March 18, 2010, Introduced by Reps. Tyler, Haines, DeShazor, Elsenheimer, Kowall, Stamas, Walsh, Marleau, Horn, Rick Jones and Crawford and referred to the Committee on Tax Policy.
A bill to create the Michigan home ownership savings program;
to provide for home ownership savings accounts; to prescribe the
powers and duties of certain state agencies, boards, and
departments; to allow certain tax credits or deductions; and to
provide for penalties and remedies.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 1. This act shall be known and may be cited as the
"Michigan home ownership savings program act".
Sec. 2. As used in this act:
(a) "Account" or "home ownership savings account" means an
account established under this act.
(b) "Account owner" means an individual who enters into a
Michigan home ownership savings program agreement and establishes a
home ownership savings account.
(c) "Department" means the department of treasury.
(d) "Eligible home" means residential real property located in
this state that is intended to serve as the account owner's
principal residence.
(e) "Management contract" means the contract executed between
the treasurer and a program manager.
(f) "Michigan home ownership savings program agreement" means
the agreement between the program and an account owner that
establishes a home ownership savings account.
(g) "Principal residence" means that term as defined under
section 7dd of the general property tax act, 1893 PA 206, MCL
211.7dd, and exempt from taxation under section 7cc of the general
property tax act, 1893 PA 206, MCL 211.7cc.
(h) "Program" means the Michigan home ownership savings
program established pursuant to this act.
(i) "Program manager" means an entity selected by the
treasurer to act as a manager of 1 or more of the savings plans
offered under the program.
(j) "Qualified home ownership expenses" means any of the
following:
(i) Closing costs, mortgage fees, brokerage fees, real estate
commissions, inspection fees, and any other similar fees or charges
incurred during the purchase of the eligible home.
(ii) Home improvement, remodeling, upgrades, and repair costs
incurred after the purchase of an eligible home.
(k) "Qualified withdrawal" means a distribution that is not
subject to a penalty or an excise tax under a penalty under this
act or taxation under the income tax act of 1967, 1967 PA 281, MCL
206.1 to 206.532, and that meets any of the following:
(i) A withdrawal from an account to pay qualified home
ownership expenses incurred after the account is established.
(ii) A withdrawal made as the result of the death or disability
of the account owner.
(iii) A transfer of funds due to the termination of the
management contract as provided in section 5.
(iv) A transfer of funds as provided in section 8.
(l) "Savings plan" or "plans" means a plan that provides
different investment strategies and allows account distributions
for qualified home ownership expenses.
(m) "Treasurer" means the state treasurer.
Sec. 3. (1) The Michigan home ownership savings program is
established in the department of treasury. The program may consist
of 1 or more savings plans.
(2) The treasurer shall solicit proposals from entities to be
a program manager to provide the services described in subsection
(5).
(3) The purposes, powers, and duties of the Michigan home
ownership savings program are vested in and shall be exercised by
the treasurer or the designee of the treasurer.
(4) The state treasurer shall administer the Michigan home
ownership savings program and shall be the trustee for the funds of
the Michigan home ownership savings program.
(5) The treasurer may employ or contract with personnel and
contract for services necessary for the administration of each
savings plan under the program and the investment of the assets of
each savings plan under the program, including, but not limited to,
managerial, professional, legal, clerical, technical, and
administrative personnel or services.
(6) When selecting a program manager, the treasurer shall give
preference to proposals from single entities that propose to
provide all of the functions described in subsection (5) and that
demonstrate the most advantageous combination, to both potential
participants and this state, of the following factors and the
management contract shall address these factors:
(a) Financial stability.
(b) The safety of the investment instruments being offered.
(c) The ability of the entity to satisfy the record-keeping
and reporting requirements of this act.
(d) The entity's plan for marketing the savings plan and the
investment it is willing to make to promote the savings plan.
(e) The entity's plan for utilizing financial organizations in
this state as account depositories and financial managers.
(f) The fees, if any, proposed to be charged to persons for
opening or maintaining an account.
(g) The minimum initial deposit and minimum contributions that
the entity will require which, for the first year of the savings
plan, shall not be greater than $25.00 for a cash contribution or
$15.00 per pay period for payroll deduction plans.
