70th OREGON LEGISLATIVE ASSEMBLY--1999 Regular Session
Enrolled
House Bill 3600
Sponsored by Representatives MERKLEY, WESTLUND; Representatives
ATKINSON, BACKLUND, BECK, BEYER, BOWMAN, BUTLER, DECKERT,
DEVLIN, EDWARDS, GARDNER, GIANELLA, HANSEN, HARPER, HILL,
HOPSON, JENSON, KAFOURY, KING, KNOPP, KROPF, KRUMMEL, KRUSE,
LEHMAN, LEONARD, LEWIS, LOKAN, LOWE, LUNDQUIST, MANNIX,
MESSERLE, MINNIS, MONTGOMERY, MORGAN, MORRISETTE, PATRIDGE,
PIERCY, PROZANSKI, RASMUSSEN, ROSENBAUM, ROSS, SCHRADER,
SHETTERLY, SIMMONS, SNODGRASS, STARR, SUNSERI, TAYLOR,
THOMPSON, UHERBELAU, WALKER, WELLS, WELSH, WILLIAMS, WILSON,
WINTERS, WITT, Senators BROWN, LIM
CHAPTER ................
AN ACT
Relating to individual development accounts.
Be It Enacted by the People of the State of Oregon:
SECTION 1. { + As used in this section and sections 2 to 8 of
this 1999 Act, unless the context requires otherwise:
(1) 'Account holder' means a member of a lower income household
who is the named depositor of an individual development account.
(2) 'Fiduciary organization' means a nonprofit, fund raising
organization that is exempt from taxation under section 501(c)(3)
of the Internal Revenue Code as amended and in effect on January
1, 1999.
(3) 'Financial institution' means an organization regulated
under ORS chapters 706 to 716, 722 or 723.
(4) 'Individual development account' means a contract between
an account holder and a fiduciary organization, for the deposit
of funds into a financial institution by the account holder, and
the deposit of matching funds into the financial institution by
the fiduciary organization, to allow the account holder to
accumulate assets for use toward achieving a specific purpose
approved by the fiduciary organization.
(5) 'Lower income household' means a household having an income
equal to or less than 80 percent of the median household income
for the area as determined by the Housing and Community Services
Department. In making the determination, the department shall
give consideration to any data on area household income published
by the United States Department of Housing and Urban
Development. + }
SECTION 2. { + The Legislative Assembly finds that:
(1) The problem of poverty will not be solved solely by
government programs and income subsidies.
(2) Family economic well-being does not come solely from
income, spending or consumption, but instead requires savings,
investment and the accumulation of assets.
Enrolled House Bill 3600 (HB 3600-A) Page 1
(3) It is appropriate for the state to institute an asset-based
antipoverty strategy.
(4) The state has an opportunity to take advantage of private
and federal resources by making the transition to an asset-based
antipoverty strategy. Those resources include, but are not
limited to, the Assets for Independence Act (42 U.S.C. 604) and
the Workforce Investment Act (P.L. 105-220).
(5) Investment through an individual development account system
will help lower income households obtain the assets they need to
succeed. Communities and this state will experience resultant
economic and social benefits accruing from the promotion of job
training and higher education, home ownership and small business
development.
(6) It is desirable for this state to enact legislation that
enables an authorized fiduciary organization sufficient
flexibility to receive private, state and federal moneys for
individual development accounts. The Legislative Assembly should
periodically review the provisions of sections 2 to 8 of this
1999 Act to ensure that this state maximizes the receipt of
available federal moneys for individual development accounts. + }
SECTION 3. { + (1) A person who qualifies to become an account
holder may enter into an agreement with a fiduciary organization
for the establishment of an individual development account.
(2) A person qualifies to become an account holder if the
person is a member of a lower income household that has a net
worth of less than $20,000. As used in this subsection, 'net
worth' means the value of all assets owned in whole or part by
household members, other than equity in a residence, minus the
total debts and obligations of household members, all as measured
at the time that the person applies to establish the account.
(3) A person applying to establish an account must enroll in a
personal development plan developed by the person and the
fiduciary organization. The plan must provide the person with
appropriate financial counseling, career or business planning and
other services designed to increase the independence of the
person and the person's household through achievement of the
account's approved purpose.
