Bill S.628

SENATE DOCKET, NO. 1221 FILED ON: 1/19/2023

SENATE . . . . . . . . . . . . . . No. 628

By Mr. Eldridge, a petition (accompanied by bill, Senate, No. 628) of James B. Eldridge, Patricia D. Jehlen and Sal N. DiDomenico for legislation to promote economic mobility through matched savings. Financial Services.

The Commonwealth of Massachusetts

_______________

In the One Hundred and Ninety-Third General Court
(2023-2024)

_______________

An Act to promote economic mobility through matched savings.

Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows:

Chapter 23A of the General Laws is hereby amended by adding the following three sections:-

Section 70.

(a) As used in this section, the following words shall, unless the context clearly requires otherwise, have the following meanings:

“Account holder”, a household that is an eligible participant.

“Eligible participant”, a household which has an income that does not exceed 80 per cent of the median income for the area, with adjustments made for smaller and larger families, as such median shall be determined from time to time by the secretary of the United States Department of Housing and Urban Development pursuant to 42 U.S.C. 1437(a)(B)(2) or any successor legislation and the regulations promulgated thereunder; provided however, that: (1) notwithstanding any federal law or rule to contrary, a person shall not be denied assistance under this chapter based wholly or in part on the amount of the person’s assets; (2) that any income generated by such assets may be treated as countable income; (3) receipt of federal, state or local public assistance of any form shall not make a person ineligible to be an account holder.

“Community-based organization”, a public or private nonprofit organization that is exempt from taxation under 26 U.S.C. 501(c)(3), a community foundation, housing authority, a city or town with demonstrated effectiveness in representing a community or a significant segment of a community and providing educational or related social services to individuals in that community.

“Fiscal intermediary”, a Massachusetts nonprofit organization that is exempt from taxation under 26 U.S.C. 501(c)(3) with demonstrated effectiveness in matched-savings account management.

“Financial institution”, a bank, credit union, any association or corporation chartered by the commonwealth under chapter 168, 170, 171 or 172, or an individual, association, partnership or corporation incorporated or doing a banking business in the commonwealth subject to the supervision of the commissioner.

“Matched-savings account”, a contract between an account holder and a fiscal intermediary to increase their economic mobility.

(b) (1) A person who qualifies to become an account holder may establish a matched-savings account. The matched-savings account shall permit the account holder to work towards approved savings goals set forth in subsection (c).

(2) A matched-savings account shall provide for the deposit of funds into 2 accounts at a financial institution: (i) a designated account at a financial institution by the account holder and; (ii) the deposit of matching funds by the fiscal intermediary into a designated account at a financial institution.

(3) Before creating a matched-savings account, a person shall create a savings plan developed by the participant and a community-based organization. The plan shall provide the participant with the appropriate financial education, counseling and asset-specific training designed to increase the economic mobility of the participant’s household.

(1) the acquisition of post-secondary education or job training;

(2) if the account holder has established the account for the benefit of a household member who is under the age of 18 years, the payment of extracurricular non-tuition expenses designed to prepare the member for post-secondary education or job training;

(3) if the account holder has established a savings plan authorized under 26 U.S.C. 529 or prepaid tuition plan on behalf of a designated beneficiary, the participant shall provide accurate account statements to the fiduciary organization in order to earn match;

(4) the purchase of a primary residence; provided further, that account moneys under this paragraph shall be broadly construed to include, but not be limited to: (i) payment on the purchase price of the residence; and (ii) any usual or reasonable settlement, financing, or other closing costs;

(5) the rental of a primary residence; provided further, that account moneys under this paragraph shall be broadly construed to include, but not be limited to: (i) security deposits; (ii) first month’s rent; (iii) prepayment of last month’s rent; (iv) application fees; (v) major appliances not included in the lease necessary to move into the primary residence; and (vi) moving expenses;

(6) the capitalization of a small business; provided further, that account moneys under this paragraph shall be broadly construed to include, but not be limited to: (i) capital, plant, equipment, and inventory expenses, (ii) hiring employees upon capitalization of the small business; (iii) working capital;

(7) improvements, repairs, or modifications to a home already owned by the account holder;

(8) the purchase of equipment, adaptive technology or specialized training required to become competitive in obtaining or maintaining employment, or to start or maintain a business, or to increase the economic mobility of the account holder;

(9) the purchase or repair of a vehicle, as specified in the account holder’s matched-savings plan for increasing the economic mobility of the person;

(10) the saving of funds for retirement;

(11) the payment of debts owed when the account holder is saving for another allowable purpose, as specified in the account holder’s matched-savings plan; provided further, a non-profit organization with demonstrated expertise shall provide credit counseling;

(12) the creation or improvement of a credit score by obtaining a secured credit-builder loan or a financial product that is designed to improve credit, as specified in the account holder’s matched-savings plan for increasing the economic independence of the person.

