HOUSE OF REPRESENTATIVES
THIRTIETH LEGISLATURE, 2020
STATE OF HAWAII
A BILL FOR AN ACT
RELATING TO INDIVIDUAL DEVELOPMENT ACCOUNTS.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that state-sponsored individual development accounts are an evidence-based method for helping low- and moderate-income people build assets, obtain stable housing, and ensure a financially secure future. Individual development accounts are special savings accounts that match the deposits of low- and moderate-income savers; provided that they participate in financial education and use the savings for targeted purposes such as housing, post‑secondary education, small business development, and transportation for work and school. Research demonstrates that these accounts make families more financially secure and communities and local economies more stable.
The purpose of this Act is to amend existing state statutes governing individual development accounts for low- and moderate‑income households in Hawaii to assist them with obtaining permanent housing, attending post-secondary education, starting a business, or accessing transportation necessary to earn a living or increase their wages.
SECTION 2. Section 235-5.6, Hawaii Revised Statutes, is amended by amending subsection (e) to read as follows:
"(e) The credit under this section shall be available for taxable years beginning after:
(1) December 31, 1999,
but shall not be available for taxable years beginning after December 31, 2004[
(2) December 31, 2020, but shall not be available for taxable years beginning after December 31, 2025."
SECTION 3. Section 257-1, Hawaii Revised Statutes, is amended as follows:
1. By amending the definition of "qualified expenditures" to read:
""Qualified expenditures" means an expense as determined by a fiduciary organization, which may include but not be limited to:
(1) Costs associated
first] first-time homeownership;
(2) Costs associated with renting a dwelling;
(3) Costs associated with using public transportation;
(4) Costs associated with purchasing or repairing a motor vehicle;
(2)] (5) Post-secondary
[ education;] educational expenses;
(3)] (6) Vocational
(4) Small] (7) Qualified
business capitalization expenses for a small or micro-business [ capitalization]."
2. By deleting the definition of "qualified principal residence".
residence" means a principal residence (within the meaning of section 1034
of the Internal Revenue Code of 1986), the qualified acquisition costs of which
do not exceed one hundred per cent of the average area purchase price
applicable to such residence (determined in accordance with paragraphs (2) and
(3) of section 143(e) of the Code)."]
SECTION 4. Section 257-2, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:
"(a) The income of the household of the individual
development account holder shall not exceed [
eighty] one hundred
per cent of the area household median income."
SECTION 5. Section 257-3, Hawaii Revised Statutes, is amended to read as follows:
§257-3[ ]] Fiduciary organizations. (a)
Fiduciary organizations shall serve as an intermediary between
individual development account holders and financial institutions holding
accounts. The fiduciary organization's
responsibilities may include:
(1) Marketing participation;
(2) Soliciting matching contributions;
(3) Counseling program participants; and
(4) Conducting verification and compliance activities.
Locally-based organizations shall [
enter into a competitive process]
apply to the department of human services for the right to become
fiduciary organizations for a portion of the state matching dollars that would
be authorized [ initially.] from time to time. Fiduciary organization proposals shall be
evaluated and participation rights awarded on the basis of such items as:
(1) Their ability to market the program to potential individual development account holders and potential matching fund contributors;
(2) Their ability to provide safe and secure investments for individual development accounts;
(3) Their overall administrative capacity, including:
(A) Certifications or verifications required to assure compliance with eligibility requirements;
(B) Authorized uses of the accounts matching contributions by individuals or businesses; and
(C) Penalties for unauthorized distributions;
(4) Their capacity to provide financial counseling and other related services to potential participants; and
(5) Their links to other activities designed to increase the independence of individuals and families through high return investments, including homeownership, education and training, and small business development.
If the [
State] department of human services approves an
application to fund an individual development account project under this
section, the [ State] department of human services shall[ , not
later than one month after June 28, 1999,] authorize the applicant to
conduct the project with state funds for five project years in accordance with
the approved application and this section[ ; provided that an applicant may
apply for funding during future fiscal years for five project years if the
State lacks the resources to fund an individual development account project
pursuant to this subsection].
