I

103D CONGRESS

2D SESSION H. R. 4215

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.

IN THE HOUSE OF REPRESENTATIVES

APRIL 14, 1994

Mr. BAKER of California (for himself, Mr. CRAPO, Mr. GALLEGLY, Mr. EMERSON, Mr. SOLOMON, Mr. STUMP, Mr. BARTLETT of Maryland, Mr. LEVY,

Mr. LIPINSKI, Mr. DOOLITTLE, Mr. LIVINGSTON, Mr. COX, and Ms.

ESHOO) introduced the following bill; which was referred to the Committee on Ways and Means

A BILL

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.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. MODIFICATIONS TO IRA DEDUCTION.

4 (a) INCREASE IN MAXIMUM AMOUNT OF DEDUC5 TION.—Subparagraph (A) of section 219(b)(1) of the In6 ternal Revenue Code of 1986 (relating to maximum
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1 amount of deduction) is amended by striking ‘‘$2,000’’

2 and inserting ‘‘$2,500’’.

3 (b) INCREASE IN INCOME PHASEOUT LEVELS.—Sub4 paragraph (B) of section 219(g)(3) of such Code is

5 amended—

6 (1) by striking ‘‘$40,000’’ and inserting

7 ‘‘$100,000’’, and

8 (2) by striking ‘‘$25,000’’ and inserting

9 ‘‘$50,000’’.

10 (c) IRA DEDUCTION ALLOWED TO NONEMPLOYED

11 SPOUSES.—Subsection (c) of section 219 of such Code is

12 amended to read as follows:

13 ‘‘(c) SPECIAL RULES FOR CERTAIN MARRIED INDI14 VIDUALS.—

15 ‘‘(1) IN GENERAL.—In the case of an individual

16 to whom this paragraph applies for the taxable year,

17 the limitation of paragraph (1) of subsection (b)

18 shall be equal to the lesser of—

19 ‘‘(A) $2,500, or

20 ‘‘(B) the sum of—

21 ‘‘(i) the compensation includible in

22 such individual’s gross income for the tax23 able year, plus

24 ‘‘(ii) the compensation includible in

25 the gross income of such individual’s
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1 spouse for the taxable year reduced by the

2 amount allowable as a deduction under

3 subsection (a) to such spouse for such tax4 able year.

5 ‘‘(2) INDIVIDUALS TO WHOM PARAGRAPH (1)

6 APPLIES.—Paragraph (1) shall apply to any individ7 ual if—

8 ‘‘(A) such individual files a joint return for

9 the taxable year, and

10 ‘‘(B) the amount of compensation (if any)

11 includible in such individual’s gross income for

12 the taxable year is less than the compensation

13 includible in the gross income of such individ14 ual’s spouse for the taxable year.’’

15 (d) INFLATION ADJUSTMENTS.—Subsection (f) of

16 section 219 of such Code is amended by adding at the

17 end thereof the following new paragraph:

18 ‘‘(8) INFLATION ADJUSTMENTS.—In the case of

19 a taxable year beginning in a calendar year after

20 1994, each dollar amount set forth in subsections

21 (b)(1)(A), (c)(1)(A), and (g)(3)(B) shall be in22 creased by an amount equal to—

23 ‘‘(A) such dollar amount, multiplied by

24 ‘‘(B) the cost-of-living adjustment deter25 mined under section 1(f)(3) for such calendar
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1 year by substituting ‘calendar year 1993’ for

2 ‘calendar year 1992’ in subparagraph (B)

3 thereof.

4 If any increase determined under the preceding sen5 tence is not a multiple of $100, such increase shall

6 be rounded to the nearest multiple of $100.’’

7 (e) CONFORMING AMENDMENTS.—

8 (1) Subsections (a)(1) and (b) of section 408(a)

9 of such Code are each amended by striking

10 ‘‘$2,000’’ and inserting ‘‘the dollar limitation in ef11 fect under section 219(b)(1)(A)’’.

12 (2) Subparagraph (A) of section 408(d)(5) of

13 such Code is amended by striking ‘‘$2,250’’ and in14 serting ‘‘the dollar limitation in effect under section

15 219(b)(1)(A)’’.

16 (3) Subsection (j) of section 408 of such Code

17 is amended by striking ‘‘the $2,000 amounts con18 tained’’ and inserting ‘‘the dollar limitations referred

19 to’’.