(4) Notwithstanding subsection (1) of this section, a fiduciary
organization may refuse to allow a qualified person to establish
an account if establishment of the account would result in the
members of a lower income household having more than one account.
Notwithstanding subsection (1) of this section, a fiduciary
organization shall refuse to allow a qualified person to
establish an account if establishment of the account would result
in the members of a lower income household having more than two
accounts. + }
SECTION 4. { + (1) A person may establish an individual
development account only for a purpose approved by a fiduciary
organization. Purposes that the fiduciary organization may
approve are:
(a) The acquisition of post-secondary education or job
training. If the account holder has established the account for
the benefit of a household member who is under the age of 18
years, an approved purpose may include the payment of
extracurricular nontuition expenses designed to prepare the
member for post-secondary education or job training.
(b) The purchase of a primary residence. In addition to payment
on the purchase price of the residence, account moneys may be
used to pay any usual or reasonable settlement, financing or
other closing costs. The account holder must not have owned or
Enrolled House Bill 3600 (HB 3600-A) Page 2
held any interest in a residence during the three years prior to
making the purchase. However, this three-year period shall not
apply to displaced homemakers or other individuals who have lost
home ownership as a result of divorce.
(c) The capitalization of a small business. Account moneys may
be used for capital, plant, equipment and inventory expenses or
for working capital pursuant to a business plan. The business
plan must have been developed by a financial institution,
nonprofit microenterprise program or other qualified agent
demonstrating business expertise and have been approved by the
fiduciary organization. The business plan must include a
description of the services or goods to be sold, a marketing plan
and projected financial statements.
(2)(a) If an emergency occurs, an account holder may withdraw
all or part of the account holder's deposits to an individual
development account for a purpose not described in subsection (1)
of this section. As used in this paragraph, an emergency includes
making payments for necessary medical expenses, to avoid eviction
of the account holder from the account holder's residence and for
necessary living expenses following a loss of employment.
(b) The account holder must reimburse the account for the
amount withdrawn under this subsection within 12 months after the
date of the withdrawal. Failure of an account holder to make a
timely reimbursement to the account is grounds for removing the
account holder from the individual development account program.
Until the reimbursement has been made in full, an account holder
may not withdraw any matching deposits or accrued interest on
matching deposits from the account.
(3) If an account holder withdraws moneys from an individual
development account for other than an approved purpose, the
fiduciary organization may remove the account holder from the
program.
(4) If an account holder moves from the area where the program
is conducted or is otherwise unable to continue in the program,
the fiduciary organization may remove the account holder from the
program.
(5) If an account holder is removed from the program under
subsection (2), (3) or (4) of this section, all matching deposits
in the account and all interest earned on matching deposits shall
revert to the fiduciary organization. The fiduciary organization
shall use the reverted funds as a source of matching deposits for
other accounts. + }
SECTION 5. { + (1) Notwithstanding section 12 of this 1999
Act, a fiduciary organization selected under section 6 of this
1999 Act may qualify as the recipient of account contributions
that qualify the contributor for a tax credit under section 12 of
this 1999 Act only if the fiduciary organization structures the
accounts to have the following features:
(a) The fiduciary organization matches amounts deposited by the
account holder according to a formula established by the
fiduciary organization. The fiduciary organization shall deposit
not less than $1 nor more than $5 into the account for each $1
deposited by the account holder.
(b) The matching deposits by the fiduciary organization to the
individual development account are placed in either:
(A) A savings account jointly held by the account holder and
the fiduciary organization and requiring the signatures of both
for withdrawals; or
Enrolled House Bill 3600 (HB 3600-A) Page 3
(B) A savings account that is controlled by the fiduciary
organization and is separate from the savings account of the
account holder.
(2) Deposits by a fiduciary organization to an account shall
not exceed $2,000 in any 12-month period. A fiduciary
organization may designate a lower amount as a limit on annual
matching deposits to an account.
