I

104TH CONGRESS

1ST SESSION H. R. 2431

To amend the Internal Revenue Code of 1986 to permit loans from individual

retirement plans for certain first-time homebuyer, education, and medical

emergency expenses.

IN THE HOUSE OF REPRESENTATIVES

SEPTEMBER 29, 1995

Mr. FRANKS of Connecticut 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 permit

loans from individual retirement plans for certain firsttime homebuyer, education, and medical emergency expenses.

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

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘IRA Self-Loan Act’’.
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1 SEC. 2. LOANS FROM INDIVIDUAL RETIREMENT PLANS FOR

2 CERTAIN FIRST-TIME HOMEBUYER, EDU3 CATION, AND MEDICAL EMERGENCY EX4 PENSES.

5 (a) IN GENERAL.—Section 408(e) of the Internal

6 Revenue Code of 1986 (relating to tax treatment of ac7 counts and annuities) is amended by adding at the end

8 thereof the following new paragraph:

9 ‘‘(7) LOANS USED FOR CERTAIN FIRST-TIME

10 HOMEBUYER, EDUCATION, AND MEDICAL EMER11 GENCY EXPENSES.—

12 ‘‘(A) IN GENERAL.—Paragraphs (3) and

13 (4) shall not apply to any qualified loan which

14 is made, or secured, by an individual retirement

15 plan.

16 ‘‘(B) QUALIFIED LOAN.—For purposes of

17 this paragraph, the term ‘qualified loan’ means

18 a loan which—

19 ‘‘(i) is used within a reasonable period

20 of time for—

21 ‘‘(I) qualified first-time home22 buyer expenses,

23 ‘‘(II) qualified education ex24 penses, or

25 ‘‘(III) qualified medical emer26 gency expenses.
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1 ‘‘(ii) is made by the trustee of an indi2 vidual retirement plan at the direction of

3 the individual on whose behalf such plan is

4 established,

5 ‘‘(iii) in the case of a loan for quali6 fied first-time homebuyer expenses, is se7 cured by the dwelling unit,

8 ‘‘(iv) by its terms requires repayment

9 in full within 5 years after the date such

10 loan is made (15 years in the case of a

11 loan for qualified first-time homebuyer ex12 penses),

13 ‘‘(v) by its terms treats any amount

14 remaining unpaid in the taxable year be15 ginning after the period described in clause

16 (iv) as distributed in such taxable year to

17 the individual on whose behalf such plan is

18 established and subject to section 72(t)(1),

19 and

20 ‘‘(vi) bears interest from the date of

21 the loan at a rate not less than the rate for

22 comparable United States Treasury obliga23 tions on such date.

24 ‘‘(C) QUALIFIED EXPENSES.—For pur25 poses of this paragraph—
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1 ‘‘(i) QUALIFIED FIRST-TIME HOME

2 BUYER EXPENSES.—

3 ‘‘(I) IN GENERAL.—The term

4 ‘qualified first-time homebuyer ex5 penses’ means qualified acquisition

6 costs with respect to a principal resi7 dence for a first-time homebuyer.

8 ‘‘(II) QUALIFIED ACQUISITION

9 COSTS.—The term ‘qualified acquisi10 tion costs’ means the cost of acquir11 ing, constructing, or reconstructing

12 the residence. Such terms includes

13 any usual or reasonable settlement, fi14 nancing, or other closing costs.

15 ‘‘(III) FIRST-TIME HOME16 BUYER.—The term ‘first-time home17 buyer’ means any eligible person, if

18 such person (and if married such per19 son’s spouse) has never had a present

20 ownership interest in a principal resi21 dence.

22 ‘‘(IV) PRINCIPAL RESIDENCE.—

23 The term ‘principal residence’ has the

24 same meaning as when used in section

25 1034.
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1 ‘‘(ii) QUALIFIED EDUCATION EX2 PENSES.—The term ‘qualified education

3 expenses’ means tuition and fees required

4 for enrollment or attendance of an eligible

5 person at an educational organization de6 scribed in section 170(b)(1)(A)(ii).

7 ‘‘(iii) QUALIFIED MEDICAL EMER8 GENCY EXPENSES.—The term ‘qualified

9 medical emergency expenses’ means any

10 amount, not compensated for by insurance

11 or otherwise, which is paid for medical care

12 (as defined in section 213(d)) of an eligible

13 person, if such medical care is required by

14 reason of any disease or accident that

15 causes hospitalization for more than 30

16 days.

17 ‘‘(iv) ELIGIBLE PERSON.—The term

18 ‘eligible person’ means—

19 ‘‘(I) an individual on whose be20 half the individual retirement plan is

21 established, and

22 ‘‘(II) a spouse, child (as defined

23 in section 151(c)(3)), or grandchild of

24 such individual (or of such individ25 ual’s spouse).
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1 ‘‘(D) AMOUNT LIMITATION.—Subpara2 graphs (A) and (B) shall not apply to any loan

3 to the extent such loan (when added to the out4 standing balance of all other loans from the in5 dividual retirement plan) exceeds the lesser of—

6 ‘‘(i) $50,000, reduced by the excess (if

7 any) of—

8 ‘‘(I) the highest outstanding bal9 ance of loans from the plan during the

10 1-year period ending on the day be11 fore the date on which such loan was

12 made, over

13 ‘‘(II) the outstanding balance of

14 loans from the plan on the date on

15 which such loan was made, or

16 ‘‘(ii) the greater of—

17 ‘‘(I) one-half of the value of the

18 plan, or

19 ‘‘(II) $10,000.’’

20 (b) EXEMPTION FROM TAX ON PROHIBITED TRANS21 ACTIONS.—Subsection (d) of section 4975 of such Code

22 (relating to exemptions from tax on prohibited trans23 actions) is amended by striking ‘‘or’’ at end of paragraph

24 (14), by striking the period at the end of paragraph (15)
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1 and inserting ‘‘; or’’, and by inserting after paragraph

2 (15) the following new paragraph:

3 ‘‘(16) any qualified loan within the meaning of

4 section 408(e)(7).’’

5 (c) EFFECTIVE DATE.—The amendments made by

6 this section shall apply to loans made after the date of

7 the enactment of this Act.

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