(d) A fiscal intermediary may qualify as the recipient of account contributions only if the fiscal intermediary structures the accounts to have the following features:

(1) The fiscal intermediary matches amounts deposited by the account holder according to a formula established by the fiscal intermediary. The fiscal intermediary shall deposit $4 into the account for each $1 deposited by the account holder.

(2) The matching deposits by the fiscal intermediary to the matched-savings account are placed in a savings account that is controlled by the fiscal intermediary and is separate from the savings account of the account holder.

(3) The total amount paid into a matched-savings account during its existence, including amounts from participant deposits and matching deposits may not exceed $20,000. The participant shall not contribute in excess of $4,000. The amount matched shall not exceed $16,000. The executive office of housing and economic development shall adjust the figures set forth in this paragraph annually to reflect increases in the cost of living by the same method used for federal income tax brackets.

(e)(1) If an emergency occurs, an account holder may withdraw all or part of the account holder’s deposits to a matched-savings account for a purpose not described in subsection (c). A financial emergency is a disruption to the account holder’s economic circumstances including , but not limited to: (i) making payments for necessary medical expenses; (ii) avoiding eviction of the account holder from the account holder’s residence; (iii) for necessary living expenses following a change in economic circumstances.

(2) The account holder shall resume contributions to the account holder’s savings account after the account holder deems that the financial emergency has been resolved. The account holder may choose to continue to pursue the savings plan through the appropriate financial education, counseling and asset-specific training in coordination with the account holder’s community-based organization while experiencing the financial emergency.

(3) If an account holder withdraws funds from a matched-savings account for other than an approved purpose, the fiscal intermediary may remove the account holder from the program.

(f)(1) If the account holder of an account established for the purpose set forth in the third paragraph through the tenth paragraph, inclusive, of subsection (c) has achieved the account’s approved purpose in accordance with the matched-savings plan developed by the account holder, the account holder may withdraw, or authorize the withdrawal of, the remaining amount of all deposits, including matching deposits, and interest in the account as follows: (i) for an account established for the purpose set forth in subsection (c)(3) of this section, by rolling over the entire withdrawal amount into one or more savings plans authorized under 26 U.S.C. 529, the establishment of which is the purpose of the matched-savings account; or (ii) for an account established for the purpose set forth in subsection (c)(10) of this section, by rolling over the entire withdrawal amount into an individual retirement account, a retirement plan or a similar account or plan established under the Internal Revenue laws of the United States.

(2) Upon withdrawal of all funds in the matched-savings account as provided in the first paragraph of this subsection, the account relationship shall terminate.

(g) (1) If an account holder moves from the area where the program is conducted or is otherwise unable to continue in the program, the fiscal intermediary may remove the account holder from the program.

(2) If the fiscal intermediary removes an account holder from the program, all matching deposits in the account and all interest earned on matching deposits shall revert to the fiscal intermediary. The fiscal intermediary shall use the reverted funds as a source of matching deposits for other accounts.

(h) (1) The executive office of housing and economic development may select a fiscal intermediary to administer moneys directed by the commonwealth to matched-savings account purposes.

(2) In making the selection, the executive office of housing and economic development shall consider factors related to its effectiveness including, but not limited to:

(i) the ability of the fiscal intermediary to implement and administer the matched-savings program, including the ability to verify account holder eligibility, certify that matching deposits are used only for approved purposes and exercise general fiscal accountability;

(ii) the capacity of the fiscal intermediary to convene and provide professional development opportunities that increase the capacity of community-based organizations to provide financial education, counseling, and asset-related training to account holders;

(iii) the partnerships that the fiscal intermediary maintains with like-minded community-based organizations, government agencies, and other entities that support asset-building and wealth creation among the lower-income households across the commonwealth;

(iv) Subject to executive office of housing and economic development rules, a fiscal intermediary has sole authority over, and responsibility for, the administration of matched-savings accounts.

(3) The fiscal intermediary may use at least 5 per cent of the allocated moneys to the matched-savings program for account management, compliance, and participation in audits.

(4) (i) The fiscal intermediary shall ensure that account holders include people of color and women, at least in such proportion as these groups exist in the commonwealth’s population as periodically determined by the state secretary as the commonwealth’s chief census officer. (ii) The fiscal intermediary shall ensure that account holders represent diverse geographic areas of the commonwealth, including urban, rural and suburban areas.

(5) The fiscal intermediary shall provide the executive office of housing and economic development with an annual report of the fiscal intermediary's matched-savings account program activity. The fiscal intermediary shall file the report with the executive office of housing and economic development no later than 90 days after the end of the fiscal intermediary’s fiscal year. The report shall include, but is not limited to: (i) the number of matched-savings accounts administered by the fiscal intermediary; (ii) the amount of deposits and matching deposits for each account; (iii) the purpose of each account; (iv) the number of withdrawals made; and (v) participant demographics including, but not limited to, race, ethnicity, age, gender identity and sexual orientation, and any other information the executive office of housing and economic development may require for the purpose of making a return-on-investment analysis.