(3) The total amount paid into an individual development
account during its existence, including amounts from deposits,
matching deposits and interest or investment earnings, may not
exceed $20,000. + }
SECTION 6. { + The Housing and Community Services Department
may select fiduciary organizations to administer moneys directed
by the state to individual development account purposes. In
making the selections, the department shall consider factors
including, but not limited to:
(1) The ability of the fiduciary organization to implement and
administer the individual development account program, including
the ability to verify account holder eligibility, certify that
matching deposits are used only for approved purposes and
exercise general fiscal accountability;
(2) The capacity of the fiduciary organization to provide or
raise matching funds for the deposits of account holders;
(3) The capacity of the fiduciary organization to provide
financial counseling and other related services to account
holders; and
(4) The links that the fiduciary organization has to other
activities and programs designed to increase the independence of
this state's lower income households through education and
training, home ownership and small business development. + }
SECTION 7. { + (1) Subject to Housing and Community Services
Department rules, a fiduciary organization has sole authority
over, and responsibility for, the administration of individual
development accounts. The responsibility of the fiduciary
organization extends to all aspects of the account program,
including marketing to participants, soliciting matching
contributions, counseling account holders, providing financial
literacy education, and conducting required verification and
compliances activities. The fiduciary organization may establish
program provisions as the organization believes necessary to
ensure account holder compliance with the provisions of sections
3 and 4 of this 1999 Act. Notwithstanding sections 1 (5) and 3
(2) of this 1999 Act, a fiduciary organization may establish
income and net worth limitations for account holders that are
lower than the income and net worth limitations established by
sections 1 (5) and 3 (2) of this 1999 Act.
(2) A fiduciary organization may act in partnership with other
entities, including businesses, government agencies, nonprofit
organizations, community development corporations, community
action programs, housing authorities and congregations to assist
in the fulfillment of fiduciary organization responsibilities
under this section and sections 4, 5 and 6 of this 1999 Act.
(3) A fiduciary organization may use a reasonable portion of
moneys allocated to the individual development account program
for administration, operation and evaluation purposes.
(4) A fiduciary organization selected to administer moneys
directed by the state to individual development account purposes
or receiving tax deductible contributions shall provide the
Housing and Community Services Department with an annual report
of the fiduciary organization's individual development account
Enrolled House Bill 3600 (HB 3600-A) Page 4
program activity. The report shall be filed no later than 90 days
after the end of the fiscal year of the fiduciary organization.
The report shall include, but is not limited to:
(a) The number of individual development accounts administered
by the fiduciary organization;
(b) The amount of deposits and matching deposits for each
account;
(c) The purpose of each account;
(d) The number of withdrawals made; and
(e) Any other information the department may require for the
purpose of making a return on investment analysis.
(5) The department may make all reasonable and necessary rules
to ensure fiduciary organization compliance with this section and
sections 4, 5 and 6 of this 1999 Act. + }
SECTION 8. { + The Housing and Community Services Department
shall begin the process to select fiduciary organizations to
administer moneys directed by the state to individual development
account purposes no later than 90 days after the effective date
of this 1999 Act. State agencies shall render all necessary
cooperation to the department, and the fiduciary organizations
selected by the department, to expedite the process of preparing
the fiduciary organization to administer individual development
accounts. + }
SECTION 9. { + Section 10 of this 1999 Act is added to and
made a part of ORS chapter 316. + }
SECTION 10. { + (1) In addition to the other modifications to
federal taxable income contained in this chapter, there shall be
subtracted from federal taxable income the amount of taxpayer
deposits to an individual development account established by the
taxpayer under section 4 of this 1999 Act.
(2) Matching deposits made by a fiduciary organization to an
individual development account, and interest accruing on account
holder deposits and matching deposits, are exempt from taxation
until withdrawn by the taxpayer.
(3) Moneys withdrawn by the taxpayer from an individual
development account for an approved purpose, as described under
section 4 of this 1999 Act, are exempt from taxation under this
chapter. A withdrawal by a taxpayer for a purpose other than an
approved purpose is taxable under this chapter. + }
SECTION 11. { + Section 12 of this 1999 Act is added to and
made a part of ORS chapter 315. + }
SECTION 12. { + (1) A credit against taxes otherwise due under
ORS chapter 316, 317 or 318 shall be allowed for donations to a
fiduciary organization for distribution to individual development
accounts established under section 4 of this 1999 Act. The credit
shall equal the lesser of $25,000 or 25 percent of the donation
amount.
