H.F. 2470 Section 1. Section 422.7, subsection 41, paragraphs a and b, 1 Code 2018, are amended to read as follows: 2 a. Subject to the restrictions in paragraph “b” , subtract 3 the sum of the following amounts: 4 (1) (a) The amount of contributions made by an account 5 holder during the tax year to the account holder’s first-time 6 homebuyer savings accounts, not to exceed the following annual 7 limit : 8 (a) (i) For married taxpayers who file a joint return and 9 maintain a joint first-time homebuyer savings account, four 10 thousand dollars. 11 (ii) For any other account holder, of two thousand dollars. 12 (b) For the tax year beginning in the 2018 calendar year 13 and for each subsequent tax year, the director shall multiply 14 each the dollar amount set forth in subparagraph division 15 (a) , subparagraph subdivisions (i) and (ii), by the latest 16 cumulative inflation factor, shall round off the resulting 17 product to the nearest one dollar, and shall incorporate the 18 result into the income tax forms and instructions for each tax 19 year. For purposes of this subparagraph division, “cumulative 20 inflation factor” means the product of the annual inflation 21 factor for the 2018 calendar year and all annual inflation 22 factors for subsequent calendar years as determined by section 23 422.4, subsection 1 , paragraph “a” . The cumulative inflation 24 factor applies to all tax years beginning on or after January 25 1 of the calendar year for which the latest annual inflation 26 factor has been determined. Notwithstanding any other 27 provision, the annual inflation factor for the 2018 calendar 28 year is one hundred percent. 29 (2) To the extent included, income from interest received 30 from the account holder’s first-time homebuyer savings 31 accounts. 32 b. (1) The subtraction in paragraph “a” shall not exceed 33 the following aggregate lifetime limit : 34 (a) For married taxpayers who file a joint return and 35 -1- LSB 5890YH (4) 87 mm/jh 1/ 6

H.F. 2470 maintain a joint first-time homebuyer savings account, an 1 amount equal to the product of the deductible amount determined 2 for the year in paragraph “a” , subparagraph (1), subparagraph 3 division (a), subparagraph subdivision (i), multiplied by ten. 4 (b) For any other account holder, an amount equal to the 5 product of the deductible amount determined for the year in 6 which the first-time homebuyer savings account is first opened 7 as calculated in paragraph “a” , subparagraph (1), subparagraph 8 division (a), subparagraph subdivision (ii), multiplied by ten. 9 (2) The subtraction in paragraph “a” shall not be allowed to 10 an account holder upon one of the following dates, whichever 11 occurs first: 12 (a) January 1 of the tenth calendar year after the calendar 13 year during which the account holder first opened a first-time 14 homebuyer savings account. 15 (b) The date on which funds within an account holder’s 16 first-time homebuyer savings account are withdrawn for purposes 17 other than the payment or reimbursement of the designated 18 beneficiary’s eligible home costs in connection with a 19 qualified home purchase. Any amount transferred between 20 different first-time homebuyer savings accounts of the same 21 account holder by a person other than the account holder 22 shall not be considered a withdrawal for purposes of this 23 subparagraph division (b). 24 Sec. 2. Section 422.7, subsection 41, paragraph c, 25 subparagraph (1), Code 2018, is amended to read as follows: 26 (1) Add, to the extent previously deducted under paragraph 27 “a” , subparagraph (1), the amount withdrawn during the tax year 28 from an account holder’s first-time homebuyer savings account 29 for purposes other than the payment or reimbursement of the 30 designated beneficiary’s eligible home costs in connection with 31 a qualified home purchase. 32 Sec. 3. Section 541B.2, subsection 3, Code 2018, is amended 33 to read as follows: 34 3. “Designated beneficiary” means an individual meeting the 35 -2- LSB 5890YH (4) 87 mm/jh 2/ 6

H.F. 2470 requirements of section 541B.3, subsection 2 , and a first-time 1 homebuyer designated by an account holder as beneficiary of the 2 account holder’s first-time homebuyer savings account pursuant 3 to section 541B.3, subsection 2 . 4 Sec. 4. Section 541B.2, subsection 6, unnumbered paragraph 5 1, Code 2018, is amended to read as follows: 6 “First-time homebuyer” means an individual who is a resident 7 of Iowa and who does not own, either individually or jointly, a 8 single-family or multifamily residence, and who has not owned 9 or purchased, either individually or jointly, a single-family 10 or multifamily residence for a period of three years prior to 11 all of the following: 12 Sec. 5. Section 541B.2, subsections 7 and 11, Code 2018, are 13 amended to read as follows: 14 7. “First-time homebuyer savings account” means an account 15 that constitutes a savings deposit as defined 12 C.F.R. 16 §204.2(d), that meets the requirements of sections 541B.3 and 17 541B.4 , and that was established for the purpose of paying or 18 reimbursing a designated beneficiary’s eligible home costs in 19 connection with a qualified home purchase. 20 11. “Single-family residence” means a single-family 21 residence owned and occupied as defined in section 562A.6, 22 a manufactured home, mobile home, condominium unit, or 23 cooperative that is purchased by a designated beneficiary and 24 will be owned and occupied as the designated beneficiary’s 25 principal residence , including but not limited to a 26 manufactured home, mobile home, condominium unit, or 27 cooperative within ninety days of the closing date . 28 Sec. 6. Section 541B.3, subsection 1, Code 2018, is amended 29 to read as follows: 30 1. Establishment of account. 31 a. Beginning January 1, 2018, an individual may open an 32 interest-bearing savings account with a financial institution 33 and designate the entire account as a first-time homebuyer 34 savings account for the purpose of paying or reimbursing a 35 -3- LSB 5890YH (4) 87 mm/jh 3/ 6