(h) The ability of the entity to accept electronic
withdrawals, including payroll deduction plans.
(7) The treasurer shall enter into a contract with each
program manager, which shall address the respective authority and
responsibility of the treasurer and the program manager to do all
of the following:
(a) Develop and implement the savings plan or plans offered
under the program.
(b) Invest the money received from account owners in 1 or more
investment instruments.
(c) Engage the services of consultants on a contractual basis
to provide professional and technical assistance and advice.
(d) Determine the use of financial organizations in this state
as account depositories and financial managers.
(e) Charge, impose, and collect annual administrative fees and
service in connection with any agreements, contracts, and
transactions relating to individual accounts, exclusive of initial
sales charges, which shall not exceed 2.0% of the average daily net
assets of the account.
(f) Develop marketing plans and promotional material.
(g) Establish the methods by which funds are allocated to pay
for administrative costs.
(h) Provide criteria for terminating and not renewing the
management contract.
(i) Address the ability of the program manager to take any
action required to keep the savings plan or plans offered under the
program in compliance with requirements of this act and its
management contract.
(j) Keep adequate records of each account and provide the
treasurer with information that the treasurer requires related to
those records.
(k) Compile the information contained in statements required
to be prepared under this act and provide that compilation to the
treasurer in a timely manner.
(l) Hold all accounts for the benefit of the account owner.
(m) Provide for audits at least annually by a firm of
certified public accountants.
(n) Provide the treasurer with copies of all regulatory
filings and reports related to the savings plan or plans offered
under the program made during the term of the management contract
or while the program manager is holding any accounts, other than
confidential filings or reports except to the extent those filings
or reports are related to or are a part of the savings plan or
plans offered under the program. It is the responsibility of the
program manager to make available for review by the treasurer the
results of any periodic examination of the program manager by any
state or federal banking, insurance, or securities commission,
except to the extent that the report or reports are not required to
be disclosed under state or federal law.
(o) Ensure that any description of the savings plan or plans
offered under the program, whether in writing or through the use of
any media, is consistent with the marketing plan developed by the
program manager.
(p) Take any other necessary and proper activities to carry
out the purposes of this act.
Sec. 4. The treasurer shall be responsible for the ongoing
supervision of each management contract in consultation with the
program manager.
Sec. 5. (1) A management contract shall be for a term of years
specified in the management contract.
(2) The treasurer may terminate a management contract based on
the criteria specified in the management contract.
Sec. 6. The treasurer may enter into contracts that it
considers necessary and proper for the implementation of this
program.
Sec. 7. (1) Beginning on and after the effective date of this
act, home ownership savings accounts may be established under this
act.
(2) Any individual described in section 2(b) may open a home
ownership savings account to save money to pay qualified home
ownership expenses.
(3) To open a home ownership savings account, the individual
described in section 2(b) shall enter into a Michigan home
ownership savings program agreement with the program. The Michigan
home ownership savings program agreement shall be in the form
prescribed by a program manager and approved by the treasurer and
shall contain the name, address, and social security number or
employer identification number of the account owner and any other
information that the treasurer or program manager considers
necessary.
(4) Any individual described in section 2(b) may make
contributions to an account.
(5) Contributions to accounts shall only be made in cash, by
check, by money order, by credit card, or by any similar method as
approved by the state treasurer but shall not be property.
(6) An account owner may withdraw all or part of the balance
from an account on 30 days' notice, or a shorter period as
authorized in the Michigan home ownership savings program
agreement.
(7) Distributions from an account shall be requested on a form
approved by the state treasurer. A program manager may retain from
the distribution the amount necessary to comply with federal and
state tax laws. Distributions may be made in the following manner:
(a) Directly to an eligible financial institution.
(b) In the form of a check payable to both the account holder
and the eligible financial institution.
(c) In the form of a check payable to the account holder.
(8) If the distribution is not a qualified withdrawal, a
program manager shall withhold an amount of up to 10% of the
distribution amount as a penalty and pay that amount to the
department for deposit into the general fund.
Sec. 8. (1) An account owner may designate another individual
as a successor owner of the account in the event of the death of
the account owner.
