First-Time Homebuyer Savings Account Act of 2016

Summary: First-Time Homebuyer Savings Account Act of 2016  This bill amends the Internal Revenue Code to provide for tax-preferred savings accounts for first-time homebuyers. An individual may make up to $14,000 per year in after-tax contributions to the account, subject to a $50,000 lifetime contribution limit, a $150,000 limit on the fair market value of the account, and adjustments for inflation after 2017.  Distributions from the account that are used to pay the qualified principal residence purchase expenditures of the designated beneficiary are excluded from gross income. A &quot;qualified principal residence purchase expenditure&quot; is, with respect to a designated beneficiary who is a first-time homebuyer, any amount: (1) paid toward the purchase price of a principal residence of the beneficiary, (2) required to be paid to settle the purchase of such residence, or (3) required to be paid by the beneficiary to obtain acquisition indebtedness with respect to the residence.  Excess contributions to the account, distributions that exceed the qualified principal residence purchase expenditures of the beneficiary, and distributions that are not used for first-time homebuyer purposes are subject to specified taxes. 

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``First-Time Homebuyer Savings Account 
Act of 2016''.

SEC. 2. FIRST-TIME HOMEBUYER ACCOUNT.

    (a) In General.--Part VIII of subchapter F of chapter 1 of the 
Internal Revenue Code of 1986 is amended by adding at the end the 
following new section:

``SEC. 530A. FIRST-TIME HOMEBUYER ACCOUNT.

