SEC. 2. SPECIAL RULE FOR CERTAIN DISTRIBUTIONS FROM 
LONG-TERM QUALIFIED TUITION PROGRAMS 
FOR FIRST HOME PURCHASES. 
(a) IN GENERAL.—Section 529(c)(3) of the Internal 
Revenue Code of 1986 is amended by adding at the end 
the following new subparagraph: 
‘‘(F) SPECIAL
RULE
FOR
CERTAIN
DIS-
TRIBUTIONS FROM LONG-TERM QUALIFIED TUI-
TION
PROGRAMS
FOR
FIRST
HOME
PUR-
CHASES.— 
‘‘(i) IN GENERAL.—In the case of a 
distribution from a qualified tuition pro-
gram of a designated beneficiary which has 
been maintained for the 15-year period 
ending on the date of such distribution, 
subparagraph (A) shall not apply to so 
much of the portion of such distribution 
which— 
‘‘(I) does not exceed the aggre-
gate amount contributed to the pro-
gram 
(and 
earnings 
attributable 
thereto) before the 5-year period end-
ing on the date of the distribution, 
and 
‘‘(II) is used, within 60 days of 
such distribution, for the purchase of 
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a principal residence of a first-time 
homebuyer who is such designated 
beneficiary. 
‘‘(ii) AGGREGATE
LIMITATION.—This 
subparagraph shall not apply to any dis-
tribution described in clause (i) to the ex-
tent that the aggregate amount of such 
distributions with respect to the designated 
beneficiary for the taxable year and all 
prior taxable years exceeds an amount 
equal to $35,000, reduced by the aggregate 
amount of distributions to which subpara-
graph (E) applies with respect to such des-
ignated beneficiary for such taxable year 
and all prior taxable years. 
‘‘(iii) SPECIAL
RULE
WHERE
DELAY 
IN ACQUISITION.—If any distribution from 
a qualified tuition program of a designated 
beneficiary fails to meet the requirements 
of subparagraph (A) solely be reason of a 
delay or cancellation of the purchase or 
construction of the residence, the amount 
of the distribution may be contributed to a 
qualified tuition program or ABLE ac-
count of such beneficiary, as provided in 
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subclauses (I) and (III), respectively, of 
subparagraph (C)(i), determined by sub-
stituting ‘120 days’ for ‘60 days’ in such 
subparagraph, except that— 
‘‘(I) subparagraph (C)(iii) shall 
not be applied to such contribution, 
and 
‘‘(II) such amount shall not be 
taken into account in determining 
whether subparagraph (C)(iii) applies 
to any other amount. 
‘‘(iv) RECAPTURE OF TAX BENEFIT.— 
‘‘(I) IN
GENERAL.—If subpara-
graph (A) does not apply to a dis-
tribution by reason of this subpara-
graph and a qualifying event occurs 
before the close of the 5-year period 
beginning on the date of the purchase 
of the principal residence with respect 
to which such distribution was used, 
the designated beneficiary’s tax for 
the taxable year in which such quali-
fying event occurs shall be increased 
by an amount, determined under reg-
ulations, equal to the tax which (but 
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for this subparagraph) would have 
been imposed, plus interest for the de-
ferral period. The amount of any in-
crease determined under the preceding 
sentence shall be reduced (but not 
below zero) by 20 percent for each full 
year occurring during the period be-
ginning on the date of such purchase 
and ending on the date of such quali-
fying event. 
‘‘(II) QUALIFYING
EVENT.—For 
purposes of this clause, the term 
‘qualifying event’ means, with respect 
to a distribution to which subpara-
graph (A) does not apply by reason of 
this subparagraph, the disposition of 
the principal residence which the des-
ignated beneficiary purchased using 
such distribution, or the cessation of 
such residence as the principal resi-
dence of the designated beneficiary 
(and, if married, such designated 
beneficiary’s spouse). 
‘‘(III) DEFERRAL PERIOD.—For 
purposes of this clause, the term ‘de-
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ferral period’ means, with respect to a 
distribution to which subparagraph 
(A) does not apply by reason of this 
subparagraph, the period beginning 
with the taxable year in which (with-
out regard to this subparagraph) the 
distribution would have been includ-
ible in gross income and ending with 
the taxable year in which the quali-
fying event described in subclause (I) 
occurs. 
‘‘(IV) EXCEPTIONS.—Rules simi-
lar to the rules of subparagraphs (A), 
(B), (C), and (E) of section 36(f)(4) 
shall apply for purposes of this sub-
paragraph. 
‘‘(v) DEFINITIONS.—For purposes of 
this subparagraph, the terms ‘purchase’, 
‘principal residence’, and ‘first-time home-
buyer’ have the meaning given such terms 
in section 36(c).’’. 
(b) COORDINATION WITH AGGREGATE LIMITATION 
ON
SPECIAL
ROLLOVERS
TO
ROTH
IRAS.—Section 
529(c)(3)(E)(ii)(II) of such Code is amended to read as 
follows: 
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‘‘(II) AGGREGATE LIMITATION.— 
This subparagraph shall not apply to 
any distribution described in clause (i) 
to the extent that the aggregate 
amount of such distributions with re-
spect to the designated beneficiary for 
the taxable year and all prior taxable 
years exceeds an amount equal to 
$35,000, reduced by the aggregate 
amount of distributions to which sub-
paragraph (F) applies with respect to 
such designated beneficiary for such 
taxable year and all prior taxable 
years.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to distributions made in taxable 
years beginning after the date of the enactment of this 
Act. 
Æ 
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