First-time home buyer savings account; use; restrictions; recapture; penalty

(ii) Used for eligible expenses related to a qualified beneficiary's purchase or construction of his or her primary residence in or outside the state if the qualified beneficiary is active-duty military and was stationed in Nebraska for any time after the creation of the account;

(iii) Used for expenses that would have qualified under subdivision (1)(a)(i) or (ii) of this section, but the contract for purchase or construction did not close;

(iv) Transferred to another newly created first-time home buyer savings account; or

(v) Used to pay a service fee that is assessed and deducted by the financial institution.

(b) Subdivision (1)(a) of this section applies regardless of whether the qualified beneficiary is the sole owner of the primary residence or a joint owner with another person who does not qualify as a qualified beneficiary.

(c) The money in a first-time home buyer savings account may not be used for the purposes described in subdivisions (1)(a)(i), (ii), and (iii) of this section if the primary residence being purchased or constructed is a manufactured or mobile home that is not taxed as real property.

(2)(a) Money withdrawn from a first-time home buyer savings account is subject to recapture in the taxable year in which it is withdrawn if:

(i) At the time of the withdrawal, it has been less than a year since the first deposit in the first-time home buyer savings account; or

(ii) The money is used for any purpose other than those authorized in subsection (1) of this section.

(b) The amount subject to recapture shall be added to federal adjusted gross income pursuant to subdivision (27)(b) of section 77-2716 .

(3) If any money is subject to recapture pursuant to subdivision (2)(a)(ii) of this section, the account holder shall pay to the department a penalty in the same taxable year as the recapture. If the withdrawal is made ten or fewer years after the first deposit in the first-time home buyer savings account, the penalty is equal to five percent of the amount subject to recapture. If the withdrawal is made more than ten years after the first deposit in the account, the penalty is equal to ten percent of the amount subject to recapture. The penalties provided in this subsection do not apply if:

(a) The money is used for eligible expenses related to a qualified beneficiary's purchase or construction of his or her primary residence outside of the state; or

(b) The money is from a first-time home buyer savings account for which the qualified beneficiary dies and the account holder does not designate a new qualified beneficiary during the same taxable year.

(4) If the account holder or, if the first-time home buyer savings account is jointly owned, the account holders die, all of the money in the account that was subtracted from taxable income is subject to recapture in the taxable year of the death or deaths, but no penalty is due to the department.