To amend the Internal Revenue Code of 1986 to increase the deduction for retirement savings, to permit nonemployed spouses a full IRA deduction, and for other purposes.

Summary: Amends the Internal Revenue Code to increase the retirement savings deduction and the maximum individual retirement account contribution from $2,000 to $2,500.  Raises income phase-out limits.  Allows such a deduction for nonemployed spouses.  Provides an inflation adjustment for retirement savings deductions. 
Excludes from gross income qualified distributions from certain retirement plans for first-time homebuyers and higher education expenses of the taxpayer, spouse, or child.  Requires the repayment of such amounts with interest.

SECTION 1. MODIFICATIONS TO IRA DEDUCTION.

    (a) Increase in Maximum Amount of Deduction.--Subparagraph (A) of 
section 219(b)(1) of the Internal Revenue Code of 1986 (relating to 
maximum amount of deduction) is amended by striking ``$2,000'' and 
inserting ``$2,500''.
    (b) Increase in Income Phaseout Levels.--Subparagraph (B) of 
section 219(g)(3) of such Code is amended--
            (1) by striking ``$40,000'' and inserting ``$100,000'', and
            (2) by striking ``$25,000'' and inserting ``$50,000''.
    (c) IRA Deduction Allowed to Nonemployed Spouses.--Subsection (c) 
of section 219 of such Code is amended to read as follows:
    ``(c) Special Rules for Certain Married Individuals.--
            ``(1) In general.--In the case of an individual to whom 
        this paragraph applies for the taxable year, the limitation of 
        paragraph (1) of subsection (b) shall be equal to the lesser 
        of--
                    ``(A) $2,500, or
                    ``(B) the sum of--
                            ``(i) the compensation includible in such 
                        individual's gross income for the taxable year, 
                        plus
                            ``(ii) the compensation includible in the 
                        gross income of such individual's spouse for 
                        the taxable year reduced by the amount 
                        allowable as a deduction under subsection (a) 
                        to such spouse for such taxable year.
            ``(2) Individuals to whom paragraph (1) applies.--Paragraph 
        (1) shall apply to any individual if--
                    ``(A) such individual files a joint return for the 
                taxable year, and
                    ``(B) the amount of compensation (if any) 
                includible in such individual's gross income for the 
                taxable year is less than the compensation includible 
                in the gross income of such individual's spouse for the 
                taxable year.''
    (d) Inflation Adjustments.--Subsection (f) of section 219 of such 
Code is amended by adding at the end thereof the following new 
paragraph:
            ``(8) Inflation adjustments.--In the case of a taxable year 
        beginning in a calendar year after 1994, each dollar amount set 
        forth in subsections (b)(1)(A), (c)(1)(A), and (g)(3)(B) shall 
        be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for such calendar year by 
                substituting `calendar year 1993' for `calendar year 
                1992' in subparagraph (B) thereof.
        If any increase determined under the preceding sentence is not 
        a multiple of $100, such increase shall be rounded to the 
        nearest multiple of $100.''
    (e) Conforming Amendments.--
            (1) Subsections (a)(1) and (b) of section 408(a) of such 
        Code are each amended by striking ``$2,000'' and inserting 
        ``the dollar limitation in effect under section 219(b)(1)(A)''.
            (2) Subparagraph (A) of section 408(d)(5) of such Code is 
        amended by striking ``$2,250'' and inserting ``the dollar 
        limitation in effect under section 219(b)(1)(A)''.
            (3) Subsection (j) of section 408 of such Code is amended 
        by striking ``the $2,000 amounts contained'' and inserting 
        ``the dollar limitations referred to''.
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1993.

SEC. 2. REPAYABLE DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT ACCOUNTS FOR 
              EDUCATIONAL EXPENSES AND FIRST-TIME HOMEBUYERS.

