SB-1636, As Passed Senate, December 19, 2008

HOUSE SUBSTITUTE FOR

SENATE BILL NO. 1636

A bill to amend 2006 PA 513, entitled

"Individual or family development account program act,"

by amending sections 2, 3, 4, 5, 7, 8, 9, and 10 (MCL 206.702,

206.703, 206.704, 206.705, 206.707, 206.708, 206.709, and 206.710).

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 2. As used in this act:

(a) "Account holder" means a person who is the owner of an

individual or family development account or the family if the

account is a family account.

(b) "Agency" means the Michigan state housing development

authority of the department of energy, labor, and economic growth.

an individual or family development account reserve fund and is not

an account holder.

~~(d) "Director" means the executive director of the~~ ~~Michigan~~

~~state housing development authority of the department of labor and~~

~~economic growth.~~

(d) "Department" means the department of energy, labor, and

economic growth.

(e) "Education expenses" means tuition and fees required for

the enrollment or attendance of a student at an eligible

educational institution, and expenses for fees, books, supplies,

and equipment required for courses of instruction at an eligible

educational institution.

(f) "Eligible educational institution" means any of the

following:

(i) A college, university, community college, or junior college

described in section 4, 5, or 6 of article VIII of the state

constitution of 1963 or established under section 7 of article VIII

of the state constitution of 1963.

(ii) An independent nonprofit college or university located in

this state.

(iii) A state-licensed vocational or technical education

program.

(iv) A state-licensed proprietary school.

(g) "Federal poverty level" means the poverty guidelines

published annually in the federal register by the United States

department of health and human services under its authority to

revise the poverty line under section 673(2) of subtitle B of title

VI of the omnibus budget reconciliation act of 1981, Public Law 97-

35, 42 USC 9902.

(h) "Fiduciary organization" or "organization" means a

charitable organization exempt from taxation under section

501(c)(3) of the internal revenue code that is approved by the

~~director of the~~ agency ~~or his or her designee~~ to manage a reserve

fund. A fiduciary organization may also be a program site.

(i) "Financial institution" means a state chartered bank,

state chartered savings bank, savings and loan association, credit

union, or trust company; or a national banking association or

federal savings and loan association or credit union.

(j) "Financial literacy" means personal financial planning and

education.

(k) "Individual or family development account" or "account"

means an account established ~~pursuant to~~ under section 4.

(l) "Individual or family development account reserve fund" or

"reserve fund" means an account established and managed by a

fiduciary organization housed at a financial institution. The

reserve fund holds money that will be used to match participant

savings based on a participant savings plan agreement.

(m) "Program" means the individual or family development

account program established in section 3.

(n) "Program site" means a charitable organization exempt from

taxation under section 501(c)(3) or 501(c)(14) of the internal

revenue code that is approved by the ~~director or his or her~~

~~designee~~ agency to implement the individual or family development

account program.

(o) "Qualified home improvement" means the purchase and

installation of any qualified energy star product intended for

residential or noncommercial use that meets or exceeds the

applicable energy star energy efficiency guidelines developed by

the United States environmental protection agency and the United

States department of energy, including, but not limited to,

windows, doors, insulation, high efficiency heating and cooling

equipment, and any appliances such as dishwashers, clothes washers,

and refrigerators.

Sec. 3. (1) The individual or family development account

program is established within the agency. The program shall provide

eligible individuals and families with an opportunity to establish

accounts to be used for education, first-time purchase of a primary

residence, qualified home improvements, or business capitalization

as provided in section 4.

(2) The agency, in consultation with the department, shall

establish policies and procedures for the program taking into

consideration the policies and procedures adopted by the department

of human services to implement the individual development account

program under section 57k of the social welfare act, 1939 PA 280,

MCL 400.57k. Except as otherwise provided under this subsection,

the agency shall be responsible for approving fiduciary

organizations and program sites and for all activities related to

the program. The department shall be responsible for approving all

activities related to these programs that relate solely to accounts

to be used for education or business capitalization as provided in

section 4.

(3) In reviewing the qualifications of fiduciary organizations

and program sites, the agency shall consider all of the following

factors:

(a) The not-for-profit status of the organization.

(b) The fiscal accountability of the organization.

for matching contributions.

(d) The significance and quality of proposed auxiliary

services to support the goals of the program.

(e) The availability of a financial literacy program for

account holders.

(f) The ability to maintain and manage necessary program data

for tracking account holders and participants in the program and

for development of reports as required under section 9.

(4) The agency shall select fiduciary organizations to provide

technical assistance and support to program sites and ~~establish and~~

~~manage~~ oversee program sites' reserve accounts on a not-for-profit

basis. In reviewing the qualifications of fiduciary organizations,

the agency shall consider the ability of the fiduciary

organizations to do all of the following:

(a) Administer 1 or more reserve funds to provide matching

funds for account holders ~~pursuant~~ according to participant savings

plan agreements.

