this Act rests is the power of Congress to lay and collect 
taxes, set forth in article I, section 8 of the United States 
Constitution. 
SEC. 2. EXCLUSION FROM GROSS INCOME OF CERTAIN DIS-
TRIBUTIONS FROM QUALIFIED RETIREMENT 
PLANS USED FOR MORTGAGE PAYMENTS. 
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 is amended 
by inserting after section 139A the following new section: 
‘‘SEC. 139B. CERTAIN DISTRIBUTIONS FROM QUALIFIED RE-
TIREMENT PLANS USED FOR MORTGAGE PAY-
MENTS. 
‘‘(a) IN GENERAL.—Gross income shall not include 
a qualified mortgage distribution. 
‘‘(b) LIMITATION.—Subsection (a) shall not apply to 
any distribution made in any month to the extent that 
such distribution (when added to all other distributions 
made in such month which are taken into account under 
subsection (a) with respect to any individual) exceeds 
$5,000. 
‘‘(c) QUALIFIED MORTGAGE DISTRIBUTION.—For 
purposes of this section— 
‘‘(1) IN GENERAL.—The term ‘qualified mort-
gage distribution’ means any distribution which is 
made before January 1, 2010, from an individual re-
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tirement plan, or from amounts attributable to em-
ployer contributions made pursuant to elective defer-
rals described in subparagraph (A) or (C) of section 
402(g)(3) or section 501(c)(18)(D)(iii), directly by 
the trustee of the plan to a mortgagee with respect 
to a qualified mortgage of any individual. Such term 
shall not include any distribution to the extent that 
such distribution exceeds the required minimum pay-
ment due under the terms of the mortgage. 
‘‘(2) QUALIFIED MORTGAGE.—The term ‘quali-
fied mortgage’ means any mortgage which is— 
‘‘(A) secured by the principal residence 
(within the meaning of section 121) of the 
mortgagor, and 
‘‘(B) originated before January 1, 2008. 
‘‘(d) REQUIREMENT TO REPAY DISTRIBUTIONS.— 
For purposes of this section— 
‘‘(1) IN GENERAL.—The term ‘qualified mort-
gage distribution’ shall not include any distribution 
except to the extent that one or more contributions 
to an individual retirement plan of the taxpayer in 
an aggregate amount equal to such distribution are 
made during the 12-year period beginning on the 
date of such distribution. 
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‘‘(2) TREATMENT
OF
RECONTRIBUTIONS.—In 
the case of any contribution to an individual retire-
ment plan taken into account under paragraph (1)— 
‘‘(A) the dollar limitations otherwise appli-
cable to contributions to individual retirement 
plans shall not apply to such contribution, and 
‘‘(B) no deduction shall be allowed for 
such contribution. 
‘‘(3) FAILURE TO REPAY.—In the case of a fail-
ure to make the aggregate amount of contributions 
described in paragraph (1) during the 12-year period 
described therein with respect to any distribution 
which would (but for paragraph (1)) be a qualified 
mortgage distribution, such distribution shall be in-
cludible in the gross income of the taxpayer for the 
taxable year in which such 12-year period ends in 
lieu of the taxable year in which the distribution was 
made.’’. 
(b) WAIVER OF 10 PERCENT EARLY WITHDRAWAL 
PENALTY WITHOUT REGARD TO REPAYMENT REQUIRE-
MENT.—Paragraph (2) of section 72(t) is amended by 
adding at the end the following new subparagraph: 
‘‘(H) QUALIFIED
MORTGAGE
DISTRIBU-
TIONS.—Any qualified mortgage distribution 
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(as defined in section 139B, but without regard 
to subsection (d) thereof).’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Section 401(k)(2)(B)(i) of such Code is 
amended by striking ‘‘or’’ at the end of subclause 
(IV), by striking ‘‘and’’ at the end of subclause (V) 
and inserting ‘‘or’’, and by inserting after subclause 
(V) the following new subclause: 
‘‘(VI) in the case of a distribu-
tion to which section 139B(a) applies, 
the date on which such distribution is 
made, and’’. 
(2) Section 403(b)(7)(A)(ii) of such Code is 
amended by inserting ‘‘or 139B(a)’’ after ‘‘section 
72(t)(2)(G)’’. 
(3) Section 403(b)(11) of such Code is amend-
ed by striking ‘‘or’’ at the end of subparagraph (B), 
by striking the period at the end of subparagraph 
(C) and inserting ‘‘, or’’, and by inserting after sub-
paragraph (C) the following new subparagraph: 
‘‘(D) for distributions to which section 
139B(a) applies.’’. 
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(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to distributions made after the 
date of the enactment of this Act. 
Æ 
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