Session of 2021
HOUSE BILL No. 2187
By Committee on Taxation
2-1

1 AN ACT establishing the first-time home buyer savings account act;
2 relating to financial institutions; providing for addition and subtraction
3 modifications for contributions to first-time home buyer savings
4 accounts under the Kansas income tax act; amending K.S.A. 79-32,117
5 and repealing the existing section.
6
7 Be it enacted by the Legislature of the State of Kansas:
8 New Section 1. Sections 1 through 6, and amendments thereto, shall
9 be known and may be cited as the first-time home buyer savings account
10 act.
11 New Sec. 2. As used in the first-time home buyer savings account
12 act:
13 (a) "Account" or "first-time home buyer savings account" means an
14 individual savings account established in accordance with the provisions
15 of this act.
16 (b) "Account holder" means an individual who establishes an account
17 that is designated as a first-time home buyer savings account pursuant to
18 the provisions of section 3, and amendments thereto, with a financial
19 institution.
20 (c) "Designated beneficiary" means the individual designated by an
21 account holder pursuant to the provisions of section 3, and amendments
22 thereto, as the individual whose eligible expenses are expected to be paid
23 from the account for the purchase or construction of a primary residence in
24 this state.
25 (d) "Eligible expenses" means a down payment and any closing costs
26 that may be included as part of a real estate settlement agreement,
27 including, but not limited to, appraisal fees, mortgage origination fees and
28 inspection fees or any down payment, costs and fees that may be included
29 as part of financing the construction of a primary residence.
30 (e) "Financial institution" means any state bank, state trust company,
31 savings and loan association, federally chartered credit union doing
32 business in this state, credit union chartered by the state of Kansas,
33 national bank, broker-dealer, mutual fund, insurance company or other
34 similar financial entity qualified to do business in this state.
35 (f) "First-time home buyer" means an individual who:
36 (1) Has never owned or purchased under contract for deed, either
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1 individually or jointly, a single-family, owner-occupied primary residence
2 including, but not limited to, a condominium unit or a manufactured or
3 mobile home that was assessed and taxed as real property; or
4 (2) as a result of the individual's dissolution of marriage, has not been
5 listed on a property title for at least three consecutive years.
6 (g) "Secretary" means the secretary of revenue.
7 New Sec. 3. (a) On and after July 1, 2022, any individual may open
8 an account with a financial institution and designate the account, in its
9 entirety, as a first-time home buyer savings account to be used to pay or
10 reimburse a designated beneficiary's eligible expenses for the purchase or
11 construction of a primary residence in this state. An individual may be the
12 account holder of multiple accounts and an individual may jointly own the
13 account with another individual if such individuals file a joint income tax
14 return. An account holder shall comply with the requirements of this act to
15 be eligible for the modifications set forth in K.S.A. 79-32,117, and
16 amendments thereto.
17 (b) An account holder shall designate, no later than April 15 of the
18 year following the taxable year during which the account is established, a
19 first-time home buyer as the designated beneficiary of the account.
20 Nothing in this section shall prohibit an account holder from designating
21 such account holder as the designated beneficiary of an account. An
22 account holder may change the designated beneficiary at any time, but no
23 account shall have more than one designated beneficiary at any time. An
24 individual may be designated as the designated beneficiary of more than
25 one account if such accounts are held by separate account holders. No
26 account holder shall be authorized to designate the same designated
27 beneficiary on multiple accounts held by such account owner.
28 (c) (1) The following limits apply to an account established pursuant
29 to this act:
30 (A) The maximum contribution to an account in any tax year shall be
31 $3,000 for an individual and $6,000 for a married couple filing a joint
32 return;
33 (B) the maximum amount of all contributions into an account in all
34 tax years shall be $24,000 for an individual and $48,000 for a married
35 couple filing a joint return; and
36 (C) the maximum total amount in an account shall be $50,000.
37 (2) If a limit in paragraph (1) is exceeded, then thereafter all interest
38 or other income earned on the investment of moneys in an account shall be
39 subject to the tax imposed by the Kansas income tax act.
40 (3) Moneys may remain in an account for an unlimited duration
41 without the interest or income being subject to recapture or penalty.
42 (d) The account holder shall not use moneys in an account to pay
43 expenses of administering the account, except that a service fee may be
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1 deducted from the account by a financial institution. The account holder
2 shall be responsible for maintaining documentation for the account and for
3 eligible expenses related to the designated beneficiary's purchase or
4 construction of a primary residence.
5 New Sec. 4. (a) (1) The moneys in a first-time home buyer savings
6 account may be:
7 (A) Used for eligible expenses related to a designated beneficiary's
8 purchase or construction of a primary residence located in this state;
9 (B) used for eligible expenses related to a designated beneficiary's
10 purchase or construction of a primary residence located outside of this
11 state if such designated beneficiary is active-duty military and was
12 stationed in Kansas for any time after the creation of the account;
13 (C) used for eligible expenses that would have qualified pursuant to
14 paragraph (1)(A) or (1)(B) but the contract for purchase or construction
15 did not close;
16 (D) transferred to another newly created account; and
17 (E) used to pay service fees assessed by the financial institution.
