S.F. 2326 Section 1. Section 422.7, subsection 27, paragraph a, 1 subparagraph (1), unnumbered paragraph 1, Code 2026, is amended 2 to read as follows: 3 The Except for an employer account holder, the amount of 4 contributions made by an account holder during the tax year to 5 the account holder’s first-time homebuyer savings accounts, not 6 to exceed the following annual limit: 7 Sec. 2. Section 422.7, Code 2026, is amended by adding the 8 following new subsection: 9 NEW SUBSECTION . 27A. Subtract, to the extent included, the 10 amount of funds withdrawn from a first-time homebuyer savings 11 account that were contributed by an employer on behalf of the 12 taxpayer pursuant to chapter 541B, plus any interest that has 13 accrued on such contribution, that were used for the payment 14 or reimbursement of the taxpayer’s eligible home costs in 15 connection with a qualified home purchase in accordance with 16 chapter 541B. 17 Sec. 3. Section 422.35, Code 2026, is amended by adding the 18 following new subsection: 19 NEW SUBSECTION . 15. a. Subject to the restrictions in 20 paragraph “b” , subtract, to the extent included, income from 21 interest received from the taxpayer’s first-time homebuyer 22 savings accounts established pursuant to chapter 541B. 23 b. The subtraction in paragraph “a” shall not be allowed to 24 a taxpayer upon one of the following dates, whichever occurs 25 first: 26 (1) January 1 of the tenth calendar year after the calendar 27 year during which the taxpayer first opened a first-time 28 homebuyer savings account for the designated beneficiary. 29 (2) The date on which funds within the taxpayer’s first-time 30 homebuyer savings account are withdrawn for purposes other than 31 the payment or reimbursement of the designated beneficiary’s 32 eligible home costs in connection with a qualified home 33 purchase. Any amount transferred between different first-time 34 homebuyer savings accounts of the taxpayer shall not be 35 -1- LSB 6762XS (4) 91 jm/jh 1/ 5

S.F. 2326 considered a withdrawal for purposes of this subparagraph as 1 long as the designated beneficiary does not change. 2 c. (1) Add, to the extent previously excluded under 3 paragraph “a” , the amount withdrawn during the tax year from the 4 taxpayer’s first-time homebuyer savings account for purposes 5 other than the payment or reimbursement of the designated 6 beneficiary’s eligible home costs in connection with a 7 qualified home purchase. 8 (2) For purposes of this paragraph “c” , any amount remaining 9 in the taxpayer’s first-time homebuyer savings account on 10 January 1 of the tenth calendar year after the calendar year 11 during which the taxpayer first opened a first-time homebuyer 12 savings account shall be considered immediately withdrawn under 13 subparagraph (1). 14 (3) For purposes of this paragraph “c” , the transfer of 15 amounts between different first-time homebuyer accounts of the 16 taxpayer by a person other than the taxpayer shall not cause 17 such transfer to be considered a withdrawal under subparagraph 18 (1) as long as the designated beneficiary does not change. 19 d. For any amount considered a withdrawal required to be 20 added to net income pursuant to paragraph “c” , the taxpayer 21 shall be assessed a penalty equal to ten percent of the amount 22 of the withdrawal. The penalty shall not apply to withdrawals 23 made by reason of the death of the designated beneficiary, 24 change of employment status with the designated beneficiary, or 25 to withdrawals made pursuant to a garnishment, levy, or other 26 order, including but not limited to an order in bankruptcy 27 following a filing for protection under the federal bankruptcy 28 code, 11 U.S.C. §101 et seq. 29 e. For purposes of this subsection, “designated 30 beneficiary” , “eligible home costs” , “first-time homebuyer 31 savings account” , and “qualified home purchase” mean the same as 32 defined in section 541B.2. 33 Sec. 4. Section 541B.2, subsection 1, Code 2026, is amended 34 to read as follows: 35 -2- LSB 6762XS (4) 91 jm/jh 2/ 5

