HB 225 — An Act providing for the establishment of first-time home buyer savings accounts for first-time home buyers in this Commonwealth.

PRINTER'S NO.   178

                   THE GENERAL ASSEMBLY OF PENNSYLVANIA



                       HOUSE BILL
                       No. 225
                                                Session of
                                                  2025

     INTRODUCED BY KUTZ, ROWE, FLEMING, RADER, KUZMA AND REICHARD,
        JANUARY 22, 2025

     REFERRED TO COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT,
        JANUARY 22, 2025


                                     AN ACT
 1   Providing for the establishment of first-time home buyer savings
 2      accounts for first-time home buyers in this Commonwealth.
 3      The General Assembly of the Commonwealth of Pennsylvania
 4   hereby enacts as follows:
 5   Section 1.   Short title.
 6      This act shall be known and may be cited as the First-Time
 7   Home Buyer Savings Account Act.
 8   Section 2.   Definitions.
 9      The following words and phrases when used in this act shall
10   have the meanings given to them in this section unless the
11   context clearly indicates otherwise:
12      "Account holder."   An individual who establishes,
13   individually or jointly, a first-time home buyer savings
14   account.
15      "Allowable closing costs."     A disbursement listed on a
16   settlement statement for the purchase of a single-family
17   residence in this Commonwealth by a qualified beneficiary.
 1      "Department."   The Department of Revenue of the Commonwealth.
 2      "Eligible costs."   The down payment and allowable closing
 3   costs for the purchase of a single-family residence in this
 4   Commonwealth by a qualified beneficiary. Eligible costs shall
 5   not include costs incurred prior to the establishment of a
 6   first-time home buyer savings account.
 7      "Financial institution."    A bank, trust company, savings
 8   institution, credit union, broker-dealer, insurance company and
 9   mutual fund or similar entity authorized to do business in this
10   Commonwealth.
11      "First-time home buyer."    An individual who resides in this
12   Commonwealth and has not owned or purchased directly or through
13   a trust, limited liability company, partnership or other legal
14   entity, either individually or jointly, a single-family
15   residence during the three-year period prior to the purchase
16   date of a single-family residence.
17      "First-time home buyer savings account."     An account
18   established under section 3.
19      "Qualified beneficiary."    A first-time home buyer who is
20   designated as a qualified beneficiary by the account holder of
21   the first-time home buyer savings account.
22      "Settlement statement."     A statement of receipts and
23   disbursements from a real estate transaction, including a
24   statement prescribed under the Real Estate Settlement Procedures
25   Act of 1974 (Public Law 93-533, 88 Stat. 1724).
26      "Single-family residence."    A single-family residence owned
27   and occupied by a qualified beneficiary as the qualified
28   beneficiary's principal residence, which may include a
29   manufactured home, trailer, mobile home or a unit in a
30   condominium, cooperative or planned community.

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 1      "Tax Reform Code of 1971."    The act of March 4, 1971 (P.L.6,
 2   No.2), known as the Tax Reform Code of 1971.
 3   Section 3.   Establishment of first-time home buyer savings
 4                account.
 5      (a)   Designation of first-time home buyer savings account.--
 6   Beginning six months after the effective date of this
 7   subsection, an individual may open a first-time home buyer
 8   savings account with a financial institution.
 9      (b)   Designation of qualified beneficiary.--An account holder
10   shall designate no more than one first-time home buyer as the
11   qualified beneficiary of a first-time home buyer savings
12   account. The account holder may designate themself as the
13   qualified beneficiary and may change the designated qualified
14   beneficiary at any time. The account holder shall declare the
15   qualified beneficiary on the annual personal income tax return
16   required under the Tax Reform Code of 1971 for the tax year in
17   which the first-time home buyer savings account is established
18   and for any year in which the qualified beneficiary is changed.
19      (c)   Use of first-time home buyer savings account.--Money
20   from a first-time home buyer savings account may only be used to
21   pay or reimburse a qualified beneficiary's eligible costs for
22   the purchase of a single-family residence in this Commonwealth.
23      (d)   Expenses.--The account holder may not use money held in
24   a first-time home buyer savings account to pay expenses of
25   administering the first-time home buyer savings account, except
26   that a service fee may be deducted from the first-time home
27   buyer savings account by a financial institution in which the
28   first-time home buyer savings account is held.
29      (e)   Joint account holders.--An account holder may jointly
30   own a first-time home buyer savings account with another person

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 1   if the joint account holders file a joint personal income tax
 2   return under Article III of the Tax Reform Code of 1971.
 3      (f)   Qualified beneficiary of more than one first-time home
 4   buyer savings account.--An individual may be designated as the
 5   qualified beneficiary on more than one first-time home buyer
 6   savings account.
 7      (g)   Contributions to first-time home buyer savings
 8   account.--
 9            (1)   Subject to the limitations under section 4(d), an
10      individual other than the account holder may contribute to a
11      first-time home buyer savings account.
12            (2)   The maximum amount of all contributions to a first-
13      time home buyer savings account is $150,000.
14      (h)   Transfer of money.--An account holder may withdraw money
15   from a first-time home buyer savings account and deposit the
16   money in a new first-time home buyer savings account held by the
17   same or a different financial institution.
18   Section 4.     Deduction and exclusion from taxable income.
19      (a)   Deduction of contributions.--Except as otherwise
20   provided under subsection (c), the amount contributed by an
21   account holder to a first-time home buyer savings account during
22   each tax year:
23            (1)   may not exceed $5,000 for an account holder who
24      files an individual personal income tax return or $10,000 for
25      joint account holders who file a joint personal income tax
26      return; and
27            (2)   shall be deductible, up to the contribution limits
28      in paragraph (1), from the taxable income of the account
29      holder under Article III of the Tax Reform Code of 1971
30      during the tax year the contribution was made.