    (a) General Rule.--Section 408 of the Internal Revenue Code of 1986 
(relating to individual retirement accounts) is amended by 
redesignating subsection (p) as subsection (q) and by inserting after 
subsection (o) the following new subsection:
    ``(p) Repayable Distributions From Individual Retirement Accounts 
for Educational Expenses and First-Time Homebuyers.--
            ``(1) In general.--Notwithstanding any other provision of 
        this section, gross income shall not include any qualified 
        distribution.
            ``(2) Repayment requirement.--
                    ``(A) Addition to tax.--If the required 
                recontributions made by the taxpayer during the 
                repayment period are less than the total required 
                repayment, the tax imposed by this chapter for the last 
                taxable year in the repayment period shall be increased 
                by the amount determined under subparagraph (B).
                    ``(B) Determination of amount.--The amount 
                determined under this subparagraph shall be an amount 
                which bears the same ratio to the adjusted tax amount 
                as--
                            ``(i) the required recontributions during 
                        the repayment period, bear to
                            ``(ii) the total required repayment.
                    ``(C) Total required repayment.--For purposes of 
                this paragraph, the term `total required repayment' 
                means the sum of--
                            ``(i) the qualified distribution, plus
                            ``(ii) interest on the non-recontributed 
                        balance of such distribution for the repayment 
                        period computed at the prime rate and 
                        compounded annually.
                    ``(D) Repayment period.--For purposes of this 
                paragraph, the term `repayment period' means, with 
                respect to any qualified distribution, the taxable year 
                in which such distribution is received and the 15 
                succeeding taxable years (10 succeeding taxable years 
                in the case of a qualified distribution described in 
                paragraph (3)(B)).
                    ``(E) Adjusted tax amount.--For purposes of this 
                paragraph, the term `adjusted tax amount' means, with 
                respect to any qualified distribution, the sum of--
                            ``(i) the aggregate reduction in the tax 
                        imposed by this chapter for the taxable year in 
                        which such distribution is received by reason 
                        of the exclusion under paragraph (1), and
                            ``(ii) interest on the amount of such 
                        reduction for the repayment period computed at 
                        the prime rate and compounded annually.
                    ``(F) Prime rate.--For purposes of this paragraph, 
                the term `prime rate' means the average predominant 
                prime rate quoted by commercial banks to large 
                business, as determined by the Board of Governors of 
                the Federal Reserve System.
            ``(3) Qualified distribution.--For purposes of this 
        paragraph, the term `qualified distribution' means any 
        distributions to an individual from an individual retirement 
        plan--
                    ``(A) if such distributions are qualified first-
                time homebuyer distributions, or
                    ``(B) to the extent such distributions do not 
                exceed the qualified higher education expenses of the 
                taxpayer for the taxable year in which received.
        The term `qualified distribution' shall not include any 
        distribution to the extent such distribution reduces the 
        balance of the amounts in individual retirement plans of the 
        taxpayer below $1,000.
            ``(4) Qualified first-time homebuyer distributions.--For 
        purposes of this subsection--
                    ``(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 subsection (d)(3)(A)(i) 
                (determined by substituting `120 days' for `60 days' in 
                such section), except that--
                            ``(i) subsection (d)(3)(B) shall not be 
                        applied to such contribution, and
                            ``(ii) such amount shall not be taken into 
                        account in determining whether subsection 
                        (d)(3)(A)(i) applies to any other amount.
            ``(5) Qualified higher education expenses.--For purposes of 
        this subsection:
                    ``(A) In general.--The term `qualified higher 
                education expenses' means tuition, fees, books, 
                supplies, and equipment required for the enrollment or 
                attendance of--
                            ``(i) the taxpayer,
                            ``(ii) the taxpayer's spouse, or
                            ``(iii) the taxpayer's child (as defined in 
                        section 151(c)(3)) or grandchild,
                at an eligible educational institution (as defined in 
                section 135(c)(3)).
                    ``(B) Coordination with savings bond provisions.--
                The amount of qualified higher education expenses for 
                any taxable year shall be reduced by any amount 
                excludable from gross income under section 135.
            ``(6) Recontribution of qualified distributions.--
                    ``(A) In general.--If an individual received a 
                qualified distribution, such individual shall make 
                required recontributions to an individual retirement 
                plan in the manner provided in this paragraph.
                    ``(B) Method of making recon- tribution.--Any 
                required recontribution--
                            ``(i) shall be made during the repayment 
                        period for the qualified distribution,
                            ``(ii) shall not exceed the required 
                        repayment amount reduced by any prior 
                        recontribution under this paragraph with 
                        respect to such distribution, and
                            ``(iii) shall be made by making a payment 
                        in cash for the benefit of such individual to 
                        an individual retirement plan.
                An individual making a required recontribution under 
                this paragraph shall designate (in the manner 
                prescribed by the Secretary) such contribution as a 
                required recontribution under this paragraph and shall 
                specify the qualified distribution in respect of which 
                such recontribution is being made.
                    ``(C) Treated as rollover contribution.--For 
                purposes of this title, any required recontribution 
                under this paragraph shall be treated as a rollover 
                contribution described in subsection (d)(3).
            ``(7) Other special rules.--
                    ``(A) Basis rules not affected.--The tax treatment 
                under this chapter of any distribution (other than a 
                qualified distribution) shall be determined as if this 
                subsection had not been enacted.
                    ``(B) Aggregation rules.--For purposes of this 
                subsection--
                            ``(i) all qualified distributions described 
                        in paragraph (3)(A) received by an individual 
                        during a taxable year shall be treated as a 
                        single distribution so described, and
                            ``(ii) all qualified distributions 
                        described in paragraph (3)(B) received by an 
                        individual during a taxable year shall be 
                        treated as a single distribution so 
                        described.''
    (b) Effective Date.--The amendment made by this subsection shall 
apply to distributions received in taxable years beginning after 
December 31, 1993.