To amend the Internal Revenue Code of 1986 to permit penalty-free withdrawals from individual retirement plans for the acquisition of a first home.

Summary: Amends the Internal Revenue Code to allow penalty-free withdrawals from individual retirement plans if used within 60 days for the acquisition of a principal residence for a first-time homebuyer.

SECTION 1. DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT PLANS MAY BE USED 
              WITHOUT PENALTY TO PURCHASE FIRST HOMES.

    (a) In General.--Paragraph (2) of section 72(t) of the Internal 
Revenue Code of 1986 (relating to exceptions to 10-percent additional 
tax on early distributions from qualified retirement plans) is amended 
by adding at the end thereof the following new subparagraph:
                    ``(D) Distributions from certain plans for first 
                home purchases.--Distributions to an individual from an 
                individual retirement plan which are qualified first-
                time homebuyer distributions (as defined in paragraph 
                (6)).''
    (b) Qualified First-time Homebuyer Distributions.--Section 72(t) of 
such Code is amended by adding at the end thereof the following new 
paragraph:
            ``(6) Qualified first-time homebuyer distributions.--For 
        purposes of paragraph (2)(D)--
                    ``(A) In general.--The term `qualified first-time 
                homebuyer distribution' means any payment or 
                distribution received by an individual to the extent 
                such payment or distribution is used by the individual 
                before the close of the 60th day after the day on which 
                such payment or distribution is received to pay 
                qualified acquisition costs with respect to a principal 
                residence of a first-time homebuyer who is such 
                individual or the spouse, child, or grandchild of such 
                individual.
                    ``(B) Qualified acquisition costs.--For purposes of 
                this paragraph, the term `qualified acquisition costs' 
                means the costs of acquiring, constructing, or 
                reconstructing a residence. Such term includes any 
                usual or reasonable settlement, financing, or other 
                closing costs.
                    ``(C) First-time homebuyer; other definitions.--For 
                purposes of this paragraph--
                            ``(i) First-time homebuyer.--The term 
                        `first-time homebuyer' means any individual 
                        if--
                                    ``(I) such individual (and if 
                                married, such individual's spouse) had 
                                no present ownership interest in a 
                                principal residence during the 3-year 
                                period ending on the date of 
                                acquisition of the principal residence 
                                to which this paragraph applies, and
                                    ``(II) subsection (a)(6), (h), or 
                                (k) of section 1034 did not suspend the 
                                running of any period of time specified 
                                in section 1034 with respect to such 
                                individual on the day before the date 
                                the distribution is applied pursuant to 
                                subparagraph (A)(ii).
                            ``(ii) Principal residence.--The term 
                        `principal residence' has the same meaning as 
                        when used in section 1034.
                            ``(iii) Date of acquisition.--The term 
                        `date of acquisition' means the date--
                                    ``(I) on which a binding contract 
                                to acquire the principal residence to 
                                which subparagraph (A) applies is 
                                entered into, or
                                    ``(II) on which construction or 
                                reconstruction of such a principal 
                                residence is commenced.
                    ``(D) Special rule where delay in acquisition.--If 
                any distribution from any individual retirement plan 
                fails to meet the requirements of subparagraph (A) 
                solely by reason of a delay or cancellation of the 
                purchase or construction of the residence, the amount 
                of the distribution may be contributed to an individual 
                retirement plan as provided in section 408(d)(3)(A)(i) 
                (determined by substituting `120 days' for `60 days' in 
                such section), except that--
                            ``(i) section 408(d)(3)(B) shall not be 
                        applied to such contribution, and
                            ``(ii) such amount shall not be taken into 
                        account in determining whether section 
                        408(d)(3)(A)(i) applies to any other amount.''
    (c) Effective Date.--The amendments made by this section shall 
apply to payments and distributions after the date of the enactment of 
this Act.