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103D CONGRESS

1ST SESSION H. R. 1343

To amend the Internal Revenue Code of 1986 to permit penalty-free withdrawals from individual retirement accounts to purchase first homes

or pay higher education expenses.

IN THE HOUSE OF REPRESENTATIVES

MARCH 16, 1993

Mrs. BYRNE 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

penalty-free withdrawals from individual retirement accounts to purchase first homes or pay higher education

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. DISTRIBUTIONS FROM INDIVIDUAL RETIRE4 MENT PLANS MAY BE USED WITHOUT PEN5 ALTY TO PURCHASE FIRST HOMES OR TO PAY

6 HIGHER EDUCATION EXPENSES.

7 (a) IN GENERAL.—Paragraph (2) of section 72(t) of

8 the Internal Revenue Code of 1986 (relating to exceptions
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1 to 10-percent additional tax on early distributions from

2 qualified retirement plans) is amended by adding at the

3 end thereof the following new subparagraph:

4 ‘‘(D) DISTRIBUTIONS FROM INDIVIDUAL

5 RETIREMENT PLANS FOR FIRST HOME PUR6 CHASES OR EDUCATIONAL EXPENSES.—Dis7 tributions to an individual from an individual

8 retirement plan—

9 ‘‘(i) which are qualified first-time

10 homebuyer distributions (as defined in

11 paragraph (6)); or

12 ‘‘(ii) to the extent such distributions

13 do not exceed the qualified higher edu14 cation expenses (as defined in paragraph

15 (7)) of the taxpayer for the taxable year.’’

16 (b) DEFINITIONS.—Section 72(t) of such Code is

17 amended by adding at the end thereof the following new

18 paragraphs:

19 ‘‘(6) QUALIFIED FIRST-TIME HOMEBUYER DIS20 TRIBUTIONS.—For purposes of paragraph

21 (2)(D)(i)—

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

23 first-time homebuyer distribution’ means any

24 payment or distribution received by an individ25 ual to the extent such payment or distribution
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1 is used by the individual before the close of the

2 60th day after the day on which such payment

3 or distribution is received to pay qualified ac4 quisition costs with respect to a principal resi5 dence of a first-time homebuyer who is such in6 dividual or the spouse, child, or grandchild of

7 such individual.

8 ‘‘(B) QUALIFIED ACQUISITION COSTS.—

9 For purposes of this paragraph, the term

10 ‘qualified acquisition costs’ means the costs of

11 acquiring, constructing, or reconstructing a res12 idence. Such term includes any usual or reason13 able settlement, financing, or other closing

14 costs.

15 ‘‘(C) FIRST-TIME HOMEBUYER; OTHER

16 DEFINITIONS.—For purposes of this para17 graph—

18 ‘‘(i) FIRST-TIME HOMEBUYER.—The

19 term ‘first-time homebuyer’ means any in20 dividual if—

21 ‘‘(I) such individual (and if mar22 ried, such individual’s spouse) had no

23 present ownership interest in a prin24 cipal residence during the 3-year pe25 riod ending on the date of acquisition
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1 of the principal residence to which

2 this paragraph applies, and

3 ‘‘(II) subsection (a)(6), (h), or

4 (k) of section 1034 did not suspend

5 the running of any period of time

6 specified in section 1034 with respect

7 to such individual on the day before

8 the date the distribution is applied

9 pursuant to subparagraph (A)(ii).

10 ‘‘(ii) PRINCIPAL RESIDENCE.—The

11 term ‘principal residence’ has the same

12 meaning as when used in section 1034.

13 ‘‘(iii) 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 (A) applies is en18 tered into, or

19 ‘‘(II) on which construction or re20 construction of such a principal resi21 dence is commenced.

22 ‘‘(D) SPECIAL RULE WHERE DELAY IN AC23 QUISITION.—If any distribution from any indi24 vidual retirement plan fails to meet the require25 ments of subparagraph (A) solely by reason of
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1 a delay or cancellation of the purchase or con2 struction of the residence, the amount of the

3 distribution may be contributed to an individual

4 retirement plan as provided in section

5 408(d)(3)(A)(i) (determined by substituting

6 ‘120 days’ for ‘60 days’ in such section), except

7 that—

8 ‘‘(i) section 408(d)(3)(B) shall not be

9 applied to such contribution, and

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

11 into account in determining whether sec12 tion 408(d)(3)(A)(i) applies to any other

13 amount.

14 ‘‘(7) QUALIFIED HIGHER EDUCATION EX15 PENSES.—For purposes of paragraph (2)(D)(ii)—

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

17 higher education expenses’ means tuition, fees,

18 books, supplies, and equipment required for the

19 enrollment or attendance of—

20 ‘‘(i) the taxpayer,

21 ‘‘(ii) the taxpayer’s spouse, or

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

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

24 at an eligible educational institution (as defined

25 in section 135(c)(3)).
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1 ‘‘(B) COORDINATION WITH SAVINGS BOND

2 PROVISIONS.—The amount of qualified higher

3 education expenses for any taxable year shall be

4 reduced by any amount excludable from gross

5 income under section 135.’’

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

7 this section shall apply to distributions received after the

8 date of the enactment of this Act.

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