Can a Kansan use a bank certificate of deposit as their official first-time home buyer savings account?

Plain-English summary

Kansas's State Treasurer, freshly given authority to market the state's First-Time Home Buyers Savings Account program, asked whether someone could designate a certificate of deposit (CD) as their account under the Act, rather than a standard savings account. The statute lets a person open an "account" with a qualifying financial institution and designate it, in its entirety, as a first-time home buyer savings account, but it defines "account" only by circular reference to "individual savings account," without ever defining what a savings account actually is.

Because the statute is silent, the Attorney General looked outside it to figure out the ordinary meaning of "savings account" and whether a CD fits. Dictionary definitions describe a savings account as a bank account that typically pays interest and allows withdrawals under certain conditions, and a CD as a fixed-value, fixed-interest deposit redeemable without penalty at maturity; while the definitions aren't identical, both share the core feature of paying interest on money set aside. The opinion then looked to how everyday sources describe CDs: the FDIC, the SEC, and the Consumer Financial Protection Bureau all describe a CD as a type of savings account or savings certificate, as does Bank of America and a major personal finance company. Turning to case law, the opinion found no Kansas precedent but relied on a 1997 Texas appellate decision holding it would be "illogical" to exclude a CD from counting as a savings account or savings certificate just because early withdrawal carries a penalty, since that penalty exists precisely to encourage the saving behavior CDs are designed for. Putting these sources together, the opinion concluded a CD is commonly understood to be a type of savings account, so it qualifies as an "individual savings account" that can be designated a first-time home buyer savings account under Kansas law, subject to the statute's other limits on contribution amounts and eligible uses.

What this means for you

First-time homebuyers in Kansas: the opinion confirms you can use a CD, not just a traditional savings account, at a qualifying financial institution as your designated first-time home buyer savings account, potentially earning a higher fixed interest rate while still getting the Act's tax benefits.

Banks and credit unions offering the program: the opinion supports offering CD products as an option for customers who want to open a first-time home buyer savings account, since CDs fall within the statute's undefined "individual savings account" language.

State Treasurer's office staff marketing the program: the opinion gives you a clear basis to tell account holders and financial institutions that CDs are an eligible account type under the Act, expanding the range of products that can be marketed alongside it.

Common questions

Does Kansas law specifically define what counts as a "savings account" for this program?
No, according to the opinion; the statute defines "account" only by circular reference to "individual savings account" and never explains what a savings account actually is, which is why the opinion had to look at dictionaries, agency guidance, and case law instead.

Do federal agencies treat CDs as savings accounts?
Yes, the opinion notes that the FDIC, the SEC, and the Consumer Financial Protection Bureau all publicly describe CDs as a type of savings account or savings certificate in their consumer-facing materials.

Does the early-withdrawal penalty on a CD disqualify it from being a savings account?
No, according to the opinion, which relies on a Texas appellate decision explaining that a CD's early-withdrawal penalty exists precisely to encourage the kind of saving behavior the account is designed for, not to disqualify it from being a savings vehicle.

Background and statutory framework

Kansas's First-Time Home Buyers Savings Account Act, K.S.A. 58-4902 and 58-4903, lets an eligible individual open an account at a qualifying financial institution and designate it in full as a first-time home buyer savings account, used to pay or reimburse a designated beneficiary's eligible expenses for purchasing or building a primary residence in Kansas. Starting July 1, 2023, the Legislature gave the State Treasurer non-exclusive authority to market the program to account holders and financial institutions statewide. The Act defines "account" or "first-time home buyer savings account" only as "an individual savings account established in accordance with the provisions of this act," without defining "savings account" itself.

Facing that statutory silence, the opinion applied ordinary-meaning interpretation, drawing on Merriam-Webster's and Black's Law Dictionary definitions of both "savings account" and "certificate of deposit," consumer-facing guidance from federal financial regulators (FDIC, SEC, Consumer Financial Protection Bureau) describing CDs as savings vehicles, and persuasive out-of-state case law (a Texas Court of Appeals decision and a California appellate decision) treating CDs as functionally equivalent to savings accounts despite differences like withdrawal penalties. Because no Kansas authority contradicts this common understanding, the opinion concluded CDs qualify as individual savings accounts under the Act, subject to whatever contribution and use limits K.S.A. 58-4903(c) otherwise imposes.

