Code” means the same as defined in 25 section 422.3. 26 8. “Participant” means an individual, or an individual’s 27 legal representative, who has entered into a participation 28 agreement under this chapter for the advance payment of home 29 acquisition costs on behalf of a beneficiary. 30 9. “Participation agreement” means an agreement between 31 a participant and the trust entered into pursuant to this 32 chapter. 33 10. “Program fund” means the program fund established under 34 section 12G.4. 35 -1- LSB 5075YH (7) 83 tw/sc 1/ 9

H.F. 2228 11. “Refund penalty” means the amount assessed by the 1 treasurer of state for cancellation of a participation 2 agreement. 3 12. “Trust” means the home ownership savings plan trust 4 created under section 12G.2. 5 Sec. 2. NEW SECTION . 12G.2 Home ownership savings plan 6 trust created. 7 1. A home ownership savings plan trust is created within the 8 office of the treasurer of state. 9 2. The treasurer of state is the trustee of the trust, and 10 shall have all powers necessary to carry out and effectuate the 11 purposes, objectives, and provisions of this chapter pertaining 12 to the trust. Such powers include the power to do all of the 13 following: 14 a. Make and enter into contracts or agreements with various 15 entities as necessary for the administration of the trust or 16 the implementation of this chapter. 17 b. Carry out the duties and obligations of the trust 18 pursuant to this chapter. 19 c. Accept grants, gifts, legislative appropriations, and 20 other moneys from the state, any unit of federal, state, or 21 local government, or any other person, firm, partnership, or 22 corporation which the treasurer of state shall deposit into the 23 administrative fund or the program fund. 24 d. Carry out studies and projections in order to advise 25 participants regarding present and estimated home acquisition 26 costs and levels of financial participation in the trust 27 required in order to enable participants to achieve their 28 funding objectives. 29 e. Participate in any federal, state, or local governmental 30 program for the benefit of the trust. 31 f. Procure insurance against any loss in connection with the 32 property, assets, or activities of the trust. 33 g. Enter into participation agreements with participants. 34 h. Make payments to participants or beneficiaries, pursuant 35 -2- LSB 5075YH (7) 83 tw/sc 2/ 9

H.F. 2228 to participation agreements on behalf of beneficiaries. 1 i. Make refunds to participants upon the termination 2 of participation agreements, and partial nonqualified 3 distributions to participants, pursuant to the provisions, 4 limitations, and restrictions set forth in this chapter. 5 j. Invest moneys from the program fund in any investments 6 which are determined by the treasurer of state to be 7 appropriate. 8 k. Engage investment advisors, if necessary, to assist in 9 the investment of trust assets. 10 l. Contract for goods and services and engage personnel 11 as necessary, including consultants, actuaries, managers, 12 legal counsel, and auditors for the purpose of rendering 13 professional, managerial, and technical assistance and advice 14 to the treasurer of state regarding trust administration and 15 operation. 16 m. Establish, impose, and collect administrative fees and 17 charges in connection with transactions of the trust, and 18 provide for reasonable service charges, including penalties for 19 cancellations and late payments with respect to participation 20 agreements. 21 n. Administer the funds of the trust. 22 o. Adopt rules pursuant to chapter 17A for the 23 administration of the trust and for the implementation of the 24 powers described in this subsection. 25 Sec. 3. NEW SECTION . 12G.3 Participation agreements. 26 1. The trust may enter into participation agreements 27 with participants on behalf of beneficiaries pursuant to the 28 provisions of this section. 29 2. a. Each participation agreement may require a 30 participant to agree to invest a specific amount of money in 31 the trust for a specific period of time for the benefit of a 32 specific beneficiary. 33 b. A participant shall not be required to make an annual 34 contribution on behalf of a beneficiary. 35 -3- LSB 5075YH (7) 83 tw/sc 3/ 9

H.F. 2228 c. (1) Contributions made to the trust on behalf of a 1 beneficiary may be deducted from the computation of Iowa net 2 income pursuant to section 422.7, subsection 54. 3 (2) The maximum amount of contributions to the trust that 4 may be deducted shall not exceed two thousand dollars per 5 beneficiary per year. 6 (3) The director of the department of revenue shall adjust 7 the maximum contribution amount annually to reflect increases 8 in the consumer price index. 9 d. Participation agreements may be amended to provide for 10 adjusted levels of payments based upon changed circumstances or 11 changes in home acquisition plans. 12 3. The execution of a participation agreement by the trust 13 shall not guarantee in any way that home acquisition costs will 14 be equal to any projections and estimates provided by the trust 15 or that the beneficiary named in any participation agreement 16 will qualify for the financing necessary to purchase a first 17 home. 18 4. a. A participant may request the treasurer of state 19 to change the beneficiary named in a participation agreement. 20 However, a beneficiary may not be changed unless the new 21 beneficiary is eligible to participate. The treasurer of state 22 shall adopt rules for changing beneficiaries in compliance with 23 the provisions of this chapter. 24 b. Participation agreements may be freely amended in order 25 to enable participants to increase or decrease the level of 26 participation, change the designation of beneficiaries, and 27 carry out similar matters as authorized by rules adopted by the 28 treasurer of state. 29 5. a. A participation agreement shall provide for the 30 cancellation of the agreement. Such cancellation shall only 31 be effective upon the fulfillment of the terms and conditions 32 of the agreement, and upon the payment of applicable refund 33 penalties, fees, and costs as set forth and contained in rules 34 adopted by the treasurer of state. 35 -4- LSB 5075YH (7) 83 tw/sc 4/ 9