S.F. 2326 1. “Account holder” means an individual who establishes , 1 either individually or jointly with the individual’s spouse, 2 or an employer, who establishes a first-time homebuyer savings 3 account pursuant to section 541B.3 . 4 Sec. 5. Section 541B.3, subsection 1, Code 2026, is amended 5 by adding the following new paragraph: 6 NEW PARAGRAPH . d. An employer may open an interest-bearing 7 savings account with a financial institution and designate the 8 entire account as a first-time homebuyer savings account for 9 the purpose of paying or reimbursing the eligible home costs 10 in connection with a qualified home purchase of an employee 11 who is the designated beneficiary. The first-time homebuyer 12 savings account designation shall be made on forms provided 13 by the department and shall be submitted on or before the 14 date prescribed in section 422.21 for making and filing an 15 individual income tax return, excluding extensions, or the 16 date for making and filing an individual income tax return 17 determined by the director pursuant to an order issued under 18 section 421.17, subsection 30, applicable to the tax year in 19 which the account is opened. 20 Sec. 6. Section 541B.3, subsection 2, paragraph a, Code 21 2026, is amended to read as follows: 22 a. The account holder shall designate one individual as 23 beneficiary of the first-time homebuyer savings account. The 24 designation shall be made on forms provided by the department 25 and shall be submitted on or before the date prescribed in 26 section 422.21 for making and filing an individual income tax 27 return, excluding extensions, or the date for making and filing 28 an individual income tax return determined by the director 29 pursuant to an order issued under section 421.17, subsection 30 30 , applicable to the tax year in which the designation is 31 made. The account holder may change the designated beneficiary 32 of the first-time homebuyer savings account at any time , except 33 an employer account holder shall only change the designated 34 beneficiary if the employment status of the designated 35 -3- LSB 6762XS (4) 91 jm/jh 3/ 5

S.F. 2326 beneficiary changes with the employer account holder . 1 Sec. 7. RETROACTIVE APPLICABILITY. This Act applies 2 retroactively to January 1, 2026, for tax years beginning on 3 or after that date. 4 EXPLANATION 5 The inclusion of this explanation does not constitute agreement with 6 the explanation’s substance by the members of the general assembly. 7 Currently, individuals may open an interest-bearing savings 8 account and designate the account as a first-time homebuyer 9 savings account (account) for the purpose of financing 10 the purchase of a single-family residence in this state 11 by a first-time homebuyer. The account may be established 12 individually, or jointly with a spouse if the married couple 13 files a joint Iowa income tax return. The contributions to 14 the account are deductible from the individual income tax. 15 Currently, contributions are deductible in the amount of $4,744 16 for married persons, and $2,372 for individuals, and any 17 interest in the account accrues state tax free. 18 This bill modifies the account by allowing an employer 19 (employer account holder) to open an account on behalf of an 20 employee and make contributions to the account on behalf of an 21 employee who is a first-time homebuyer. 22 The bill specifies the amount of funds withdrawn from the 23 account that are contributed by the employer account holder 24 that are used by an individual taxpayer to purchase a home as 25 a first-time homebuyer are deductible against the individual 26 income tax by the individual taxpayer. 27 Unlike individual account holders, the bill prohibits an 28 employer account holder from taking a deduction against income 29 taxes for any contributions made to the account. 30 In the same manner as individual account holders, the bill 31 assesses a penalty against an employer account holder in the 32 amount of 10 percent of any withdrawal amount if the amount 33 is withdrawn for a purpose other than for a purchase by a 34 first-time homebuyer. The penalty is not assessed upon death 35 -4- LSB 6762XS (4) 91 jm/jh 4/ 5

S.F. 2326 of the first-time homebuyer, change of employment status with 1 the first-time homebuyer and the employer account holder, or 2 upon withdrawals made pursuant to a garnishment, levy, or 3 bankruptcy. 4 The bill and current law require the account to be closed 5 after a period of 10 years, and the account is subject to 6 penalties and tax if the moneys in the account are not used in 7 the purchase of a home by a first-time homebuyer within the 8 10-year period. 9 The bill applies retroactively to tax years beginning on or 10 after January 1, 2026. 11 -5- LSB 6762XS (4) 91 jm/jh 5/ 5