18 (2) This subsection shall apply even if a designated beneficiary is a
19 joint owner of a primary residence with another person who is not a
20 designated beneficiary of an account. Moneys in an account shall not be
21 used to purchase a manufactured or mobile home that is not taxed as real
22 property.
23 (b) Moneys withdrawn from an account shall be subject to recapture
24 by the secretary in the tax year in which they were withdrawn if:
25 (1) At the time of the withdrawal, it has been less than a year since
26 the first deposit in the account; or
27 (2) the moneys are used for any purpose other than the expenses or
28 transactions authorized pursuant to subsection (a)(1).
29 (c) Moneys that are subject to recapture shall be an amount equal to
30 the moneys withdrawn from an account and shall be added to the Kansas
31 adjusted gross income pursuant to K.S.A. 79-32,117(b)(xxvii), and
32 amendments thereto, of the account holder or, if the account holder is no
33 longer living, the designated beneficiary. If any moneys are subject to
34 recapture, the account holder shall pay a penalty in the following amounts:
35 (1) If the withdrawal of moneys occurred 10 or less years after the first
36 deposit in the account, 5% of the amount subject to recapture; and (2) if
37 the withdrawal of moneys occurred more than 10 years after the first
38 deposit in the account, 10% of the amount subject to recapture.
39 (d) The penalties provided in subsection (c) shall not apply if: (1) The
40 withdrawn moneys are used for eligible expenses related to a designated
41 beneficiary's purchase or construction of a primary residence outside of
42 this state; or (2) the withdrawn moneys are from an account in which the
43 designated beneficiary died, and the account holder did not designate a
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1 new designated beneficiary during the same tax year.
2 (e) If the account holder dies or, if the account is jointly owned and
3 the account owners die, and the account does not have a surviving transfer
4 on death beneficiary, then all of the moneys in the account resulting from
5 contributions or income earned from assets in the account pursuant to
6 K.S.A. 79-32,117, and amendments thereto, shall be subject to recapture in
7 the tax year of the death or deaths, but no penalty shall be assessed
8 pursuant to subsection (c).
9 New Sec. 5. (a) The secretary shall establish forms for an account
10 holder to annually report information about any accounts held by such
11 account holder. An account holder shall annually file with the account
12 holder's state income tax return all forms required by the secretary under
13 this section, the form 1099 for the account issued by the financial
14 institution and any other supporting documentation the secretary requires.
15 (b) Prior to July 1, 2022, the secretary shall adopt rules and
16 regulations necessary to administer the provisions of the first-time home
17 buyer savings account act.
18 New Sec. 6. (a) No financial institution shall be required to:
19 (1) Designate an account as a first-time home buyer savings account
20 or designate the beneficiaries of an account in the financial institution's
21 account contracts or systems or in any other way;
22 (2) track the use of moneys withdrawn from an account; or
23 (3) report any information to the department of revenue or any other
24 governmental agency that is not otherwise required by law.
25 (b) No financial institution shall be responsible or liable for:
26 (1) Determining or ensuring that an account holder is eligible for a
27 Kansas adjusted gross income modification pursuant to K.S.A. 79-32,117,
28 and amendments thereto;
29 (2) determining or ensuring that moneys in the account are used for
30 eligible expenses; or
31 (3) reporting or remitting taxes or penalties related to the use of
32 account moneys.
33 Sec. 7. K.S.A. 79-32,117 is hereby amended to read as follows: 79-
34 32,117. (a) The Kansas adjusted gross income of an individual means such
35 individual's federal adjusted gross income for the taxable year, with the
36 modifications specified in this section.
37 (b) There shall be added to federal adjusted gross income:
38 (i) Interest income less any related expenses directly incurred in the
39 purchase of state or political subdivision obligations, to the extent that the
40 same is not included in federal adjusted gross income, on obligations of
41 any state or political subdivision thereof, but to the extent that interest
42 income on obligations of this state or a political subdivision thereof issued
43 prior to January 1, 1988, is specifically exempt from income tax under the
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1 laws of this state authorizing the issuance of such obligations, it shall be
2 excluded from computation of Kansas adjusted gross income whether or
3 not included in federal adjusted gross income. Interest income on
4 obligations of this state or a political subdivision thereof issued after
5 December 31, 1987, shall be excluded from computation of Kansas
6 adjusted gross income whether or not included in federal adjusted gross
7 income.
8 (ii) Taxes on or measured by income or fees or payments in lieu of
9 income taxes imposed by this state or any other taxing jurisdiction to the
10 extent deductible in determining federal adjusted gross income and not
11 credited against federal income tax. This paragraph shall not apply to taxes
12 imposed under the provisions of K.S.A. 79-1107 or 79-1108, and
13 amendments thereto, for privilege tax year 1995, and all such years
14 thereafter.