(b) Administer any money appropriated by this state for the

purposes of this act.

(d) Provide technical assistance and support to program sites

to assist them to effectively administer programs.

(e) Work in conjunction with approved program sites to hold,

manage, and disburse matching funds for accounts as provided in

section 5.

(f) Maintain and manage necessary program data for tracking

account holders and participants in the program and for development

reports as required under section 9.

(5) The agency shall select program sites to administer the

accounts under the oversight of a fiduciary on a not-for-profit

basis. In reviewing the qualifications of program sites, the agency

shall consider the ability of the program site to do all of the

following:

(a) Develop and implement participant savings plan agreements

to be used with account holders that include at least all of the

following:

(i) The purpose for which the account holder's account is

established.

(ii) The schedule of deposits that the account holder will make

to the account.

(iii) The agreed-upon amount of matching funds and the projected

date when those matching funds will be provided.

(iv) A plan to provide financial literacy; homeownership

training; education, career, or business planning assistance, if

appropriate; and any other services designed to increase the

independence of the account holder or the account holder's family

through the achievement of the designated purpose of the account.

(b) Develop a partnership with all account holders with whom

the program site has a participant savings plan agreement to assist

the account holder to effectively make financial decisions relating

to the use of the funds available through the account and to offer

support services to maximize the opportunities provided by the

individual or family development account program.

(6) The agency shall work cooperatively with financial

institutions, fiduciary organizations, program sites, and

~~contributors~~ the department to implement the programs under this

act.

Sec. 4. (1) An individual or family whose household income is

less than or equal to 200% of the federal poverty level for an

individual or for that family's family size may apply to a program

site to establish an individual or family development account.

(2) A program site may approve applications to the extent that

the program site has matching funds available to meet matching

commitments in participant savings plan agreements.

(3) A program site may reject an application made under

subsection (1) if approving the application would result in the

establishment of an individual or family development account by 1

or more of the members of a family that has established an

individual or family development account for the same person for

the same purpose.

(4) A household shall not have more than 1 account for the

same purpose if that purpose is a first-time purchase of a primary

residence or start-up capitalization of a business.

(5) If the program site approves the individual's or the

family's application to establish an individual or family

development account, the individual shall do all of the following:

(a) Establish the individual or family development account

with a financial institution.

(b) Enter into a participant savings plan agreement with a

program site.

purpose for which the account is established.

(d) Any other criteria required by the program site.

(6) An account may be established only to pay qualified

expenses as provided in subsection (7).

(7) An account shall be established for 1 or more of the

following purposes:

(a) To pay educational expenses for the individual account

holder who will be 17 years of age or older when the funds in the

account will be used if the account is an account for educational

purposes.

(b) For the first-time purchase of a primary residence by the

individual account holder if the account is an account for the

purchase of a primary residence.

individual account holder who is 18 years of age or older if the

account is an account for capitalization of a business based on a

business plan approved by the program site.

(d) For qualified home improvements.

(8) An account established under this section shall be an

account that requires 2 signatures for withdrawals. The 2 required

signatures shall be those of the account holder and an

administrator of the program site with which the account holder has

a participant savings plan agreement.

Senate Bill No. 1636 (H-3) as amended December 18, 2008

Sec. 5. (1) A program site shall enter into a participant

savings plan agreement with each account holder who is approved to

establish an individual or family development account.

(2) ~~The~~ Upon request from a program site, the fiduciary

organization shall provide matching funds for contributions to an

account by an account holder ~~pursuant~~ according to a participant

savings plan agreement. [Only the fiduciary organization shall]

expend funds to provide matching funds or for account holder

support services.

(3) Matching fund distributions shall be made on behalf of an

account holder ~~pursuant~~ according to participant savings plan

agreements at the same time that an account holder withdraws money

to pay qualified expenses. Matching distributions shall be at least

a match of $1.00 for every $1.00 withdrawn from an account by an

account holder to pay expenses for a purpose described in section

4(7) or for a purpose approved by the agency.

(4) Matching distributions under this section shall be made by

check to the order of the account holder and the entity the account

holder is paying.

Sec. 7. ~~(1)~~ An individual who is not an account holder and who

is subject to the tax imposed by the income tax act of 1967, 1967

PA 281, MCL 206.1 to 206.532, or a taxpayer who is subject to the

tax imposed by the Michigan business tax act, 2007 PA 36, MCL

208.1101 to 208.1601, if applicable, may claim a credit under

section ~~272~~ 276 of the income tax act of 1967, 1967 PA 281, MCL

~~206.272~~ 206.276, equal to 75% of the contributions made to the

reserve fund of a fiduciary organization against the tax imposed by

the income tax act of 1967, 1967 PA 281, MCL 206.1 to 206.532, or

the Michigan business tax act, 2007 PA 36, MCL 208.1101 to

208.1601, if applicable.