H.F. 2228 b. A participant may cancel a participation agreement at 1 will. Upon cancellation of a participation agreement and 2 after the payment of applicable refund penalties, fees, and 3 costs, a participant shall be entitled to the return of the 4 participant’s account balance. 5 Sec. 4. NEW SECTION . 12G.4 Program and administrative funds 6 —— investment and payments. 7 1. The treasurer of state shall segregate moneys received by 8 the trust into a program fund and an administrative fund. 9 2. All moneys paid by participants in connection with 10 participation agreements shall be deposited as received into 11 separate accounts within the program fund. 12 3. The treasurer shall only accept contributions to the 13 trust made in the form of cash. 14 4. A participant or beneficiary shall not provide 15 investment direction regarding program contributions or 16 earnings held by the trust. 17 5. Moneys accrued by participants in the program fund of the 18 trust may be used for the payment of home acquisition costs. 19 6. Payments from the trust may be made to an institution, a 20 participant, or a beneficiary. 21 Sec. 5. NEW SECTION . 12G.5 Repayment —— treatment of income 22 —— ownership and transfer of moneys. 23 1. A participant retains ownership of all payments made 24 under a participation agreement up to the date of utilization 25 for payment of home acquisition costs for the beneficiary. 26 2. All income derived from the investment of the payments 27 made by the participant is considered to be held in trust for 28 the benefit of the beneficiary. 29 3. If the program is terminated prior to payment of home 30 acquisition costs for the beneficiary, the participant is 31 entitled to a refund of the participant’s account balance. 32 4. An institution receiving payments toward home 33 acquisition costs from the fund shall obtain ownership of the 34 payments at the time each payment is made to the institution. 35 -5- LSB 5075YH (7) 83 tw/sc 5/ 9

H.F. 2228 5. Any amounts which may be paid to any person pursuant to 1 the home ownership savings plan trust which are not listed in 2 this section are owned by the trust. 3 6. A participant may transfer ownership rights to another 4 eligible individual, including a gift of the ownership rights 5 to a minor beneficiary. The transfer shall be made and the 6 property distributed in accordance with rules adopted by the 7 treasurer of state or with the terms of the participation 8 agreement. 9 7. A participant’s interest in the trust shall not be used 10 as security for a loan. 11 Sec. 6. NEW SECTION . 12G.6 Annual audited financial report. 12 1. The treasurer of state shall submit an annual audited 13 financial report, prepared in accordance with generally 14 accepted accounting principles, on the operations of the trust 15 by November 1 to the governor and the general assembly. 16 2. The annual audit shall be made either by the auditor 17 of state or by an independent certified public accountant 18 designated by the auditor of state and shall include direct and 19 indirect costs attributable to the use of outside consultants, 20 independent contractors, and any other persons who are not 21 state employees. 22 3. The annual audit shall be supplemented by all of the 23 following information prepared by the treasurer of state: 24 a. Any related studies or evaluations prepared in the 25 preceding year. 26 b. A summary of the benefits provided by the trust including 27 the number of participants and beneficiaries in the trust. 28 c. Any other information which is relevant in order to make 29 a full, fair, and effective disclosure of the operations of the 30 trust. 31 Sec. 7. NEW SECTION . 12G.7 Income tax treatment. 32 1. State income tax treatment of the home ownership savings 33 plan trust shall be as provided in section 422.7, subsections 34 54 and 55. 35 -6- LSB 5075YH (7) 83 tw/sc 6/ 9