(i) (1) Subject to executive office of housing and economic development rules, the responsibility of the community-based organization extends to all aspects of operating the matched-savings program, including, but not limited to: (i) marketing and outreach; (ii) verification and enrollment of participants; (iii) financial education; (iv) one-on-one counseling; (v) conducting asset-specific training; (vi) indirect costs; (vii) and other required verification and compliance activities.

(2) There is no limit to how many community-based organizations work with the selected fiscal intermediary if they satisfy the required qualifications.

(3) A community-based organization shall receive no more than 25 per cent of the allocated monies for providing all activities set forth in the first paragraph.

(j) The executive office of housing and economic development may issue regulations to implement this section.

Section 70a. (a) There shall be a Matched Savings Trust Fund, which shall be administered by the secretary of housing and economic development. Monies in the trust fund shall be deposited with the state treasurer in a manner that will secure the highest interest rate available consistent with the safety of the trust fund.

(b) The secretary shall appoint the trustee of the fund, who shall serve until a successor is appointed.

(c) There shall be credited to the trust fund: (1) all revenue collected through section 70b; (2) all additional funds appropriated by the general court; (3) federal funds directed to the trust fund; (4) grants and any other funds directed to the trust fund; and (5) all interest earned on monies in the trust fund.

(d) Expenditures from the fund shall not be subject to appropriation and balances remaining at the end of a fiscal year shall not revert to the General Fund. Expenditures from the fund shall be made for promoting economic mobility among account holders as defined in section 70. Expenditures from the fund may be made for satisfying the objectives of section, including but limited to, providing matches to account holder contributions to their accounts, financial education, counseling, asset-specific training, for program administration, the fiscal intermediary and for oversight by the executive office of housing and economic development.

(e) Not later than August 1 of each fiscal year, the secretary shall submit a spending plan to the secretary of administration and finance and the house and senate committees on ways and means. For the purpose of accommodating discrepancies between the receipt of revenues and related expenditures, the secretary may incur obligations and the comptroller may certify payment amounts not to exceed the most recent revenue estimate submitted by the secretary and approved by the secretary of administration and finance but the fund shall be in balance by the close of each fiscal year.

Section 70b.

(a) For the purposes of this section, the following words shall, unless the context clearly requires otherwise, have the following meanings:-

“Commissioner”, the commissioner of revenue or the commissioner's duly authorized representative.

“Community partnership fund”, a fund administered by a nonprofit organization selected by the department to receive qualified investments from taxpayers for the purpose of allocating such investments to community partners.

“Taxpayer”, a taxpayer subject to an excise under this chapter.

(b) There is hereby established a Massachusetts matched savings tax credit.

(d) A taxpayer that makes a qualified investment through a community partnership fund shall be allowed a refundable credit, to be computed as provided in this subsection, against the taxes imposed by chapter 63. If the amount of the credit allowed under this subsection exceeds the taxpayer's tax liability, the commissioner shall treat the excess as an overpayment and shall pay the taxpayer the amount of the excess, without interest. Alternatively, at the option of the taxpayer, a taxpayer entitled to a credit under this subsection for a taxable year may carry over and apply against the taxpayer's tax liability for any 1 or more of the succeeding 5 taxable years, the portion, as reduced from year to year, of the credit which exceeds the tax for the taxable year. If the taxpayer elects to carry over a credit balance, then the credit refund provision allowed by this subsection shall not apply. The credit shall be equal to 50 per cent of the total qualified investments made by the taxpayer, subject to the limits described in subsection (g). The department shall issue a certification to the taxpayer after the taxpayer makes a qualified investment. The certification shall be acceptable as proof that the expenditures related to that investment qualify as a qualified investment for purposes of the credit allowed under this section.

(e) The credit allowable under this section shall be allowed for the taxable year in which a qualified investment is made.

(f) Matched savings tax credits allowed to a pass-through entity such as a partnership or a limited liability company taxed as a partnership shall be passed through to the persons designated as partners, members or owners, respectively, pro rata or under an executed agreement among the persons designated as partners, members or owners documenting an alternative distribution method without regard to their sharing of other tax or economic attributes of the entity.

(g) The department shall authorize the tax credits under this section. The total value of the tax credits authorized in this section shall not exceed $12,000,000 in each taxable year.

(h) The commissioner, in consultation with the department, shall prescribe regulations necessary to carry out the tax credit established under this section.

Name:	District/Address:
James B. Eldridge	Middlesex and Worcester
Patricia D. Jehlen	Second Middlesex	2/16/2023
Sal N. DiDomenico	Middlesex and Suffolk	3/10/2023
Jacob R. Oliveira	Hampden, Hampshire and Worcester	4/3/2023
Michael D. Brady	Second Plymouth and Norfolk	4/28/2023