Citations and references

Statutes:
- K.S.A. 58-4902(a)
- K.S.A. 58-4903 (incl. (a), (c))

Cases:
- Sammons v. Elder, 940 S.W.2d 276 (Tex. Ct. App. 1997)
- Estate of O'Connell v. Arnold, 105 Cal. Rptr. 590 (Ct. App. 1972)

Source

• Landing page: https://www.ag.ks.gov/reports-resources/ag-opinions
• Original PDF: https://www.ag.ks.gov/home/showpublisheddocument/10500/638460984368130000

Original opinion text

September 1, 2023

ATTORNEY GENERAL OPINION NO. 2023-7

The Honorable Steven Johnson
Kansas State Treasurer
900 SW Jackson St., Ste. 201,
Topeka, KS 66612-1235

Re: Personal and Real Property—First-Time Home Buyers Savings
Account Act—Individual Savings Account

Synopsis: A certificate of deposit qualifies as an individual savings account that
may be designated as a first-time home buyers savings account under
K.S.A. 58-4903. Although neither a savings account nor a certificate of
deposit is defined by the statute, other sources shows a savings
account is commonly understood to include a certificate of deposit.
Cited herein: K.S.A. 58-4902; K.S.A 58-4903.

                          *            *             *

Dear Treasurer Johnson:

As the Kansas State Treasurer, you ask whether K.S.A. 58-4903 permits a
certificate of deposit (CD) with a financial institution qualified to do business in the
State of Kansas to be used as a first-time home buyer savings account. Kansas
statutes do not define CDs. But, review of caselaw and evidence of common usage
reveals that they are ordinarily understood to be a type of savings account, thus
permitting their use as a first-time home buyer savings account.

To answer your question, we must construe K.S.A. 58-4902 and K.S.A. 58-4903.
Statutory interpretation begins with the statutory text, giving words their ordinary,

everyday meanings. Only when the statutory language is ambiguous do we turn to
the tools of statutory interpretation or consider legislative history.1

K.S.A. 58-4903(a) permits an individual to "open an account with a financial
institution and designate the account, in its entirety, as a first-time home buyer
savings account to be used to pay or reimburse a designated beneficiary's eligible
expenses for the purchase or construction of a primary residence in this state."
Starting July 1, 2023, the Legislature gave the State Treasurer non-exclusive
authority to market the first-time home buyers savings account program to account
holders and financial institutions throughout the state.2

"Account" or "first-time home buyer savings account" is defined by the statute as
"an individual savings account established in accordance with the provisions of this
act."3

The Act does not define "savings account," nor specify the type of accounts it entails.
Thus, the statutory language does not answer the question of whether CDs qualify
as individual savings accounts. We must look for the answer outside of the statutory
text.

Turning to the dictionary, a savings account is defined as: "an account (as in a bank)
on which interest is usu[ally] paid and from which withdrawals can be made
usu[ally] only by presentation of a passbook or by written authorization on a
prescribed form."4 A certificate of deposit is "a money-market bond of a preset face
value paying fixed interest and redeemable without penalty only on maturity."5
Though the definition of a CD does not mention a savings account, it does define a
CD as paying a fixed interest rate, which is also a quality of a savings account.