15 (iii) The federal net operating loss deduction, except that the federal
16 net operating loss deduction shall not be added to an individual's federal
17 adjusted gross income for tax years beginning after December 31, 2016.
18 (iv) Federal income tax refunds received by the taxpayer if the
19 deduction of the taxes being refunded resulted in a tax benefit for Kansas
20 income tax purposes during a prior taxable year. Such refunds shall be
21 included in income in the year actually received regardless of the method
22 of accounting used by the taxpayer. For purposes hereof, a tax benefit shall
23 be deemed to have resulted if the amount of the tax had been deducted in
24 determining income subject to a Kansas income tax for a prior year
25 regardless of the rate of taxation applied in such prior year to the Kansas
26 taxable income, but only that portion of the refund shall be included as
27 bears the same proportion to the total refund received as the federal taxes
28 deducted in the year to which such refund is attributable bears to the total
29 federal income taxes paid for such year. For purposes of the foregoing
30 sentence, federal taxes shall be considered to have been deducted only to
31 the extent such deduction does not reduce Kansas taxable income below
32 zero.
33 (v) The amount of any depreciation deduction or business expense
34 deduction claimed on the taxpayer's federal income tax return for any
35 capital expenditure in making any building or facility accessible to the
36 handicapped, for which expenditure the taxpayer claimed the credit
37 allowed by K.S.A. 79-32,177, and amendments thereto.
38 (vi) Any amount of designated employee contributions picked up by
39 an employer pursuant to K.S.A. 12-5005, 20-2603, 74-4919 and 74-4965,
40 and amendments thereto.
41 (vii) The amount of any charitable contribution made to the extent the
42 same is claimed as the basis for the credit allowed pursuant to K.S.A. 79-
43 32,196, and amendments thereto.
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1 (viii) The amount of any costs incurred for improvements to a swine
2 facility, claimed for deduction in determining federal adjusted gross
3 income, to the extent the same is claimed as the basis for any credit
4 allowed pursuant to K.S.A. 79-32,204, and amendments thereto.
5 (ix) The amount of any ad valorem taxes and assessments paid and
6 the amount of any costs incurred for habitat management or construction
7 and maintenance of improvements on real property, claimed for deduction
8 in determining federal adjusted gross income, to the extent the same is
9 claimed as the basis for any credit allowed pursuant to K.S.A. 79-32,203,
10 and amendments thereto.
11 (x) Amounts received as nonqualified withdrawals, as defined by
12 K.S.A. 75-643, and amendments thereto, if, at the time of contribution to a
13 family postsecondary education savings account, such amounts were
14 subtracted from the federal adjusted gross income pursuant to K.S.A. 79-
15 32,117(c)(xv), and amendments thereto, or if such amounts are not already
16 included in the federal adjusted gross income.
17 (xi) The amount of any contribution made to the same extent the
18 same is claimed as the basis for the credit allowed pursuant to K.S.A. 74-
19 50,154, and amendments thereto.
20 (xii) For taxable years commencing after December 31, 2004,
21 amounts received as withdrawals not in accordance with the provisions of
22 K.S.A. 74-50,204, and amendments thereto, if, at the time of contribution
23 to an individual development account, such amounts were subtracted from
24 the federal adjusted gross income pursuant to subsection (c)(xiii), or if
25 such amounts are not already included in the federal adjusted gross
26 income.
27 (xiii) The amount of any expenditures claimed for deduction in
28 determining federal adjusted gross income, to the extent the same is
29 claimed as the basis for any credit allowed pursuant to K.S.A. 79-32,217
30 through 79-32,220 or 79-32,222, and amendments thereto.
31 (xiv) The amount of any amortization deduction claimed in
32 determining federal adjusted gross income to the extent the same is
33 claimed for deduction pursuant to K.S.A. 79-32,221, and amendments
34 thereto.
35 (xv) The amount of any expenditures claimed for deduction in
36 determining federal adjusted gross income, to the extent the same is
37 claimed as the basis for any credit allowed pursuant to K.S.A. 79-32,223
38 through 79-32,226, 79-32,228 through 79-32,231, 79-32,233 through 79-
39 32,236, 79-32,238 through 79-32,241, 79-32,245 through 79-32,248 or 79-
40 32,251 through 79-32,254, and amendments thereto.
41 (xvi) The amount of any amortization deduction claimed in
42 determining federal adjusted gross income to the extent the same is
43 claimed for deduction pursuant to K.S.A. 79-32,227, 79-32,232, 79-
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1 32,237, 79-32,249, 79-32,250 or 79-32,255, and amendments thereto.
2 (xvii) The amount of any amortization deduction claimed in
3 determining federal adjusted gross income to the extent the same is
4 claimed for deduction pursuant to K.S.A. 79-32,256, and amendments
5 thereto.
6 (xviii) For taxable years commencing after December 31, 2006, the
7 amount of any ad valorem or property taxes and assessments paid to a state
8 other than Kansas or local government located in a state other than Kansas
9 by a taxpayer who resides in a state other than Kansas, when the law of
10 such state does