20 (f) EFFECTIVE DATE.—The amendments made by

21 this section shall apply to taxable years beginning after

22 December 31, 1993.
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1 SEC. 2. REPAYABLE DISTRIBUTIONS FROM INDIVIDUAL RE2 TIREMENT ACCOUNTS FOR EDUCATIONAL

3 EXPENSES AND FIRST-TIME HOMEBUYERS.

4 (a) GENERAL RULE.—Section 408 of the Internal

5 Revenue Code of 1986 (relating to individual retirement

6 accounts) is amended by redesignating subsection (p) as

7 subsection (q) and by inserting after subsection (o) the

8 following new subsection:

9 ‘‘(p) REPAYABLE DISTRIBUTIONS FROM INDIVIDUAL

10 RETIREMENT ACCOUNTS FOR EDUCATIONAL EXPENSES

11 AND FIRST-TIME HOMEBUYERS.—

12 ‘‘(1) IN GENERAL.—Notwithstanding any other

13 provision of this section, gross income shall not in14 clude any qualified distribution.

15 ‘‘(2) REPAYMENT REQUIREMENT.—

16 ‘‘(A) ADDITION TO TAX.—If the required

17 recontributions made by the taxpayer during

18 the repayment period are less than the total re19 quired repayment, the tax imposed by this

20 chapter for the last taxable year in the repay21 ment period shall be increased by the amount

22 determined under subparagraph (B).

23 ‘‘(B) DETERMINATION OF AMOUNT.—The

24 amount determined under this subparagraph

25 shall be an amount which bears the same ratio

26 to the adjusted tax amount as—
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1 ‘‘(i) the required recontributions dur2 ing the repayment period, bear to

3 ‘‘(ii) the total required repayment.

4 ‘‘(C) TOTAL REQUIRED REPAYMENT.—For

5 purposes of this paragraph, the term ‘total re6 quired repayment’ means the sum of—

7 ‘‘(i) the qualified distribution, plus

8 ‘‘(ii) interest on the non-recontributed

9 balance of such distribution for the repay10 ment period computed at the prime rate

11 and compounded annually.

12 ‘‘(D) REPAYMENT PERIOD.—For purposes

13 of this paragraph, the term ‘repayment period’

14 means, with respect to any qualified distribu15 tion, the taxable year in which such distribution

16 is received and the 15 succeeding taxable years

17 (10 succeeding taxable years in the case of a

18 qualified distribution described in paragraph

19 (3)(B)).

20 ‘‘(E) ADJUSTED TAX AMOUNT.—For pur21 poses of this paragraph, the term ‘adjusted tax

22 amount’ means, with respect to any qualified

23 distribution, the sum of—

24 ‘‘(i) the aggregate reduction in the tax

25 imposed by this chapter for the taxable
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1 year in which such distribution is received

2 by reason of the exclusion under paragraph

3 (1), and

4 ‘‘(ii) interest on the amount of such

5 reduction for the repayment period com6 puted at the prime rate and compounded

7 annually.

8 ‘‘(F) PRIME RATE.—For purposes of this

9 paragraph, the term ‘prime rate’ means the av10 erage predominant prime rate quoted by com11 mercial banks to large business, as determined

12 by the Board of Governors of the Federal Re13 serve System.

14 ‘‘(3) QUALIFIED DISTRIBUTION.—For purposes

15 of this paragraph, the term ‘qualified distribution’

16 means any distributions to an individual from an in17 dividual retirement plan—

18 ‘‘(A) if such distributions are qualified

19 first-time homebuyer distributions, or

20 ‘‘(B) to the extent such distributions do

21 not exceed the qualified higher education ex22 penses of the taxpayer for the taxable year in

23 which received.

24 The term ‘qualified distribution’ shall not include

25 any distribution to the extent such distribution re-
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1 duces the balance of the amounts in individual re2 tirement plans of the taxpayer below $1,000.

3 ‘‘(4) QUALIFIED FIRST-TIME HOMEBUYER DIS4 TRIBUTIONS.—For purposes of this subsection—

5 ‘‘(A) IN GENERAL.—The term ‘qualified

6 first-time homebuyer distribution’ means any

7 payment or distribution received by an individ8 ual to the extent such payment or distribution

9 is used by the individual before the close of the

10 60th day after the day on which such payment

11 or distribution is received to pay qualified ac12 quisition costs with respect to a principal resi13 dence of a first-time homebuyer who is such in14 dividual or the spouse, child, or grandchild of

15 such individual.

16 ‘‘(B) QUALIFIED ACQUISITION COSTS.—

17 For purposes of this paragraph, the term

18 ‘qualified acquisition costs’ means the costs of

19 acquiring, constructing, or reconstructing a res20 idence. Such term includes any usual or reason21 able settlement, financing, or other closing

22 costs.