We can also look to how various entities that handle savings accounts represent
CDs to the public for clues as to the ordinary, public meaning of a CD. Various
federal agencies on their public websites define a CD as a type of savings account.6

1 Bruce v. Kelly, 316 Kan. 218, 224, 514 P.3d 1007 (2022).
2 K.S.A. Ch. 5, § 1.
3 K.S.A. 58-4902(a).
4 Savings Account, MERRIAM-WEBSTER'S COLLEGIATE DICTIONARY (11th ed. 2003); see also Savings

Account, BLACK'S LAW DICTIONARY (11th ed. 2019) ("A savings-bank depositor's account usu[ally]
bearing interest or containing conditions (such as advance notice) to the right of withdrawal.").
5 Certificate of Deposit, MERRIAM-WEBSTER'S COLLEGIATE DICTIONARY, supra; see also Certificate of

Deposit, BLACK'S LAW DICTIONARY, supra ("A banker's certificate acknowledging the receipt of money
and promising to repay the debtor.").
6 See, e.g., Q: What are Certificates of Deposit (CDs)?, FEDERAL DEPOSIT INSURANCE CORPORATION,

https://perma.cc/VT24-EAKW (last visited September 1, 2023) ("Certificates of Deposit (CDs) are
savings certificates where the money you put into them are invested by a bank for a set period of
time, you can typically choose between one month and five years, and the bank gives you the
money back with interest."); Certificate of Deposit, SECURITIES EXCHANGE COMMISSION
https://perma.cc/6MR7-R3DP (last visited September 1, 2023) ("A certificate of deposit (CD) is a
savings account that holds a fixed amount of money for a fixed period of time, such as six months,

Additionally, Bank of America refers to a CD as "a low-risk savings tool" that is like
a savings account in that it is insured by the FDIC and earns compound interest.7
Finally, another personal finance company explains a CD "is a type of savings
account with a fixed time period and interest rate."8

Finally, caselaw provides some help. Though no Kansas cases address the meaning
of "savings account" or of "certificate of deposit," the Texas Court of Appeals has
examined the issue. Noting the similarities between regular savings accounts and
CDs, that court determined: "It would be inappropriate to conclude that money
deposited in a bank, placed there for 'saving' in an account or certificate, is not a
savings account or savings certificate because it is termed a certificate of deposit or
money market account."9 Thus, the court held: "It is illogical to preclude an account
or certificate from being a savings account or savings certificate merely because the
typical certificate of deposit or money market account requires the depositor to pay
a penalty for early withdrawal" because the restrictions placed on CDs are to
encourage depositors to do what CDs were designed to do, save money.10

These definitions show that CDs are commonly understood to be a type of savings
account. In the absence of any statutory definition, this common understanding
should control the meaning of a CD and an individual savings account.

In light of the Legislature's decision not to define "individual savings account," and
given the common understanding of this term, we conclude that your belief is
correct, CDs purchased in a qualified financial institution and designated for the
purpose of a down payment for a first-time home buyer would qualify, subject to the
limits set forth in K.S.A. 2022 Supp. 58-4903(c).

one year, or five years, and in exchange, the issuing bank pays interest."); What is a certificate of
deposit (CD)?, CONSUMER FINANCIAL PROTECTION BUREAU https://perma.cc/Z9CV-L5VC (last visited
September 1, 2023) ("A certificate of deposit, or CD, is a type of savings account offered by banks and
credit unions. You generally agree to keep your money in the CD without taking a withdrawal for a
specified length of time. Withdrawing money early means paying a penalty fee to the bank.").
7 What is a CD and how do they work?, BANK OF AMERICA, https://perma.cc/Z3FE-ZSRM (last visited

September 1, 2023).
8 What is a CD (Certificate of Deposit)?, NERDWALLET https://perma.cc/6ZV8-RD8D (last visited

September 1, 2023).
9 Sammons v. Elder, 940 S.W.2d 276, 282 (Tex. Ct. App. 1997); see also Estate of O'Connell v.

Arnold, 105 Cal. Rptr. 590, 593 (Ct. App. 1972) ("Like most laymen, the testatrix apparently looked
on her savings on deposit with the Wells Fargo Bank as indistinguishable, whether represented by
the savings pass book or the certificate of deposit.").
10 940 S.W.2d at 282.

                Sincerely,


                /s/ Kris W. Kobach

                Kris W. Kobach
                Kansas Attorney General

                /s/ Ryan J. Ott

                Ryan J. Ott
                Assistant Solicitor General