H. R. 3360
IN THE HOUSE OF REPRESENTATIVES
November 3, 2011
Mr. Renacci (for himself, Mr. Carney, Mr. Meehan, Mr. Webster, Mr. Quigley, and Mr. Welch) introduced the following bill; which was referred to the Committee on Ways and Means
To amend the Internal Revenue Code of 1986 to allow a deduction for contributions to tax-exempt Housing Equity Savings Accounts.
This Act may be cited as the
Creating Homeownership Opportunity Act
Housing equity savings accounts
Part VII of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to additional itemized deductions for individuals) is amended by redesignating section 224 as section 225 and by inserting after section 223 the following new section:
Housing equity savings accounts
In the case of an eligible individual, there shall be allowed as a deduction the aggregate amount paid in cash during the taxable year by or on behalf of such individual to a housing equity savings account of such individual.
The amount allowable as a deduction under subsection (a) for any taxable year shall not exceed the lesser of—
an amount equal to the compensation (as defined in section 219(f)(1)) includible in the individual's gross income for such taxable year.
For purposes of this section, the term eligible individual means, with respect to any taxable year, 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 at the close of the preceding taxable year.
Housing equity savings account
For purposes of this section, the term housing equity savings account means a trust created or organized in the United States exclusively for the benefit of an individual, but only if the written governing instrument creating the trust meets the following requirements:
Except in the case of rollover contributions from another housing equity savings account of such individual—
no contribution will be accepted unless it is in cash, and
contributions will not be accepted for the taxable year in excess of the dollar amount in effect for the taxable year under subsection (b)(1).
The trustee is a bank (as defined in section 408(n)) or such other person who demonstrates to the satisfaction of the Secretary that the manner in which such other person will administer the trust will be consistent with the requirements of this section.
No part of the trust funds will be invested in life insurance contracts.
The interest of an individual in the balance in his account is nonforfeitable.
The assets of the trust will not be commingled with other property except in a common trust fund or common investment fund.
Tax treatment of distributions
Except as otherwise provided in this subsection, any amount distributed out of a housing equity savings account shall be included in gross income of the distributee for the taxable year in which the distribution is received. Notwithstanding any other provision of this title (including chapters 11 and 12), the basis of any person in such an account is zero.
Exception for amounts used to purchase principal residence and for certain payments to individual retirement accounts
Paragraph (1) shall not apply to any distribution during the taxable year which would (but for this paragraph) be includible in gross income for such year to the extent that the aggregate of such distributions during the taxable year do not exceed the aggregate qualified payments made by the account beneficiary during such year.
For purposes of this paragraph, the term qualified payment means—
any payment of qualified acquisition costs (as defined in section 72(t)(8)(C)) incurred with respect to the principal residence of the account beneficiary, and
any payment to an individual retirement account but only if—
the account beneficiary of the housing equity savings account from which the payment is made is also the beneficiary of the individual retirement account, and
the payment is a qualified IRA payment.
Qualified ira payment
For purposes of subparagraph (B), the term qualified IRA payment means any payment if—
the account beneficiary—
is an eligible individual at the time of the payment, and
attains age 55 as of the close of the taxable year during which the payment is made,
the account beneficiary is—
an eligible individual at the time of the payment, and
has been an eligible individual throughout the 20-year period ending on the date of the payment, or
the payment is made within 1 year after the date of a payment described in subparagraph (B)(i).
Exceptions for certain other distributions
Rules similar to the rules of paragraphs (3), (4), (5), and (6) of section 408(d) shall apply for purposes of this section.
Additional tax on amounts included in gross income
If any distribution from a housing equity savings account is includible in gross income of the account beneficiary, the tax liability of such beneficiary under this chapter for the taxable year in which the distribution is received shall be increased by an amount equal to 20 percent of the amount of the distribution.
Tax treatment of accounts
Exemption from tax
A housing equity savings account is exempt from taxation under this subtitle unless such account has ceased to be a housing equity savings account by reason of paragraph (2). Notwithstanding the preceding sentence, any such account is subject to the taxes imposed by section 511 (relating to imposition of tax on unrelated business income of charitable, etc. organizations).
