Report Title:

State Mortgage Credit Certificates

Description:

Assists low- and moderate-income home buyers by providing a state income tax credit up to 20 percent of the annual mortgage interest payment. (HB2990 HD1)

HOUSE OF REPRESENTATIVES

H.B. NO.

2990

TWENTY-THIRD LEGISLATURE, 2006

H.D. 1

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to state mortgage credit certificates.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The purpose of this Act is to assist low- and moderate-income persons with purchasing a principal residence by providing qualified buyers with a state income tax credit in an amount up to twenty per cent of the annual mortgage interest payment. This tax credit is based on a federal tax credit under Section 25 of the Internal Revenue Code.

SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"PART . MORTGAGE CREDIT CERTIFICATES

§235-A Definitions. As used in this part:

"Certificate credit rate" means the rate of the credit allowable by this part that is specified in the mortgage credit certificate.

"Certified indebtedness amount" means the amount of indebtedness that is incurred by the taxpayer to acquire the principal residence of the taxpayer and specified in the mortgage credit certificate.

"First-time homebuyer" means an individual who has not owned a home in the state at least three years prior to the purchase of the home for which the individual is claiming a credit under this part.

"Mortgage credit certificate" means any certificate that is issued under a qualified mortgage credit certificate program to the taxpayer in connection with the acquisition of the taxpayer's principal residence, specifies the certificate credit rate and the certified indebtedness amount, and is in a form as the director may prescribe.

"Principal residence" has the same meaning as used in Section 121 of the Internal Revenue Code of 1986, as amended.

"Qualified mortgage credit certificate program" means any program:

(1) Under which the indebtedness certified by mortgage credit certificates meets the following requirements:

(A) The residence financed by the indebtedness is a single-family residence in the state that can reasonably be expected to become the principal residence of the mortgagor within a reasonable time after the financing is provided;

(B) The mortgagor had no present ownership interest in the mortgagor's principal residence at any time during the three-year period ending on the date that the mortgage is executed;

(C) The purchase price of the residence financed by the indebtedness does not exceed           , and

(D) The income of the mortgagor does not exceed $              ;

(2) Under which no mortgage credit certificate may be issued with respect to any residence for which any of the financing is provided from the proceeds of a qualified mortgage bond or a qualified veterans' mortgage bond;

(3) Except to the extent provided in rules, that is not limited to indebtedness incurred from particular lenders; and

(4) Except to the extent provided in rules, that provides that a mortgage credit certificate is not transferable.

§235-B Allowance of credit. (a) There shall be allowed as a credit against the tax imposed by this chapter, for the taxable year, an amount equal to the product of:

(1) The certificate credit rate; and

(2) The interest paid or accrued by the taxpayer during the taxable year on the remaining principal of the certified indebtedness amount.

(b) If the certificate credit rate exceeds twenty per cent, the amount of the credit allowed to the taxpayer under this section for any taxable year shall not exceed $2,000.

(c) If two or more persons hold interests in any residence, the limitation of subsection (b) shall be allocated among the persons in proportion to their respective interests in the residence.

(d) A taxpayer claiming a credit under this part shall be a first-time homebuyer. If more than one individual is purchasing a residence, all of the individuals shall be first-time homebuyers to claim the credit.

(e) A taxpayer may not claim a credit under this part if the taxpayer is claiming a credit pursuant to the federal mortgage credit certificate program under Section 25 of the Internal Revenue Code of 1986, as amended.

§235-C Determination of certificate credit rate. For purposes of this part, the certificate credit rate specified in any mortgage credit certificate shall not be less than ten per cent or more than fifty per cent.

§235-D Aggregate limit on certificate credit rates. In the case of each qualified mortgage credit certificate program, the sum of the products determined by multiplying the certified indebtedness amount of each mortgage credit certificate issued under the program, by the certificate credit rate with respect to the certificate, shall not exceed the amount authorized by the legislature for that year by adoption of a concurrent resolution.

§235-E Carryover of unused credit. (a) If the credit allowable under this part for any taxable year exceeds the applicable tax limit for the taxable year, the excess shall carryover to each of the three succeeding taxable years and, subject to the limitations of subsection (b), shall be added to the credit allowable by this part for the succeeding taxable year.

(b) The amount of the unused credit that may be taken into account under this section for any taxable year shall not exceed the amount, if any, by which the applicable tax limit for the taxable year exceeds the sum of:

(1) The credit allowable under this part for the taxable year determined without regard to this section; and

(2) The amounts that, by reason of this section, are carried to the taxable year and are attributable to taxable years before the unused credit year.

§235-F Indebtedness not treated as certified where certain requirements not, in fact, met. (a) This part shall not apply to any indebtedness if all the requirements of section 235-   , were not, in fact, met with respect to the indebtedness.

(b) Except to the extent otherwise provided in rules adopted by the director of taxation, the requirements under this part shall be treated as met if there is a certification, under penalty of perjury, that the requirements are met.

§235-G Period for which certificate in effect. (a) Except as otherwise provided in this part, a mortgage credit certificate shall be treated as in effect with respect to interest attributable to the period:

(1) Beginning on the date the certificate is issued; and

(2) Ending on the earlier of:

(A) The date that is specified in the certificate; or

(B) The date on which the residence to which the certificate relates ceases to be the principal residence of the individual to whom the certificate relates.

(b) A certificate shall not apply to any indebtedness that is incurred after the close of the second calendar year following the calendar year in which the certificate is issued.

§235-H Interest paid or accrued to related persons. No credit shall be allowed under this part for any interest paid or accrued to a person who is a related person to the taxpayer, within the meaning of Section 144(a)(3)(A) of the Internal Revenue Code of 1986, as amended.

§235-I Reporting requirements. (a) Each person who makes a loan that is a certified indebtedness amount under any mortgage credit certificate shall file a report with the director containing:

(1) The name, address, and social security account number of the individual to which the certificate was issued;

(2) The certificate's issuer, date of issue, certified indebtedness amount, and certificate credit rate; and

(3) Any other information as the director may require by rules.

(b) Each person who issues a mortgage credit certificate shall file a report showing the information as the director shall prescribe by rules. Any report shall be filed at a time and in a manner as the director may require by rules.

§235-J Rules. The director shall adopt rules pursuant to chapter 91 as may be necessary to carry out the purposes of this part, including rules that may require recipients of mortgage credit certificates to pay a reasonable processing fee to defray the expenses incurred in administering the program."

SECTION 3. There is appropriated out of the general revenues of the State of Hawaii the sum of $          or so much thereof as may be necessary for fiscal year 2006-2007 for the purposes of this Act.

The sum appropriated shall be expended by the department of taxation for the purposes of this Act.

SECTION 4. In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 5. This Act shall take effect upon its approval and shall apply to taxable years beginning after December 31, 2005; provided that sections 3 and 4 shall take effect on July 1, 2006.