    ``(a) In General.--A first-time homebuyer account shall be exempt 
from taxation under this subtitle. Notwithstanding the preceding 
sentence, the first-time homebuyer account shall be subject to the 
taxes imposed by section 511 (relating to imposition of tax on 
unrelated business income of charitable organizations).
    ``(b) First-Time Homebuyer Account.--The term `first-time homebuyer 
account' means a trust created or organized in the United States 
exclusively for the purpose of paying the qualified principal residence 
purchase expenditures of an individual who is the designated 
beneficiary of the trust (and designated as a first-time homebuyer 
account at the time created or organized), but only if the written 
governing instrument creating the trust meets the following 
requirements:
            ``(1) No contribution will be accepted--
                    ``(A) unless it is in cash,
                    ``(B) except in the case of a rollover 
                contribution, if such contribution would result in 
                aggregate contributions--
                            ``(i) for the taxable year exceeding 
                        $14,000 (200 percent of such amount in effect 
                        for the taxable year in the case of individuals 
                        who are married, own a first-time homebuyer 
                        account jointly, and file a joint return for 
                        the taxable year),
                            ``(ii) for all taxable years exceeding 
                        $50,000, and
                    ``(C) if the fair market value of the account to 
                exceeds, or to the extent such contribution would 
                result in the fair market value of the account 
                exceeding, $150,000.
            ``(2) The trustee is a bank (as defined in section 408(n)) 
        or another person who demonstrates to the satisfaction of the 
        Secretary that the manner in which that person will administer 
        the trust will be consistent with the requirements of this 
        section or who has so demonstrated with respect to any 
        individual retirement plan.
            ``(3) No part of the trust assets will be invested in life 
        insurance contracts.
            ``(4) The assets of the trust shall not be commingled with 
        other property except in a common trust fund or common 
        investment fund.
    ``(c) Qualified Principal Residence Purchase Expenditures.--For 
purposes of this section--
            ``(1) In general.--The term `qualified principal residence 
        purchase expenditures' means, with respect to a designated 
        beneficiary who is a first-time homebuyer--
                    ``(A) any amount paid toward the purchase price of 
                a principal residence of the beneficiary,
                    ``(B) any amount required to be paid to settle the 
                purchase of such residence, and
                    ``(C) any amount required to be paid by the 
                beneficiary to obtain acquisition indebtedness with 
                respect to such residence.
            ``(2) Purchase price.--The term `purchase price' means the 
        adjusted basis of the residence on the date such residence is 
        purchased.
    ``(d) Tax Treatment.--
            ``(1) Distributions.--
                    ``(A) In general.--If distributions from a first-
                time homebuyer account for the taxable year do not 
                exceed the qualified principal residence purchase 
                expenditures of the designated beneficiary for the 
                taxable year, no amount shall be includible in gross 
                income.
                    ``(B) Distributions in excess of expenditures.--If 
                such distributions exceed such expenditures for the 
                taxable year, such distributions shall be includible in 
                the gross income of the distributee in the manner as 
                provided in section 72 (to the extent not excluded from 
                gross income under any other provision of this 
                chapter), reduced by an amount which bears the same 
                ratio to the amount otherwise so includible as such 
                expenses bear to such distributions.
                    ``(C) Additional tax for distributions not used for 
                first-time homebuyer purposes.--
                            ``(i) In general.--The tax imposed by this 
                        chapter for any taxable year on any taxpayer 
                        who receives a payment or distribution from a 
                        first-time homebuyer account which is 
                        includible in gross income shall be increased 
                        by the applicable percentage of the amount 
                        which is so includible.
                            ``(ii) Applicable percentage.--For purposes 
                        of clause (i), the applicable percentage is--
                                    ``(I) in the case of a payment or 
                                distribution made not later than 10 
                                years after the date of the first 
                                contribution to the account, 5 percent, 
                                and
                                    ``(II) in the case of any other 
                                payment or distribution, 10 percent.
                            ``(iii) Exceptions.--Clause (i) shall not 
                        apply if the payment or distributions--
                                    ``(I) is made to a beneficiary (or 
                                to the estate of the designated 
                                beneficiary) on or after the death of 
                                the designated beneficiary,
                                    ``(II) is attributable to the 
                                designated beneficiary's being disabled 
                                (within the meaning of section 
                                72(m)(7)), or
                                    ``(III) are made under rules 
                                similar to the rules under section 
                                408(d)(4) (relating to contributions 
                                returned before due date of return).
                    ``(D) Rollovers.--Subparagraph (A) shall not apply 
                to any amount paid or distributed from a first-time 
                homebuyer account to the extent that the amount 
                received is paid, not later than the 60th day after the 
                date of such payment or distribution, into another 
                first-time homebuyer account for the benefit of the 
                same beneficiary. The preceding sentence shall not 
                apply to any payment or distribution if it applied to 
                any prior payment or distribution during the 12-month 
                period ending on the date of the payment or 
                distribution.
                    ``(E) Change in beneficiary.--Any change in the 
                beneficiary of a first-time homebuyer account shall not 
                be treated as a distribution for purposes of 
                subparagraph (A).
                    ``(F) Disallowance of excluded amounts as 
                deduction, credit, or exclusion.--No deduction, credit, 
                or exclusion shall be allowed to the taxpayer under any 
                other section for any qualified principal residence 
                purchase expenditures to the extent taken into account 
                in determining the amount of the exclusion under this 
                paragraph.
            ``(2) Estate and gift tax with respect to the account.--
        Rules similar to the rules of paragraphs (2), (4), and (5) of 
        section 529(c) shall apply for purposes of this section.
            ``(3) Tax treatment after death of account holder.--
                    ``(A) Jointly held accounts.--In the case of a 
                first-time homebuyer account which was jointly held by 
                spouses, if the surviving spouse acquires the deceased 
                spouse's interest in a first-time homebuyer account by 
                reason of being the designated beneficiary of such 
                account at the death, such account shall be treated as 
                if the spouse were the sole account holder.
                    ``(B) Other cases.--
                            ``(i) In general.--If, by reason of the 
                        death of the account holder, any person 
                        acquires the account holder's interest in an 
                        first-time homebuyer account in a case to which 
                        subparagraph (A) does not apply--
                                    ``(I) such account shall cease to 
                                be a first-time homebuyer account as of 
                                the date of death, and
                                    ``(II) an amount equal to the fair 
                                market value of the assets in such 
                                account on such date shall be 
                                includible if such person is not the 
                                estate of such holder, in such person's 
                                gross income for the taxable year which 
                                includes such date, or if such person 
                                is the estate of such holder, in such 
                                holder's gross income for the last 
                                taxable year of such holder.
                            ``(ii) Deduction for estate taxes.--An 
                        appropriate deduction shall be allowed under 
                        section 691(c) to any person (other than the 
                        decedent or the decedent's spouse) with respect 
                        to amounts included in gross income under 
                        clause (i).
    ``(e) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) First-time homebuyer.--
                    ``(A) In general.--The term `first-time homebuyer' 
                means any individual if such individual (and if 
                married, such individual's spouse) has had no present 
                ownership interest in a principal residence.
                    ``(B) Special rule for divorced individuals.--Any 
                individual who is divorced and is not described in 
                subparagraph (A) shall be treated as a first-time 
                homebuyer for purposes of this section if such 
                individual had no present ownership interest in a 
                principal residence since such individual's most recent 
                divorce and during the 3-year period ending on the date 
                of the purchase of the principal residence with respect 
                to which payments from a first-time homebuyer account 
                are made under this section.
            ``(2) Principal residence.--The term `principal residence' 
        has the same meaning as when used in section 121.
            ``(3) Designated beneficiary.--The term `designated 
        beneficiary' means--
                    ``(A) the individual designated at the commencement 
                of the first-time homebuyer account as the beneficiary 
                of amounts paid (or to be paid) to the account, or
                    ``(B) in the case of a change in beneficiaries 
                described in subsection (d)(1)(C), the individual who 
                is the new beneficiary
            ``(4) Account ownership.--Except in the case of individuals 
        who are married, an account may be owned by only one individual 
        and may only have one designated beneficiary.
            ``(5) Cost-of-living adjustment.--In the case of any 
        taxable year beginning in a calendar year after 2017, the 
        dollar amounts under subsection (b)(1) shall be increased by an 
        amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, determined by substituting 
                `calendar year 2007' for `calendar year 1992' in 
                subparagraph (B) thereof.
        If any amount after adjustment under the preceding sentence is 
        not a multiple of $100, such amount shall be rounded to the 
        next lower multiple of $100.''.
    (b) Excess Contributions.--
            (1) In general.--Section 4973(a) of such Code is amended by 
        striking ``or'' at the end of paragraph (5), by inserting 
        ``or'' at the end of paragraph (6), and by inserting after 
        paragraph (6) the following new paragraph:
            ``(7) a first-time homebuyer account (within the meaning of 
        section 530A),''.
            (2) Excess contributions.--Section 4973 of such Code is 
        amended by adding at the end the following new subsection:
    ``(i) Excess Contributions to First-Time Homebuyer Account.--In the 
case of a first-time homebuyer account, the term `excess contributions' 
means the amount by which the amount contributed for the taxable year 
to such account (other than contributions described in section 
530A(d)(1)(C) (iv) and (v)) exceeds the contribution limits under 
section 530A(b). For purposes of the preceding sentence, any 
contribution which is distributed from the account in a distribution to 
which section 530A(d)(1)(C)(iii)(III) applies shall be treated as an 
amount not contributed.''.
    (c) Clerical Amendment.--The table of sections for part VIII of 
subchapter F of chapter 1 of such Code is amended by adding at the end 
the following new item:

``Sec. 530A. First-time homebuyer account.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.