(d) For each individual development account
program approved under this section, the State shall make a grant to the
qualified entity or collaboration of entities authorized to conduct the project
on the first day of the project year in an amount not to exceed $100,000 per
year for five years. (e)] (d) From among the individuals eligible for
assistance under the Hawaii individual development account program, each
selected fiduciary organization shall select the individuals whom the fiduciary
organization deems to be best suited to receive such assistance."
SECTION 6. Section 257-7, Hawaii Revised Statutes, is amended to read as follows:
"§257-7 Assets; disregarded. The department of human services shall [
with individual development account fiduciary organizations to] ensure that
the accounts as provided for in this chapter, including any earned interest,
shall be disregarded in the determination of benefits or eligibility for
services account holders may receive from the department of human services as
allowed by federal and state laws and regulations.
The department of human services shall establish rules to be aligned with individual development accounts."
SECTION 7. Section 257-8, Hawaii Revised Statutes, is amended to read as follows:
§257-8[ ]] Matches. (a)
The State shall match an amount of up to $100,000 per calendar year for
individual development accounts[ .] per qualified fiduciary
organization in a given year.
Not more than a 2:1 match of state funds
to account holder deposits shall be deposited into any individual development
account in a given year.] A fiduciary organization shall maintain sufficient state matching
funds to finance the aggregate amount of program matches in a deposit account
solely owned by the fiduciary organization at the financial institution holding
the individual development accounts.
State matching funds shall only be withdrawn from the fiduciary organization's deposit account when the fiduciary organization makes a withdrawal request for a qualified expenditure to the fiduciary organization. State matching funds shall not be deposited directly to any individual development account."
SECTION 8. Section 257-10, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:
"(c) The administrator of the fiduciary organization, with the cooperation of the participating organizations, shall maintain records of the names of contributors and the total amount each contributor contributes to an individual development account match fund for the taxable year. All contributions shall be verified by the department of human services. The department of human services shall total all contributions that the department certifies. Upon each determination, the department of human services shall issue a certificate to the taxpayer. The taxpayer shall file the certificate with the taxpayer's tax return with the department of taxation.
When the total amount of certified
contributions reaches $1,000,000, the department shall immediately discontinue
certifying contributions and notify the department of taxation. In no instance[
,] shall the total
amount of certified contributions exceed $1,000,000 over the five-year period
(1) January 1, 2000,
and December 31, 2004[
(2) January 1, 2021, and December 31, 2025."
SECTION 9. Section 257-11, Hawaii Revised Statutes, is amended to read as follows:
§257-11[ ]] Administration; evaluation;
information; reporting. (a) The fiduciary organization running an
individual development account program shall have sole authority over the
administration of the project. The State
may prescribe only such regulations with respect to demonstration projects
under this chapter as are necessary to ensure compliance pursuant to this
(b) Each individual development account program
shall annually report the number of accounts, the amount of savings and matches
for each account, the uses of the account, and the number of businesses, homes,
and educations purchased, as well as other information as may be required for
responsible operation of the program. (c) The fiduciary organization shall submit to
the legislature its findings and recommendations no later than twenty days
prior to the convening of each legislative session. (d)] (b) Selected fiduciary organizations may use no
more than [ ten] twenty per cent of state funds as appropriated
under this [ chapter[ ]] to cover administrative costs in any
SECTION 10. 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 2020-2021 for the purposes of this Act.
The sum appropriated shall be expended by the department of human services for the purposes of this Act.
SECTION 11. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 12. This Act shall take effect on July 1, 2020; provided that section 2 shall apply to taxable years beginning after December 31, 2020.
Individual Development Accounts; Income Tax Credit; DHS; Appropriation
Reactivates the individual development account contribution income tax credit for the five-year period from 2021 through 2025. Amends provisions regarding state-funded individual development accounts. Appropriates funds to the department of human services.
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.