House Passes First Time Homebuyer Incentives
This week the House passed House File 631 by a vote of 91-7. The bill establishes a new chapter in Iowa Code entitled the Iowa First-Time Homebuyer Savings Account Act and is an effort to try to incentivize young people to save and plan for the single biggest purchase of their life—their first home.
This week the House passed House File 631 by a vote of 91-7. The bill establishes a new chapter in Iowa Code entitled the Iowa First-Time Homebuyer Savings Account Act and is an effort to try to incentivize young people to save and plan for the single biggest purchase of their life—their first home.
Specifically, the bill provides for the establishment of a first-time homebuyer savings account. The account holder must be a resident of Iowa. An account can be established individually or jointly with a spouse so long as both individuals are first-time homebuyers. The bill requires that the account be an interest-bearing account.
Specifically, the bill provides for the establishment of a first-time homebuyer savings account. The account holder must be a resident of Iowa. An account can be established individually or jointly with a spouse so long as both individuals are first-time homebuyers. The bill requires that the account be an interest-bearing account.
House File 631 also spells out the use and administration by the account holder. It states that the account holder shall use the money for eligible costs related to the purchase of a residence within ten years following establishment of the account and shall not contribute to the account for longer than ten years. There is no limitation on the amount of contributions that may be made to or retained in the account. The burden of proving that a withdrawal from an account was made for eligible costs is upon the account holder. The bill also provides that a person who knowingly prepares false statements associated with an account is guilty of a serious misdemeanor.
House File 631 also spells out the use and administration by the account holder. It states that the account holder shall use the money for eligible costs related to the purchase of a residence within ten years following establishment of the account and shall not contribute to the account for longer than ten years. There is no limitation on the amount of contributions that may be made to or retained in the account. The burden of proving that a withdrawal from an account was made for eligible costs is upon the account holder. The bill also provides that a person who knowingly prepares false statements associated with an account is guilty of a serious misdemeanor.
Additionally, the bill provides for an Iowa income tax deduction of up to $3,000/year per individual ($6,000 for married couples) for contributions to that individual’s first-time homebuyer savings account. Amounts exceeding that limit can be carried forward for deductions in subsequent tax years (but still keeping the annual deduction limitations). No deductions can be taken after the ten year life span of an account has expired. (Maximum deduction for an account is $30,000/$60,000). As another tax incentive, House File 631 also provides that the income from interest and earnings on a first-time homebuyer savings account is exempt from income tax.
Additionally, the bill provides for an Iowa income tax deduction of up to $3,000/year per individual ($6,000 for married couples) for contributions to that individual’s first-time homebuyer savings account. Amounts exceeding that limit can be carried forward for deductions in subsequent tax years (but still keeping the annual deduction limitations). No deductions can be taken after the ten year life span of an account has expired. (Maximum deduction for an account is $30,000/$60,000). As another tax incentive, House File 631 also provides that the income from interest and earnings on a first-time homebuyer savings account is exempt from income tax.
Finally, the bill spells out some penalties. For instance, if a withdrawal is made for a purpose other than an eligible cost, an account holder will have to add all of the tax deductions they previously took back into their taxable income. Additionally, if a withdrawal for a purpose other than an eligible cost is made on a day other than the last business day of the calendar year—such a withdrawal shall also be assessed a penalty of ten percent of the amount of the withdrawal.
Finally, the bill spells out some penalties. For instance, if a withdrawal is made for a purpose other than an eligible cost, an account holder will have to add all of the tax deductions they previously took back into their taxable income. Additionally, if a withdrawal for a purpose other than an eligible cost is made on a day other than the last business day of the calendar year—such a withdrawal shall also be assessed a penalty of ten percent of the amount of the withdrawal.
House Republicans continue to look for ways to encourage young people put down roots in Iowa. Buying a home is a huge purchase—one that takes careful planning and considerable saving. With the tax incentives in House File 631, House Republicans hope that more young people will make Iowa their permanent home. The bill now moves to the Senate for further consideration.
Report: Iowa Economy Close to Contracting
The Iowa Department of Revenue released a report last week showing that some of Iowa’s most important indicators point to an economic dip that could indicate a coming contraction. Agriculture is emanating particularly worrisome signs even as the report collected data through March of 2015, many weeks before the state’s bird flu epidemic hit.
The Iowa Leading Indicators Index (ILII) is a compilation of eight economic measurements. Four of them–diesel fuel consumption, average weekly unemployment claims, the U.S. Treasury bond yield spread and the number of residential building permits–positively impacted the index. But the agriculture future profits index, the new orders index, average weekly manufacturing hours and the Iowa stock market index all contributed negatively.
The agricultural profits index contributed most to the decline, as the 12-month moving average of corn, soybean, hog and cattle profits shrunk for all four commodities. Prices for corn, hogs and soybeans are down from March of last year. And while cattle prices are up, the breakeven point for them has increased. The new orders index was the second-largest contributor to the index’s decline, as its 12-month moving average of orders received for manufacturing continues to slide from last year.
The department’s report summarizes previous changes in the ILII with six-month intervals, and the latest percentage decrease of 1.5 percent between September 2014 and March 2015 is the worst six-month performance over the past three years. The last positive percentage change over a six-month interval came between May and November of 2012, but every interval between then has been negative.
The index is considered to have reliably signaled an economic contraction when it declines by at least a two percent annualized rate over a six-month period and a majority of the eight indicators decline over that same period. This latest report comes very close to signaling a contraction. With the last six-month index having a majority of indicators declining and the overall index declining by 1.5 percent, the index was only .5 percent short of signaling an economic contraction.
The full report from the Department of Revenue can be found here.
| Recap for the Week |
With the official session ending on last Friday, May 1st. We moved into the overtime part of the session. That means the clerks have gone home. We had a short week but accomplished much in the 2 two days we were in Des Moines.
We got all but two of the budget bills moved into conference committees. The two left to do are Health and Human Services and the Standings budgets. They are normally the last two to be completed and the Senate started them this year.
I look for them to be debated on the House floor early next week. Once we complete the debate of these two budgets I look for them to be sent to conference committees also. Then the negotiations begin and rumors will be the talk of the Capitol.
The first rumor was that we could finish the session as early as next weekend. I have my doubts on that but would like to be proved wrong also. There is a lot to be done but things are started to roll towards adjournment.
As we move to completing the budgets we are still committed to these principles to produce a balanced and sustainable state budget:
- We will spend less than the state collects;
- We will not use one-time money to fund on-going needs;
- We will not balance the budget by intentionally under funding programs.
If you have any questions, comments or concerns about these topics or any others please feel free to contact me by e-mail at lee.hein@legis.state.ia.us or by phone at (319) 480-1997.
Sincerely,
Rep. Lee Hein
Lee Hein 