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 1      (b)   Exclusion of earnings.--Except as otherwise provided
 2   under subsection (c), the amount of earnings on a first-time
 3   home buyer savings account during the tax year may be excluded
 4   from the taxable income of an account holder under Article III
 5   of the Tax Reform Code of 1971.
 6      (c)   Limitations on deductions and exclusions.--An account
 7   holder may claim a deduction and exclusion under this section:
 8            (1)   for a period of no more than 10 years;
 9            (2)   for an aggregate amount of principal and earnings
10      not to exceed $50,000 within 10 years; and
11            (3)   except as otherwise provided in section 3(h), only
12      if the principal and earnings of a first-time home buyer
13      savings account remain in the first-time home buyer savings
14      account until a withdrawal is made for the eligible costs
15      relating to the purchase of a single-family residence by a
16      qualified beneficiary.
17      (d)   Nonaccount holders.--An individual other than the
18   account holder who deposits money in a first-time home buyer
19   savings account under section 3(g) is not entitled to the
20   deduction and exclusion provided for under this section.
21      (e)   Remaining money.--Money in a first-time home buyer
22   savings account not expended on eligible costs before expiration
23   of the 10-year period under subsection (c)(1) shall be included
24   in the account holder's taxable income under Article III of the
25   Tax Reform Code of 1971.
26      (f)   Application to alternative basis taxation.--The
27   deduction and exclusion from taxable income shall apply to any
28   alternative basis for calculating taxable income under Article
29   III of the Tax Reform Code of 1971.
30   Section 5.     Reporting.

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 1      The account holder shall submit to the department all of the
 2   following:
 3            (1)   Upon a withdrawal of money from a first-time home
 4      buyer savings account, a detailed account of the eligible
 5      costs toward which the money was applied and a statement of
 6      the amount of money remaining in the first-time home buyer
 7      savings account.
 8            (2)   With the account holder's personal income tax
 9      return:
10                  (i)    information regarding the first-time home buyer
11            savings account, including a list of transactions for the
12            first-time home buyer savings account during the tax
13            year; and
14                  (ii)   the form 1099 issued by the financial
15            institution holding the first-time home buyer savings
16            account.
17            (3)   Any other information as required by the department.
18   Section 6.     Financial institutions.
19      (a)   Limitations on financial institutions.--A financial
20   institution may not be required or be held liable to do any of
21   the following:
22            (1)   Designate an account as a first-time home buyer
23      savings account or designate a qualified beneficiary of a
24      first-time home buyer savings account in a financial
25      institution's account contracts or systems.
26            (2)   Track the use of money withdrawn from a first-time
27      home buyer savings account.
28            (3)   Allocate money in a first-time home buyer savings
29      account among joint account holders or multiple qualified
30      beneficiaries.

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 1             (4)   Report any information to the department or any
 2      other governmental agency that is not otherwise required by
 3      law.
 4             (5)   Determine if an account satisfies the requirements
 5      to be a first-time home buyer savings account.
 6             (6)   Ensure that money in a first-time home buyer savings
 7      account is used for eligible costs.
 8             (7)   Report or remit taxes or penalties related to the
 9      use of a first-time home buyer savings account.
10      (b)     Distribution of money.--Upon proof of the death of the
11   account holder, a financial institution shall distribute the
12   first-time home buyer savings account in accordance with the
13   contract terms governing the first-time home buyer savings
14   account.
15   Section 7.      Withdrawal for purpose other than eligible costs.
16      Except as permitted under section 3(h), if an account holder
17   or beneficiary withdraws any amount from a first-time home buyer
18   savings account and uses the withdrawal for a purpose other than
19   eligible costs:
20             (1)   The entire amount withdrawn shall be included in the
21      account holder's taxable income as interest income under
22      Article III of the Tax Reform Code of 1971 for the tax year
23      the withdrawal was made.
24             (2)   The account holder or beneficiary shall pay to the
25      department a penalty equal to 10% of the amount
26      withdrawn. The penalty shall not apply to money withdrawn
27      from a first-time home buyer savings account that was:
28                   (i)    withdrawn by reason of the account holder's or
29             the beneficiary's death or disability; or
30                   (ii)   a disbursement of assets of the first-time home

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 1            buyer savings account pursuant to a filing for protection
 2            under 11 U.S.C. (relating to bankruptcy).
 3   Section 8.     Department of Revenue.
 4      (a)   Duties.--The department shall prepare forms:
 5            (1)   to designate an account with a financial institution
 6      to serve as a first-time home buyer savings account;
 7            (2)   to designate a qualified beneficiary of a first-time
 8      home buyer savings account; and
 9            (3)   for an account holder to annually submit to the
10      department detailed information regarding the first-time home
11      buyer savings account, including, but not limited to, a list
12      of transactions for the first-time home buyer savings account
13      during the tax year and identifying any supporting
14      documentation that is required to be maintained by the
15      account holder.
16      (b)   Rules and regulations.--The department may promulgate
17   rules and regulations necessary to administer and enforce this
18   act.
19   Section 9.     Effective date.
20      This act shall take effect in 60 days.




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