I

105TH CONGRESS

2D SESSION H. R. 4740

To amend the Internal Revenue Code of 1986 to permit early distributions

from employee stock ownership plans for higher education expenses and

first-time homebuyer purchases.

IN THE HOUSE OF REPRESENTATIVES

OCTOBER 8, 1998

Mr. CRANE 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

early distributions from employee stock ownership plans

for higher education expenses and first-time homebuyer

purchases.

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

3 SECTION 1. EARLY DISTRIBUTIONS FROM EMPLOYEE

4 STOCK OWNERSHIP PLANS FOR HIGHER EDU5 CATION EXPENSES AND FIRST-TIME HOME6 BUYER PURCHASES.

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

8 the Internal Revenue Code of 1986 (relating to 10-percent
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1 additional tax on early distributions from qualified retire2 ment plans) is amended by adding at the end the following

3 new subparagraph:

4 ‘‘(G) DISTRIBUTIONS FROM EMPLOYEE

5 STOCK OWNERSHIP PLANS FOR HIGHER EDU6 CATION EXPENSES AND FIRST-TIME HOME7 BUYER PURCHASES.—

8 ‘‘(i) IN GENERAL.—Distributions

9 made to the employee from an employee

10 stock ownership plan (within the meaning

11 of section 4975(e)(7)), the amount of

12 which does not exceed the sum of—

13 ‘‘(I) qualified higher education

14 expenses (as defined by paragraph

15 (7)) reduced by the amount of such

16 expenses taken into account under

17 subparagraph (E), and

18 ‘‘(II) qualified first-time home19 buyer distributions (as defined by

20 paragraph (8)) reduced by the amount

21 of such distributions taken into ac22 count under subparagraph (F).

23 ‘‘(ii) LIMITATION.—A distribution

24 may only be taken into account under

25 clause (i) if—
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1 ‘‘(I) such distribution is in the

2 form of either employer securities

3 (within the meaning of section 409(l))

4 or cash proceeds resulting from the

5 sale of such securities made not more

6 than 180 days before the date of such

7 distribution for the purposes of such

8 distribution,

9 ‘‘(II) such securities so distrib10 uted or sold were held by such plan

11 for at least 5 years before the date of

12 such distribution or, if applicable,

13 sale, and

14 ‘‘(III) the number of shares in

15 each class of such securities so dis16 tributed or sold, when added to all

17 previous distributions and sales of

18 each such class of such securities for

19 such purposes on behalf of such em20 ployee, does not exceed 10 percent of

21 the aggregate number of shares of

22 each class of such securities allocated

23 to the account of such employee under

24 such plan.
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1 ‘‘(iii) VALUATION OF DISTRIBUTED

2 SECURITIES.—For purposes of clause (ii),

3 the value of a security shall be the value

4 of such security on the date of distribu5 tion.’’.

6 (b) CONFORMING AMENDMENTS.—

7 (1) Paragraph (7) of section 72(t) of such Code

8 is amended by striking ‘‘paragraph(2)(E)’’ and in9 serting ‘‘subparagraphs (E) and (G) of paragraph

10 (2)’’.

11 (2) Paragraph (8) of section 72(t) of such Code

12 is amended by striking ‘‘paragraph(2)(F)’’ and in13 serting ‘‘subparagraphs (F) and (G) of paragraph

14 (2)’’.

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

16 this section shall apply to distributions made after Decem17 ber 31, 1998.

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