To amend the Internal Revenue Code of 1986 to improve and expand education savings accounts.

Summary: 401Kids Family Savings Act of 2006 - Amends the Economic Growth and Tax Relief Reconciliation Act of 2001 to extend through 2015 provisions allowing increased annual contributions to Coverdell education savings accounts.

Amends the Internal Revenue Code to: (1) allow tax-free distributions from a Coverdell education savings account for first-time homebuyer expenses; (2) permit rollovers from Coverdell education savings accounts to Roth individual retirement accounts (Roth IRAs); and (3) rename Coverdell education savings accounts as 401Kids Savings Accounts.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``401Kids Family Savings Act of 
2006''.

SEC. 2. EXTENSION OF DATE FOR SUNSET OF CERTAIN EDUCATION SAVINGS 
              INCENTIVES.

    In the case of the provisions of, and amendments made by, subtitle 
A of title IV of the Economic Growth and Tax Relief Reconciliation Act 
of 2001 (relating to education savings incentives), section 901 of such 
Act (relating to sunset of provisions of Act) shall be applied by 
substituting ``December 31, 2015'' for ``December 31, 2010'' in 
subsection (a)(1) thereof.

SEC. 3. DISTRIBUTIONS FROM EDUCATION SAVINGS ACCOUNTS FOR FIRST HOME 
              PURCHASES TREATED AS QUALIFIED DISTRIBUTIONS.

    (a) In General.--Subsections (b)(1), (d)(2)(A), (d)(2)(B), 
(d)(2)(C)(ii)(II), and (d)(2)(D) of section 530 of the Internal Revenue 
Code of 1986 are each amended by striking ``qualified education 
expenses'' and inserting ``qualified expenses''.
    (b) Qualified Expenses.--Subsection (b) of section 530 of such Code 
is amended--
            (1) by redesignating paragraphs (2) through (4) as 
        paragraphs (3) through (5), respectively, and by inserting 
        after paragraph (1) the following new paragraph:
            ``(2) Qualified expenses.--The term `qualified expenses' 
        means--
                    ``(A) qualified education expenses (as defined in 
                paragraph (3)), and
                    ``(B) qualified first-time homebuyer expenses (as 
                defined in paragraph (4)).'', and
            (2) by redesignating paragraphs (4) and (5) (as 
        redesignated by paragraph (1)) as paragraphs (5) and (6), 
        respectively, and by inserting after paragraph (3) the 
        following new paragraph:
            ``(4) Qualified first-time homebuyer expenses.--The term 
        `qualified first-time homebuyer expenses' means, in the case of 
        a designated beneficiary who is a first-time homebuyer, the 
        qualified acquisition costs with respect to a principal 
        residence of such beneficiary. Terms used in this paragraph 
        shall have the same meaning as when used in section 
        72(t)(8).''.
    (c) Conforming Amendment.--The heading for paragraph (2) of section 
530(d) of such Code is amended by striking ``qualified education 
expenses'' and inserting ``qualified expenses''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 4. ROLLOVERS FROM EDUCATION SAVINGS ACCOUNTS TO ROTH IRAS.

    (a) In General.--Paragraph (5) of section 530(d) of the Internal 
Revenue Code of 1986, as amended by section 5, is amended by inserting 
``or a Roth IRA'' after ``another 401Kids savings account''.
    (b) Conforming Amendment.--Subsection (e) of section 408A of such 
Code is amended by inserting the following after the second sentence: 
``Such term includes a rollover contribution to a Roth IRA from a 
401Kids savings account described in section 530(d)(5).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 5. RENAMING COVERDELL EDUCATION SAVINGS ACCOUNTS AS 401KIDS 
              SAVINGS ACCOUNTS.

    (a) In General.--Section 530 of the Internal Revenue Code of 1986 
is amended by striking ``Coverdell education savings account'' each 
place it appears and inserting ``401Kids savings account''.
    (b) Conforming Amendments.--
            (1) The following provisions of the Internal Revenue Code 
        of 1986 are amended by striking ``Coverdell education savings'' 
        each place it appears and inserting ``401Kids savings'':
                    (A) Section 26(b)(2)(E).
                    (B) Section 72(e)(9).
                    (C) Section 135(c)(2)(C).
                    (D) Section 529(c)(6).
                    (E) Subsections (a) and (e) of section 4973(a).
                    (F) Subsections (c) and (e) of section 4975.
                    (G) Section 6693(a)(2)(E).
            (2) The headings for the following provisions of such Code 
        are amended by striking ``Coverdell education savings'' and 
        inserting ``401kids savings'':
                    (A) Section 72(e)(9).
                    (B) Section 135(c)(2)(C).
                    (C) Section 529(c)(3)(B)(vi).
                    (D) Section 530(b)(1).
                    (E) Section 4973(e).
                    (F) Section 4975(c)(5).
            (3) The heading for section 4973(e) of such Code is amended 
        by striking ``Coverdell Education Savings'' and inserting 
        ``401Kids Savings''.
            (4) The heading for section 530 of such Code is amended to 
        read as follows:

``SEC. 530. 401KIDS SAVINGS ACCOUNTS.''.

            (5) The item in the table of contents for part VII of 
        subchapter F of chapter 1 of such Code relating to section 530 
        is amended to read as follows:

``Sec. 530. 401Kids savings accounts.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act.