IRA Self-Loan Act

Summary: IRA Self-Loan Act - Amends the Internal Revenue Code to allow loans to be made or secured by an individual retirement account for first-time homebuyer expenses, education expenses, or medical emergency expenses.  Exempts such loans from the tax on prohibited transactions.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``IRA Self-Loan Act''.

SEC. 2. LOANS FROM INDIVIDUAL RETIREMENT PLANS FOR CERTAIN FIRST-TIME 
              HOMEBUYER, EDUCATION, AND MEDICAL EMERGENCY EXPENSES.

    (a) In General.--Section 408(e) of the Internal Revenue Code of 
1986 (relating to tax treatment of accounts and annuities) is amended 
by adding at the end thereof the following new paragraph:
            ``(7) Loans used for certain first-time homebuyer, 
        education, and medical emergency expenses.--
                    ``(A) In general.--Paragraphs (3) and (4) shall not 
                apply to any qualified loan which is made, or secured, 
                by an individual retirement plan.
                    ``(B) Qualified loan.--For purposes of this 
                paragraph, the term `qualified loan' means a loan 
                which--
                            ``(i) is used within a reasonable period of 
                        time for--
                                    ``(I) qualified first-time 
                                homebuyer expenses,
                                    ``(II) qualified education 
                                expenses, or
                                    ``(III) qualified medical emergency 
                                expenses.
                            ``(ii) is made by the trustee of an 
                        individual retirement plan at the direction of 
                        the individual on whose behalf such plan is 
                        established,
                            ``(iii) in the case of a loan for qualified 
                        first-time homebuyer expenses, is secured by 
                        the dwelling unit,
                            ``(iv) by its terms requires repayment in 
                        full within 5 years after the date such loan is 
                        made (15 years in the case of a loan for 
                        qualified first-time homebuyer expenses),
                            ``(v) by its terms treats any amount 
                        remaining unpaid in the taxable year beginning 
                        after the period described in clause (iv) as 
                        distributed in such taxable year to the 
                        individual on whose behalf such plan is 
                        established and subject to section 72(t)(1), 
                        and
                            ``(vi) bears interest from the date of the 
                        loan at a rate not less than the rate for 
                        comparable United States Treasury obligations 
                        on such date.
                    ``(C) Qualified expenses.--For purposes of this 
                paragraph--
                            ``(i) Qualified first-time home buyer 
                        expenses.--
                                    ``(I) In general.--The term 
                                `qualified first-time homebuyer 
                                expenses' means qualified acquisition 
                                costs with respect to a principal 
                                residence for a first-time homebuyer.
                                    ``(II) Qualified acquisition 
                                costs.--The term `qualified acquisition 
                                costs' means the cost of acquiring, 
                                constructing, or reconstructing the 
                                residence. Such terms includes any 
                                usual or reasonable settlement, 
                                financing, or other closing costs.
                                    ``(III) First-time homebuyer.--The 
                                term `first-time homebuyer' means any 
                                eligible person, if such person (and if 
                                married such person's spouse) has never 
                                had a present ownership interest in a 
                                principal residence.
                                    ``(IV) Principal residence.--The 
                                term `principal residence' has the same 
                                meaning as when used in section 1034.
                            ``(ii) Qualified education expenses.--The 
                        term `qualified education expenses' means 
                        tuition and fees required for enrollment or 
                        attendance of an eligible person at an 
                        educational organization described in section 
                        170(b)(1)(A)(ii).
                            ``(iii) Qualified medical emergency 
                        expenses.--The term `qualified medical 
                        emergency expenses' means any amount, not 
                        compensated for by insurance or otherwise, 
                        which is paid for medical care (as defined in 
                        section 213(d)) of an eligible person, if such 
                        medical care is required by reason of any 
                        disease or accident that causes hospitalization 
                        for more than 30 days.
                            ``(iv) Eligible person.--The term `eligible 
                        person' means--
                                    ``(I) an individual on whose behalf 
                                the individual retirement plan is 
                                established, and
                                    ``(II) a spouse, child (as defined 
                                in section 151(c)(3)), or grandchild of 
                                such individual (or of such 
                                individual's spouse).
                    ``(D) Amount limitation.--Subparagraphs (A) and (B) 
                shall not apply to any loan to the extent such loan 
                (when added to the outstanding balance of all other 
                loans from the individual retirement plan) exceeds the 
                lesser of--
                            ``(i) $50,000, reduced by the excess (if 
                        any) of--
                                    ``(I) the highest outstanding 
                                balance of loans from the plan during 
                                the 1-year period ending on the day 
                                before the date on which such loan was 
                                made, over
                                    ``(II) the outstanding balance of 
                                loans from the plan on the date on 
                                which such loan was made, or
                            ``(ii) the greater of--
                                    ``(I) one-half of the value of the 
                                plan, or
                                    ``(II) $10,000.''
    (b) Exemption From Tax on Prohibited Transactions.--Subsection (d) 
of section 4975 of such Code (relating to exemptions from tax on 
prohibited transactions) is amended by striking ``or'' at end of 
paragraph (14), by striking the period at the end of paragraph (15) and 
inserting ``; or'', and by inserting after paragraph (15) the following 
new paragraph:
            ``(16) any qualified loan within the meaning of section 
        408(e)(7).''
    (c) Effective Date.--The amendments made by this section shall 
apply to loans made after the date of the enactment of this Act.