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103D CONGRESS

1ST SESSION H. R. 1149

To amend the Internal Revenue Code of 1986 to provide assistance to firsttime homebuyers.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 25, 1993

Mr. ORTON (for himself, Mr. ACKERMAN, Mr. BACCHUS of Florida, Mr. DOOLITTLE, Mr. DORNAN, Mr. FINGERHUT, Mr. GILLMOR, Mr. GILMAN, Mr.

HANSEN, Mr. MACHTLEY, Mr. PARKER, Mr. PAYNE of New Jersey, Mr.

QUINN, Mr. ROHRABACHER, Mr. SARPALIUS, Ms. SHEPHERD, Mr. SISISKY, Mr. SOLOMON, Mr. SUNDQUIST, and Mr. ZELIFF) introduced the

following bill; which was referred to the Committee on Committee on

Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to provide

assistance to first-time homebuyers.

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 ‘‘First-time Homebuyer

5 Affordability Act of 1993’’.

6 SEC. 2. FINDINGS AND POLICY.

7 (a) FINDINGS.—The Congress finds that—
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1 (1) it is desirable to make funds available from

2 individual retirement plans to encourage first time

3 home ownership, and

4 (2) the tax and penalty on the premature with5 drawal of funds from individual retirement plans are

6 substantial impediments to making such funds avail7 able for that purpose.

8 (b) POLICY.—It is the policy of the Congress to re9 move impediments to home investment by first-time home10 buyers by permitting owners of individual retirement plans

11 to direct the trustees of such plans to invest plan funds

12 as home equity or debt in the homes of family members

13 who are first-time homebuyers.

14 SEC. 3. CERTAIN RETIREMENT PLANS AUTHORIZED TO

15 MAKE EQUITY INVESTMENTS IN PRINCIPAL

16 RESIDENCES FOR FIRST-TIME HOMEBUYERS.

17 (a) EXEMPTION FROM PROHIBITED TRANSACTION

18 RULES.—Section 4975 of the Internal Revenue Code of

19 1986 (relating to tax on prohibited transactions) is

20 amended by redesignating subsections (h) and (i) as sub21 sections (i) and (j), respectively, and by inserting after

22 subsection (g) the following new subsection:

23 ‘‘(h) SPECIAL RULE FOR HOME EQUITY PARTICIPA24 TION ARRANGEMENTS.—
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1 ‘‘(1) IN GENERAL.—The prohibitions provided

2 in subsection (c) shall not apply to any qualified

3 home equity participation arrangement.

4 ‘‘(2) QUALIFIED HOME EQUITY PARTICIPATION

5 ARRANGEMENT.—For purposes of this subsection—

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

7 home equity participation arrangement’ means

8 an arrangement—

9 ‘‘(i) under which the trustee of an in10 dividual retirement plan, at the direction of

11 the eligible participant, shall acquire an

12 ownership interest in all or any part of any

13 dwelling unit which within a reasonable pe14 riod of time (determined at the time the

15 arrangement is executed) is to be used as

16 the principal residence for a first-time

17 homebuyer, and

18 ‘‘(ii) which meets the requirements of

19 subparagraph (B) of this paragraph.

20 ‘‘(B) OWNERSHIP INTEREST REQUIRE21 MENT.—An arrangement shall meet the re22 quirements of this subparagraph if the owner23 ship interest described in subparagraph (A)—

24 ‘‘(i) is a fee interest in such property

25 equal to the percentage which—
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1 ‘‘(I) the amount invested by the

2 trustee of the individual retirement

3 plan, bears to

4 ‘‘(II) the acquisition cost of or

5 total equity in the dwelling unit,

6 ‘‘(ii) by its terms requires repayment

7 in full upon—

8 ‘‘(I) the sale or other transfer of

9 the dwelling unit, or

10 ‘‘(II) the cessation of use as the

11 principal residence of the first-time

12 homebuyer, and

13 ‘‘(iii) may not be used as security for

14 any loan secured by any interest in the

15 dwelling unit.

16 ‘‘(3) DEFINITIONS.—For purposes of this sub17 section—

18 ‘‘(A) ELIGIBLE PARTICIPANT.—The term

19 ‘eligible participant’ means an individual on

20 whose behalf an individual retirement plan is

21 established.

22 ‘‘(B) FIRST-TIME HOMEBUYER.—The term

23 ‘first-time homebuyer’ means an individual

24 who—
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1 ‘‘(i) is an eligible participant or quali2 fied family member, and

3 ‘‘(ii) had (and if married, such indi4 vidual’s spouse had) no present ownership

5 interest in a principal residence at any

6 time during the 36-month period before

7 the date of the arrangement.