23 ‘‘(C) FIRST-TIME HOMEBUYER; OTHER

24 DEFINITIONS.—For purposes of this paragraph:
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1 ‘‘(i) FIRST-TIME HOMEBUYER.—The

2 term ‘first-time homebuyer’ means any in3 dividual if—

4 ‘‘(I) such individual (and if mar5 ried, such individual’s spouse) had no

6 present ownership interest in a prin7 cipal residence during the 3-year pe8 riod ending on the date of acquisition

9 of the principal residence to which

10 this paragraph applies, and

11 ‘‘(II) subsection (a)(6), (h), or

12 (k) of section 1034 did not suspend

13 the running of any period of time

14 specified in section 1034 with respect

15 to such individual on the day before

16 the date the distribution is applied

17 pursuant to subparagraph (A)(ii).

18 ‘‘(ii) PRINCIPAL RESIDENCE.—The

19 term ‘principal residence’ has the same

20 meaning as when used in section 1034.

21 ‘‘(iii) DATE OF ACQUISITION.—The

22 term ‘date of acquisition’ means the date—

23 ‘‘(I) on which a binding contract

24 to acquire the principal residence to
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1 which subparagraph (A) applies is en2 tered into, or

3 ‘‘(II) on which construction or re4 construction of such a principal resi5 dence is commenced.

6 ‘‘(D) SPECIAL RULE WHERE DELAY IN AC7 QUISITION.—If any distribution from any indi8 vidual retirement plan fails to meet the require9 ments of subparagraph (A) solely by reason of

10 a delay or cancellation of the purchase or con11 struction of the residence, the amount of the

12 distribution may be contributed to an individual

13 retirement plan as provided in subsection

14 (d)(3)(A)(i) (determined by substituting ‘120

15 days’ for ‘60 days’ in such section), except

16 that—

17 ‘‘(i) subsection (d)(3)(B) shall not be

18 applied to such contribution, and

19 ‘‘(ii) such amount shall not be taken

20 into account in determining whether sub21 section (d)(3)(A)(i) applies to any other

22 amount.

23 ‘‘(5) QUALIFIED HIGHER EDUCATION EX24 PENSES.—For purposes of this subsection:
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1 ‘‘(A) IN GENERAL.—The term ‘qualified

2 higher education expenses’ means tuition, fees,

3 books, supplies, and equipment required for the

4 enrollment or attendance of—

5 ‘‘(i) the taxpayer,

6 ‘‘(ii) the taxpayer’s spouse, or

7 ‘‘(iii) the taxpayer’s child (as defined

8 in section 151(c)(3)) or grandchild,

9 at an eligible educational institution (as defined

10 in section 135(c)(3)).

11 ‘‘(B) COORDINATION WITH SAVINGS BOND

12 PROVISIONS.—The amount of qualified higher

13 education expenses for any taxable year shall be

14 reduced by any amount excludable from gross

15 income under section 135.

16 ‘‘(6) RECONTRIBUTION OF QUALIFIED DIS17 TRIBUTIONS.—

18 ‘‘(A) IN GENERAL.—If an individual re19 ceived a qualified distribution, such individual

20 shall make required recontributions to an indi21 vidual retirement plan in the manner provided

22 in this paragraph.

23 ‘‘(B) METHOD OF MAKING RECON24 TRIBUTION.—Any required recontribution—
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1 ‘‘(i) shall be made during the repay2 ment period for the qualified distribution,

3 ‘‘(ii) shall not exceed the required re4 payment amount reduced by any prior

5 recontribution under this paragraph with

6 respect to such distribution, and

7 ‘‘(iii) shall be made by making a pay8 ment in cash for the benefit of such indi9 vidual to an individual retirement plan.

10 An individual making a required recontribution

11 under this paragraph shall designate (in the

12 manner prescribed by the Secretary) such con13 tribution as a required recontribution under

14 this paragraph and shall specify the qualified

15 distribution in respect of which such

16 recontribution is being made.

17 ‘‘(C) TREATED AS ROLLOVER CONTRIBU18 TION.—For purposes of this title, any required

19 recontribution under this paragraph shall be

20 treated as a rollover contribution described in

21 subsection (d)(3).

22 ‘‘(7) OTHER SPECIAL RULES.—

23 ‘‘(A) BASIS RULES NOT AFFECTED.—The

24 tax treatment under this chapter of any dis25 tribution (other than a qualified distribution)
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1 shall be determined as if this subsection had

2 not been enacted.

3 ‘‘(B) AGGREGATION RULES.—For purposes

4 of this subsection—

5 ‘‘(i) all qualified distributions de6 scribed in paragraph (3)(A) received by an

7 individual during a taxable year shall be

8 treated as a single distribution so de9 scribed, and

10 ‘‘(ii) all qualified distributions de11 scribed in paragraph (3)(B) received by an

12 individual during a taxable year shall be

13 treated as a single distribution so de14 scribed.’’

15 (b) EFFECTIVE DATE.—The amendment made by

16 this subsection shall apply to distributions received in tax17 able years beginning after December 31, 1993.

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