S.B. NO.



S.D. 1

















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 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 with [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 training; and

[(4)] (7) [Small] Qualified business capitalization expenses for a small or micro-business [capitalization]."

2. By repealing the definition of "qualified principal residence":

[""Qualified principal 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 3. 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]            per cent of the area household median income."

SECTION 4. 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.

(b) 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. 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.

(c) 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 5. Section 257-7, Hawaii Revised Statutes, is amended to read as follows:

"257-7 Assets; disregarded. The department of human services shall [collaborate 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 6. 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.

(b) [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 match 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 match funds shall only be withdrawn from the fiduciary organization's deposit account when an account holder makes a withdrawal request for a qualified expenditure to the fiduciary organization. State match funds shall not be deposited directly to any individual development account."

SECTION 7. 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 between January 1, 2000, and December 31, 2004[.], and between January 1, 2020, and December 31, 2024."

SECTION 8. 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 chapter.

[(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 given year."


SECTION 9. 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 December 31, 1999, but shall not be available for taxable years beginning after December 31, 2004[.] and shall be available for taxable years beginning after December 31, 2019, but shall not be available for taxable years beginning after December 31, 2024."


SECTION 10. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 11. This Act shall take effect on July 1, 2050.




Report Title:

Individual Development Accounts



Expands eligibility for state-funded individual development accounts to households with income up to 100 percent of the area median income. Expands allowable uses of account funds to rental housing, transportation, costs related to the purchase or repair of a motor vehicle, and qualified business capitalization expenses for a small business. Clarifies certain requirements for fiduciary organizations. Reactivates the tax credit for the five-year period for taxable years 2020 through 2024. Effective 7/1/2050. (SD1)




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