~~(2) The administrator of a fiduciary organization that~~

~~administers 1 or more reserve funds, with the cooperation of the~~

~~participating financial institutions, shall submit the names of~~

~~contributors and the total amount that each contributor contributes~~

~~to an individual or family development account reserve fund for~~

~~each calendar year to the agency . The director shall determine the~~

~~date by which the information shall be submitted to the agency.~~

Sec. 8. (1) The total of all credits under section ~~272~~ 276 of

the income tax act of 1967, 1967 PA 281, MCL ~~206.272~~ 206.276, and

under the Michigan business tax act, 2007 PA 36, MCL 208.1101 to

208.1601, if applicable, shall not exceed $1,000,000.00 per

calendar year.

(2) A taxpayer that makes a contribution to a reserve fund as

provided under section 7 shall apply to the agency for

certification that the contribution qualifies for a credit under

section ~~272~~ 276 of the income tax act of 1967, 1967 PA 281, MCL

~~206.272~~ 206.276, or the Michigan business tax act, 2007 PA 36, MCL

208.1101 to 208.1601, if applicable. An application shall be

approved or denied not more than 45 days after receipt of the

application. If the application is not approved or denied 45 days

after the application is received by the agency, the application is

considered approved and the agency shall issue a certificate under

this subsection. If the agency approves an application under this

section, the director or his or her designee shall issue a

certificate that states that the taxpayer is eligible to claim a

credit based on the contribution and the amount of the credit. If

an application is denied under this section, a taxpayer is not

prohibited from subsequently applying under this section for

another contribution.

(3) In reviewing applications for credits, the agency shall

consider all of the following criteria:

(a) The funds available to match contributions are deposited

into a reserve fund in the same year that the credit will be

claimed.

(b) The approval of the credit will not exceed the annual

maximum amount under subsection (1).

which a credit is requested.

(4) The agency may delegate responsibility for subsections (2)

and (3) to fiduciary organizations.

(5) ~~(4)~~ A taxpayer shall not claim a credit in excess of the

amount approved under subsection (2).

(6) ~~(5)~~ A taxpayer shall attach the certificate received

~~pursuant~~ according to subsection (2) to the return filed under the

income tax act of 1967, 1967 PA 281, MCL 206.1 to 206.532, on which

a credit allowed under section ~~272~~ 276 of the income tax act of

1967, 1967 PA 281, MCL ~~206.272~~ 206.276, is claimed.

Sec. 9. (1) A fiduciary organization selected to administer an

individual or family development account program under this act

shall file with the agency an annual report ~~with the agency~~ of the

fiduciary organization’s individual development account program

Senate Bill No. 1636 (H-3) as amended December 18, 2008

activity related to accounts established for the first-time

purchase of a primary residence [or for qualified home improvements]. The

report shall be filed no later

than September 30 each year. The report shall include, but is not

limited to, all of the following:

(a) The number of individual development accounts established

for the first-time purchase of a primary residence [and for qualified

home improvements] and administered

by the fiduciary organization.

(b) The amount of deposits and matching deposits for each

account.

(d) The number of withdrawals made.

(e) The number of terminated accounts and the reasons for

termination.

(f) Any other information the agency may require for the

purpose of making a return on investment analysis.

(2) A fiduciary organization selected to administer an

individual or family development account program under this act

shall file with the department an annual report of the fiduciary

organization’s individual development account program activity

related to accounts established either for educational purposes or

capitalization of a business. The report shall be filed no later

than September 30 each year. The report shall include, but is not

limited to, all of the following:

(a) The number of individual development accounts established

either for educational purposes or capitalization of a business and

administered by the fiduciary organization.

(b) The amount of deposits and matching deposits for each

account.

(d) The number of withdrawals made.

(e) The number of terminated accounts and the reasons for

termination.

(f) Any other information the department may require for the

purpose of making a return on investment analysis.

(3) ~~(2) The~~ Not later than December 31 of each year, the

agency and the department shall jointly file with the clerk of the

house of representatives and the secretary of the senate a report

~~not later than December 31 each year with the clerk of the house of~~

~~representatives and the secretary of the senate~~ that includes all

of the information under ~~subsection~~ subsections (1) and (2) and

copies of any changes in policies or procedures used to administer

this act that occurred during the year.

Sec. 10. The Michigan state housing development authority and

the department, in consultation with one another, may promulgate

rules as needed to implement their respective responsibilities

under this act under the administrative procedures act of 1969,

1969 PA 306, MCL 24.201 to 24.328.