(2) If a credit allowed under this section is claimed, the
amount upon which the credit is based that is allowed or
allowable as a deduction from federal taxable income under
section 170 of the Internal Revenue Code shall be added to
federal taxable income in determining Oregon taxable income. As
used in this subsection, the amount upon which a credit is based
is the allowed credit divided by 25 percent.
(3) The allowable tax credit that may be used in any one tax
year shall not exceed the tax liability of the taxpayer.
(4) Any tax credit otherwise allowable under this section that
is not used by the taxpayer in a particular year may be carried
forward and offset against the taxpayer's tax liability for the
next succeeding tax year. Any tax credit remaining unused in the
Enrolled House Bill 3600 (HB 3600-A) Page 5
next succeeding tax year may be carried forward and used in the
second succeeding tax year. Any tax credit not used in the second
succeeding tax year may be carried forward and used in the third
succeeding tax year, but may not be carried forward for any tax
year thereafter. + }
SECTION 13. { + (1) In addition to the report required under
section 7 (4) of this 1999 Act, each fiduciary organization
authorized to administer an individual development account shall
report quarterly to the Housing and Community Services Department
for the calendar quarters ending after October 1, 2000, and
before October 1, 2001. The report shall summarize the amounts of
deposits made to individual development accounts by account
holders, the amounts of deposit withdrawals for approved
purposes, the amounts of deposit withdrawals for non-approved
purposes, the number and size of donations and the determination
of whether the donor is a corporation. The department may require
that the report contain additional information as requested by
the Legislative Revenue Office. The fiduciary organization must
file the report not more than 30 days after the end of the
calendar quarter. The department shall promptly forward report
information quarterly to the Legislative Revenue Office.
(2) Based on any available information, the Legislative Revenue
Office shall estimate the total revenue impact of tax deductions
allowed under section 10 (1) of this 1999 Act for the biennium
ending June 30, 2001. The revenue office shall report on the
estimated revenue impact to an appropriate interim committee of
the Seventieth Legislative Assembly before December 31, 2000.
(3) Based on any available information, the Legislative Revenue
Office shall estimate the total revenue impact of tax credits
allowed under section 12 (1) of this 1999 Act for the biennium
ending June 30, 2001. The revenue office shall report on the
estimated revenue impact to an appropriate interim committee of
the Seventieth Legislative Assembly before December 31, 2000. + }
SECTION 14. { + (1) Notwithstanding section 10 of this 1999
Act, if the Legislative Revenue Office reports under section 13
(2) of this 1999 Act that the revenue impact of tax deductions
under section 10 (1) of this 1999 Act for the biennium ending
June 30, 2001, is likely to exceed $250,000, a deduction shall
not be allowed under section 10 of this 1999 Act for any deposits
made on or after January 1, 2001, and on or before December 31,
2002.
(2) Notwithstanding section 12 of this 1999 Act, if the
Legislative Revenue Office reports under section 13 (3) of this
1999 Act that the revenue impact of tax credits under section 12
(1) of this 1999 Act for the biennium ending June 30, 2001, is
likely to exceed $500,000, a credit shall not be allowed under
section 12 of this 1999 Act for donations made on or after
January 1, 2001, and on or before December 31, 2002. + }
SECTION 15. { + Sections 8, 13 and 14 of this 1999 Act are
repealed on January 1, 2004. The repeal of section 14 of this
1999 Act does not allow a taxpayer to file for any deduction or
credit under section 10 or 12 of this 1999 Act that was
prohibited under section 14 of this 1999 Act. + }
----------
Enrolled House Bill 3600 (HB 3600-A) Page 6
Passed by House May 6, 1999
...........................................................
Chief Clerk of House
...........................................................
Speaker of House
Passed by Senate June 3, 1999
...........................................................
President of Senate
Enrolled House Bill 3600 (HB 3600-A) Page 7
Received by Governor:
......M.,............., 1999
Approved:
......M.,............., 1999
...........................................................
Governor
Filed in Office of Secretary of State:
......M.,............., 1999
...........................................................
Secretary of State
Enrolled House Bill 3600 (HB 3600-A) Page 8