H.F. 2470 designated beneficiary’s eligible home costs in connection with 1 a qualified home purchase. The first-time homebuyer savings 2 account designation shall be made no later than April 30 the 3 last day of the fourth month after the expiration of the year 4 following the tax year during which the account is opened, on 5 forms provided by the department. 6 b. A married couple electing to file a joint Iowa individual 7 income tax return may establish a joint first-time homebuyer 8 savings account. Married taxpayers electing to file separate 9 tax returns or separately on a combined tax return for Iowa tax 10 purposes shall not establish or maintain a joint first-time 11 homebuyer savings account. 12 c. b. An individual may establish more than one first-time 13 homebuyer savings account, provided each account has a 14 different designated beneficiary. 15 Sec. 7. Section 541B.3, subsection 2, paragraph a, Code 16 2018, is amended to read as follows: 17 a. The account holder shall designate one individual as 18 beneficiary of the first-time homebuyer savings account. The 19 designation shall be made on forms provided by the department 20 and filed with the department no later than April 30 of the 21 year following the last day of the fourth month after the 22 expiration of the tax year during which the account is opened. 23 The account holder may change the designated beneficiary of the 24 first-time homebuyer savings account at any time. 25 Sec. 8. Section 541B.4, subsection 3, Code 2018, is amended 26 to read as follows: 27 3. Required reports. The account holder shall submit the 28 following information to the department: 29 a. An annual report for the first-time homebuyer savings 30 account on forms furnished by the department. The report shall 31 be included with the Iowa income tax return of the account 32 holder. 33 b. A copy of the federal internal revenue service form 34 1099, or other similar federal internal revenue service income 35 -4- LSB 5890YH (4) 87 mm/jh 4/ 6

H.F. 2470 reporting form, if any, issued for the first-time homebuyer 1 savings account to the account holder by the financial 2 institution where the account is held. The form shall be 3 included with the Iowa income tax return of the account holder. 4 c. b. Upon a withdrawal of funds from a first-time 5 homebuyer savings account, a transaction report on forms 6 furnished by the department. 7 Sec. 9. EFFECTIVE DATE. This Act, being deemed of immediate 8 importance, takes effect upon enactment. 9 Sec. 10. RETROACTIVE APPLICABILITY. This Act applies 10 retroactively to January 1, 2018, for tax years beginning on 11 or after that date. 12 EXPLANATION 13 The inclusion of this explanation does not constitute agreement with 14 the explanation’s substance by the members of the general assembly. 15 This bill makes numerous changes to the Iowa first-time 16 homebuyer savings account program in Code chapter 541B 17 (program). 18 The bill removes the requirement that a first-time homebuyer 19 be a resident of Iowa. The bill modifies the definition of 20 “first-time homebuyer savings account” under the program to 21 provide that the account must constitute a savings deposit 22 as that term is defined for purposes of the federal reserve 23 system. The bill modifies the definition of “single-family 24 residence” under the program to include a reference to the 25 definition of “single-family residence” under the uniform 26 residential landlord and tenant law (Code chapter 562A), and to 27 require that the single-family residence be owned and occupied 28 by the designated beneficiary within 90 days of the closing 29 date. 30 The bill strikes the ability of a married couple filing joint 31 individual income tax returns to establish and maintain a joint 32 first-time homebuyer savings account (account). 33 The bill modifies various deadlines for filing forms and 34 making designations under the program from April 30 of the year 35 -5- LSB 5890YH (4) 87 mm/jh 5/ 6

H.F. 2470 following the year the account is opened, to the last day of 1 the fourth month after the expiration of the tax year during 2 which the account is opened. 3 The bill strikes the requirement that an annual report for 4 an account be included with the account holder’s Iowa income 5 tax return, and further strikes a requirement that an account 6 holder submit a copy of the federal internal revenue service 7 form 1099 related to an account with the account holder’s Iowa 8 income tax return. 9 Finally, the bill makes changes to the income tax benefits 10 related to contributions to and earnings from an account. 11 Under current law, account holders are allowed a deduction 12 for the first $2,000 of contributions made to an account 13 during a tax year, and that $2,000 annual limit is indexed to 14 inflation and increased each tax year. Current law also sets a 15 lifetime limit on the total amount of contributions that may be 16 deductible on an account holder’s income tax return equal to 10 17 times the annual contribution limit determined for the year. 18 The bill modifies this lifetime limit by setting it as an 19 amount equal to 10 times the annual contribution limit for the 20 year in which the account is first opened by an account holder. 21 Also under current law, previously deducted account 22 contributions are added back to income, and thus taxable, to 23 the extent the amounts are later withdrawn from an account 24 for purposes other than the payment or reimbursement of a 25 designated beneficiary’s eligible home costs under the program. 26 The bill specifies that this add-back requirement also applies 27 to previously deducted interest earned on the account. 28 The bill takes effect upon enactment and applies 29 retroactively to January 1, 2018, for tax years beginning on 30 or after that date. 31 -6- LSB 5890YH (4) 87 mm/jh 6/ 6