H.F. 2228 2. State inheritance tax treatment of interests in the home 1 ownership savings plan trust shall be as provided in section 2 450.4, subsection 11. 3 Sec. 8. NEW SECTION . 12G.8 Property rights to assets in 4 trust. 5 1. The assets of the trust shall at all times be preserved, 6 invested, and expended solely and only for the purposes of 7 the trust and shall be held in trust for the participants and 8 beneficiaries. 9 2. No property rights in the trust shall exist in favor of 10 the state. 11 3. The assets of the trust shall not be transferred or used 12 by the state for any purposes other than the purposes of the 13 trust. 14 Sec. 9. NEW SECTION . 12G.9 Construction. 15 This chapter shall be construed liberally in order to 16 effectuate its purpose. 17 Sec. 10. Section 422.7, Code Supplement 2009, is amended by 18 adding the following new subsections: 19 NEW SUBSECTION . 54. a. Subtract the amount of a 20 contribution to the home ownership savings plan trust under a 21 participation agreement with the treasurer of state, not to 22 exceed the maximum amount that may be deducted for Iowa income 23 tax purposes under section 12G.3, subsection 2, paragraph “c” . 24 b. Add the amount resulting from the cancellation of 25 a participation agreement refunded to the taxpayer as a 26 participant in the home ownership savings plan trust to the 27 extent previously deducted as a contribution to the trust under 28 paragraph “a” . 29 c. Add the amount resulting from a withdrawal made by 30 a taxpayer from the home ownership savings plan trust for 31 purposes other than the payment of home acquisition costs, 32 to the extent such amount was previously deducted as a 33 contribution to the trust under paragraph “a” . For purposes of 34 this paragraph, “home acquisition costs” has the same meaning as 35 -7- LSB 5075YH (7) 83 tw/sc 7/ 9

H.F. 2228 defined in section 12G.1. 1 NEW SUBSECTION . 55. Subtract, to the extent included, 2 income from interest and earnings received from the home 3 ownership savings plan trust created in chapter 12G. 4 Sec. 11. Section 450.4, Code 2009, is amended by adding the 5 following new subsection: 6 NEW SUBSECTION . 11. On the value of any interest in the 7 home ownership savings plan trust, as described in chapter 8 12G, to the same extent to which the value of the interest is 9 excluded from the decedent’s gross estate for federal estate 10 tax purposes. 11 Sec. 12. RETROACTIVE APPLICABILITY. The section of this Act 12 amending Code section 422.7 applies retroactively to January 1, 13 2010, for tax years beginning on or after that date. 14 EXPLANATION 15 This bill establishes a home ownership savings plan trust 16 modeled after the Iowa educational savings plan trust contained 17 in Code chapter 12D. The bill provides for the creation of 18 the home ownership savings plan trust in new Code chapter 12G 19 and authorizes the treasurer of state to administer the Code 20 chapter by way of several specified powers and duties. 21 The objective of the home ownership savings plan trust is 22 to provide a mechanism for making contributions on behalf of a 23 beneficiary into an account which will be invested and managed 24 by the treasurer of state, with the accumulated funds payable 25 to or on behalf of a beneficiary at a future date for purposes 26 of acquiring a first home. 27 The bill provides for entering into a participation 28 agreement requiring a participant to agree to invest a specific 29 amount of money in the trust for a specific period of time 30 for the benefit of a specific beneficiary. The bill limits 31 the maximum contribution that may be deducted for Iowa income 32 tax purposes to $2,000 per beneficiary annually, adjusted to 33 reflect increases in the consumer price index. 34 The bill provides for amending participation agreements, 35 -8- LSB 5075YH (7) 83 tw/sc 8/ 9

H.F. 2228 substituting beneficiaries, and cancellation of agreements, 1 and states that the execution of a participation agreement by 2 the trust does not guarantee that home ownership costs will be 3 equal to projections and estimates provided by the trust or 4 that the beneficiary named in any participation agreement will 5 qualify for any other financing necessary to purchase a first 6 home. 7 The bill provides for the segregation of moneys received 8 by the trust into a program fund and an administrative fund, 9 with all moneys paid by participants deposited into separate 10 accounts within the program fund. 11 The bill specifies that contributions to the trust can only 12 be made in cash, and that the contributions may be used for the 13 payment of home acquisition costs. Payments can be made to an 14 institution, the participant, or to the beneficiary. 15 The bill specifies circumstances under which ownership 16 rights can be transferred and provides that a participant 17 cannot utilize the participant’s interest in the trust as 18 security for a loan. 19 The bill provides for an annual audited financial report to 20 be submitted by the treasurer of state to the governor and the 21 general assembly. 22 The bill allows income tax exemptions for contributions to 23 the trust and for interest and earnings from the trust and 24 specifies the amounts that may be deducted from net income for 25 purposes of computing Iowa individual income tax liability and 26 provides for inheritance tax exemptions in certain cases. 27 The income tax exemptions apply retroactively to January 1, 28 2010, for tax years beginning on or after that date. 29 -9- LSB 5075YH (7) 83 tw/sc 9/ 9