8 ‘‘(C) QUALIFIED FAMILY MEMBER.—The

9 term ‘qualified family member’ means a child

10 (as defined in section 151(c)(3)), parent, or

11 grandparent of the eligible participant (or such

12 participant’s spouse). Section 152(b)(2) shall

13 apply in determining if an individual is a parent

14 or grandparent of an eligible participant (or

15 such participant’s spouse).

16 ‘‘(D) ACQUISITION; ETC.—

17 ‘‘(i) ACQUISITION.—The term ‘acqui18 sition’ includes construction, reconstruc19 tion, and improvement related to such ac20 quisition.

21 ‘‘(ii) ACQUISITION COST.—The term

22 ‘acquisition cost’ has the meaning given

23 such term by section 143(k)(3).
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1 ‘‘(E) PRINCIPAL RESIDENCE.—The term

2 ‘principal residence’ has the same meaning as

3 when used in section 1034.’’.

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

5 this section shall apply to arrangements entered into after

6 December 31, 1992.

7 SEC. 4. LOANS USED TO ACQUIRE PRINCIPAL RESIDENCES

8 FOR FIRST-TIME HOMEBUYERS.

9 (a) INDIVIDUAL RETIREMENT PLANS.—Section

10 408(e) of the Internal Revenue Code of 1986 (relating to

11 tax treatment of accounts and annuities) is amended by

12 adding at the end thereof the following new paragraph:

13 ‘‘(7) LOANS USED TO PURCHASE A HOME FOR

14 FIRST-TIME HOMEBUYERS.—

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

16 (4) shall not apply to any qualified home pur17 chase loan made, or secured, by an individual

18 retirement plan.

19 ‘‘(B) QUALIFIED HOME PURCHASE

20 LOAN.—For purposes of this paragraph, the

21 term ‘qualified home purchase loan’ means a

22 loan—

23 ‘‘(i) made by the trustee of an individ24 ual retirement plan at the direction of the
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1 individual on whose behalf such plan is es2 tablished,

3 ‘‘(ii) the proceeds of which are used

4 for the acquisition of a dwelling unit which

5 within a reasonable period of time (deter6 mined at the time the loan is made) is to

7 be used as the principal residence for a

8 first-time homebuyer,

9 ‘‘(iii) which is secured by the dwelling

10 unit,

11 ‘‘(iv) which by its terms requires re12 payment in full within 15 years after the

13 date of acquisition of the dwelling unit,

14 ‘‘(v) which by its terms treats any

15 amount remaining unpaid in the taxable

16 year beginning after the period described

17 in clause (iv) as distributed in such taxable

18 year to the individual on whose behalf such

19 plan is established and subject to section

20 72(t)(1), and

21 ‘‘(vi) which bears interest from the

22 date of the loan at a rate not less than the

23 rate for comparable United States Treas24 ury obligations on such date.
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1 ‘‘(C) DEFINITIONS.—For purposes of this

2 paragraph—

3 ‘‘(i) FIRST-TIME HOMEBUYER.—The

4 term ‘first-time homebuyer’ has the mean5 ing given such term by section

6 4975(h)(3)(B).

7 ‘‘(ii) ACQUISITION.—The term ‘acqui8 sition’ has the meaning given such term by

9 section 4975(h)(3)(D)(i).

10 ‘‘(iii) PRINCIPAL RESIDENCE.—The

11 term ‘principal residence’ has the same

12 meaning as when used in section 1034.

13 ‘‘(iv) DATE OF ACQUISITION.—The

14 term ‘date of acquisition’ means the date—

15 ‘‘(I) on which a binding contract

16 to acquire the principal residence to

17 which subparagraph (B) applies is en18 tered into, or

19 ‘‘(II) on which construction, re20 construction, or improvement of such

21 a principal residence is commenced.’’.

22 (b) PROHIBITED TRANSACTION.—Section 4975(d) of

23 the Internal Revenue Code of 1986 (relating to exemptions

24 from tax on prohibited transactions) is amended by strik25 ing ‘‘or’’ at the end of paragraph (14), by striking the
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1 period at the end of paragraph (15) and inserting ‘‘; or’’,

2 and by inserting after paragraph (15) the following new

3 paragraph:

4 ‘‘(16) any loan that is a qualified home pur5 chase loan (as defined in section 408(e)(7)(B)).’’.

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

7 this section shall apply to loans made after December 31,

8 1992.

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