Rules similar to the rules of paragraphs (2) and (4) of section 408(e) shall apply to housing equity savings accounts, and any amount treated as distributed under such rules shall be treated as not used to make payments described in subsection (e)(2).
Beneficiary must be under age 55
No deduction shall be allowed under this section with respect to any payment to a housing equity savings account for the benefit of an individual if such individual has attained age 55 before the close of such individual's taxable year for which the contribution was made.
Other definitions and special rules
For purposes of this section—
The term account beneficiary means the individual for whose benefit the housing equity savings account was established.
The term principal residence has the same meaning as when used in section 121, except that such term shall include only residences located in the United States.
In the case of any taxable beginning in a calendar after 2012, the dollar amount in subsection (b)(1) shall be increased by an amount equal to—
such dollar amount, multiplied by
cost-of-living adjustment determined under section 1(f)(3) for the calendar
year in which such taxable year begins determined by substituting
calendar year 2011 for
calendar year 1992 in
subparagraph (B) thereof.
If any increase under subparagraph (A) is not a multiple of $50, such increase shall be rounded to the nearest multiple of $50.
Certain rules to apply
Rules similar to the following rules shall apply for purposes of this section:
Section 219(d)(2) (relating to no deduction for rollovers).
Section 219(f)(3) (relating to time when contributions deemed made).
Section 219(f)(5) (relating to employer payments).
Section 408(g) (relating to community property laws).
Section 408(h) (relating to custodial accounts).
The trustee of a housing equity savings account shall make such reports regarding such account to the Secretary and to the individual for whose benefit the account is maintained with respect to contributions, distributions, and such other matters as the Secretary may by regulation prescribe. 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 such regulations.
Deduction allowed in arriving at adjusted gross income
Subsection (a) of section 62 of such Code is amended by inserting after paragraph (21) the following new paragraph:
Housing equity savings account contributions
The deduction allowed by section 224.
Tax on excess contributions
Subsection (a) of
section 4973 of such Code (relating to tax on excess contributions to
individual retirement accounts, etc.) is amended by striking
at the end of paragraph (4), by inserting
or at the end of
paragraph (5), and by inserting after paragraph (5) the following new
a housing equity savings account (within the meaning of section 224(d)),
Section 4973 of such Code is amended by adding at the end the following new subsection:
Excess contributions to housing equity savings accounts
For purposes of this section, in the case of housing equity savings accounts (within the meaning of section 224(d)), the term excess contributions means the sum of—
the excess (if any) of—
the aggregate amount contributed for the taxable year to the accounts (other than rollover contributions), over
the amount allowable as a deduction under section 224 for such contributions, and
the amount determined under this subsection for the preceding taxable year, reduced by the sum of—
the distributions out of the accounts which were included in gross income under rules similar to the rules of section 408(d)(5) which apply to such accounts by reason of section 224(e)(3), and
the excess (if any) of—
the maximum amount allowable as a deduction under section 224(b) for the taxable year, over
the amount contributed to the accounts for the taxable year.
Tax on prohibited transactions
Paragraph (1) of section 4975(e) of such Code (relating
to prohibited transactions) is amended by striking
or at the end
of subparagraph (F), by redesignating subparagraph (G) as subparagraph (H), and
by inserting after subparagraph (F) the following new subparagraph:
a housing equity savings account described in section 224(d), or
Subsection (c) of section 4975 of such Code is amended by adding at the end the following new paragraph:
Special rule for housing equity savings accounts
An individual for whose benefit a housing equity savings account is established shall be exempt from the tax imposed by this section with respect to any transaction concerning such account (which would otherwise be taxable under this section) if section 224(f)(2) applies with respect to such transaction.
Failure To provide reports on housing equity savings accounts
of section 6693(a) of such Code (relating to failure to provide reports on
individual retirement accounts or annuities) is amended by striking
and at the end of subparagraph (D), by striking the period at
the end of subparagraph (E) and inserting
, and, and by adding
at the end the following new subparagraph:
Section 224(i) (relating to housing equity savings accounts).
The table of sections for part VII of subchapter B of chapter 1 of such Code is amended by striking the item relating to section 224 and inserting the following new items:
Sec. 224. Housing equity savings accounts.
Sec. 225. Cross references.
The amendments made by this section shall apply to contributions for taxable years beginning after December 31, 2011.