(2) An account owner may transfer ownership of all or a
portion of an account to an individual that is eligible to be an
account owner under this act.
(3) An account owner may transfer all or a portion of an
account to another home ownership savings account that is owned by
another member of the family.
(4) Transfers under this section are not permitted to the
extent that the transfer would constitute excess contributions or
unauthorized investment choices.
Sec. 9. (1) Except as otherwise provided in this section, an
account owner shall not direct the investment of any contributions
to an account or the earnings on an account.
(2) An account owner may select among different investment
strategies designed by a program manager in all of the following
circumstances:
(a) At the time any contribution is made to an account with
respect to the amount of that contribution.
(b) Once each calendar year with respect to the accumulated
account balance.
(3) The program may allow employees of the program, or the
employees of a contractor hired by the program to perform
administrative services, to make contributions to an account.
Sec. 10. (1) The maximum account balance limit for a home
ownership savings account is $100,000.00.
(2) The program shall reject a contribution to any account if,
at the time of the contribution, the total balance of the account
has reached the maximum account balance limit under subsection (1).
An account may continue to accrue earnings if the total balance of
the account has reached the maximum account balance limit and shall
not be considered to have exceeded the maximum account balance
limit under subsection (1).
Sec. 11. (1) Each program manager shall report distributions
from an account during a tax year to the internal revenue service
and the account owner or, to the extent required by federal law or
regulation, to the distributee.
(2) Each program manager shall provide statements that
identify the individual contributions made during the tax year, the
total contributions made to the account for the tax year, the value
of the account at the end of the tax year, distributions made
during the tax year, and any other information that the treasurer
requires to each account owner on or before the January 31
following the end of each calendar year.
Sec. 12. Each program manager shall disclose the following
information in writing to each account owner of a home ownership
savings account and any other person who requests information about
a home ownership savings account:
(a) The terms and conditions for establishing a home ownership
savings account.
(b) Restrictions on the substitutions of designated
beneficiaries and transfer of account funds.
(c) The person or entity entitled to terminate a Michigan home
ownership savings program agreement.
(d) The period of time during which an account owner may
receive benefits under the Michigan home ownership savings program
agreement.
(e) The terms and conditions under which money may be wholly
or partially withdrawn from an account or the program, including,
but not limited to, any reasonable charges and fees and penalties
that may be imposed for withdrawal.
(f) The potential tax consequences associated with
contributions to and distributions and withdrawals from accounts.
(g) Investment history and potential growth of account funds
and a projection of the impact of the growth of the account funds
on the maximum amount allowable in an account.
(h) All other rights and obligations under Michigan home
ownership savings program agreements and any other terms,
conditions, and provisions of a contract or an agreement entered
into under this act.
Sec. 14. (1) This act does not create and shall not be
construed to create any obligation upon this state or any agency or
instrumentality of this state to guarantee for the benefit of an
account owner any of the following:
(a) The rate of interest or other return on an account.
(b) The payment of interest or other return on an account.
(2) The contracts, applications, deposit slips, and other
similar documents used in connection with a contribution to an
account shall clearly indicate that the account is not insured by
this state and that the money deposited into and investment return
earned on an account are not guaranteed by this state.
Sec. 15. Each program manager shall file an annual report with
the treasurer that includes all of the following:
(a) The names and identification numbers of account owners.
The information reported pursuant to this subdivision is not
subject to the freedom of information act, 1976 PA 442, MCL 15.231
to 15.246.
(b) The total amount contributed to all accounts during the
year.
(c) All distributions from all accounts and whether or not
each distribution was a qualified withdrawal.
(d) Any information that the program manager or treasurer may
require regarding the taxation of amounts contributed to or
withdrawn from accounts.
Sec. 16. (1) Contributions to and interest earned on a home
ownership savings account are exempt from taxation as provided in
sections 30 and 30f of the income tax act of 1967, 1967 PA 281, MCL
206.30 and 206.30f.
(2) Withdrawals made from home ownership savings accounts are
taxable as provided in section 30 of the income tax act of 1967,
1967 PA 281, MCL 206.30.
Enacting section 1. This act does not take effect unless
Senate Bill No.____ or House Bill No. 5966(request no. 05320'09) of
the 95th Legislature is enacted into law.