SECTION 1. PENALTY FREE WITHDRAWALS FROM RETIREMENT PLANS FOR VICTIMS 
              OF FEDERALLY DECLARED NATURAL DISASTERS.

    (a) In General.--Paragraph (2) of section 72(t) of the Internal 
Revenue Code of 1986 (relating to 10-percent additional tax on early 
distributions from qualified retirement plans) is amended by adding at 
the end the following new subparagraph:
                    ``(G) Distributions from retirement plans to 
                victims of federally declared natural disasters.--
                            ``(i) In general.--Any qualified disaster-
                        relief distribution.
                            ``(ii) Amount distributed may be repaid.--
                        Any individual who receives a qualified 
                        disaster-relief distribution may, at any time 
                        during the 5-year period beginning on the day 
                        after the date on which such distribution was 
                        made, make one or more contributions to an 
                        individual retirement plan of such individual 
                        in an aggregate amount not to exceed the amount 
                        of such distribution. The dollar limitations 
                        otherwise applicable to contributions to 
                        individual retirement plans shall not apply to 
                        any contribution made pursuant to the preceding 
                        sentence. No deduction shall be allowed for any 
                        contribution pursuant to this clause.
                            ``(iii) Qualified disaster-relief 
                        distribution.--For purposes of this 
                        subparagraph, the term `qualified disaster-
                        relief distribution' means any distribution to 
                        an individual who has sustained a loss in 
                        excess of $100 as a result of a major disaster 
                        declared under the Robert T. Stafford Disaster 
                        Relief and Emergency Assistance Act--
                                    ``(I) if such distribution is made 
                                during the 1-year period beginning on 
                                the date such declaration is made, and
                                    ``(II) to the extent such 
                                distribution does not exceed the amount 
                                of such loss and is not compensated for 
                                by insurance or otherwise.
                        For purposes of subclause (II), the amount of 
                        any loss shall be determined using the greater 
                        of the fair market value of the property on the 
                        day before the date of such disaster or the 
                        adjusted basis of the property as provided in 
                        section 1011.''.
    (b) Exemption of Distributions From Withholding.--Paragraph (4) of 
section 402(c) of the Internal Revenue Code of 1986 (relating to 
eligible rollover distribution) is amended by striking ``and'' at the 
end of subparagraph (B), by striking the period at the end of 
subparagraph (C) and inserting ``, and'', and by inserting at the end 
the following new subparagraph:
                    ``(D) any qualified disaster-relief distribution 
                (within the meaning of section 72(t)(2)(G)).''.
    (c) Conforming Amendments.--
            (1) Section 401(k)(2)(B)(i) of the Internal Revenue Code of 
        1986 is amended by striking ``or'' at the end of subclause 
        (III), by striking ``and'' at the end of subclause (IV) and 
        inserting ``or'', and by inserting after subclause (IV) the 
        following new subclause:
                                    ``(V) the date on which a period 
                                referred to in section 
                                72(t)(2)(G)(iii)(I) begins (but only to 
                                the extent provided in section 
                                72(t)(2)(G)), and''.
            (2) Section 403(b)(7)(A)(ii) of such Code is amended by 
        inserting ``sustains a loss as a result of a major disaster 
        declared under the Robert T. Stafford Disaster Relief and 
        Emergency Assistance Act (but only to the extent provided in 
        section 72(t)(2)(G)),'' before ``or''.
            (3) Section 403(b)(11) of such Code is amended by striking 
        ``or'' at the end of subparagraph (A), by striking the period 
        at the end of subparagraph (B) and inserting ``, or'', and by 
        inserting after subparagraph (B) the following new 
        subparagraph:
                    ``(C) for distributions to which section 
                72(t)(2)(G) applies.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to distributions received in taxable years beginning after 
December 31, 2003.
Amends the Internal Revenue Code to: (1) exempt qualified disaster-relief distributions from the ten percent penalty on premature distributions from tax-exempt retirement plans; and (2) allow repayment of such distributions to the retirement plan within five years after the date of such distribution. Defines a "qualified disaster-relief distribution" as a distribution to an individual who has sustained a loss in excess of $100 from a major disaster declared under the Robert T. Stafford Disaster Relief and Emergency Assistance Act if such distribution is made within one year after the disaster declaration and the distribution does not exceed the amount of the loss and is not covered by insurance or otherwise.
A bill to amend the internal Revenue Code of 1986 to allow penalty free withdrawals from retirement plans for victims of federally declared disasters.