‘‘(3) SPECIAL
RULES.—Rules similar to the
rules of paragraphs (4) and (5) of section 408(d)
shall apply for purposes of this section.
‘‘(c) QUALIFIED FAMILY DEVELOPMENT DISTRIBU-
TION.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified family
development distribution’ means any amount paid or
distributed out of a family development account
which would otherwise be includible in gross income,
to the extent that such payment or distribution is
used exclusively to pay qualified family development
expenses for the holder of the account or the spouse
or dependent (as defined in section 152) of such
holder.
‘‘(2) QUALIFIED
FAMILY
DEVELOPMENT
EX-
PENSES.—The term ‘qualified family development
expenses’ means any of the following:
‘‘(A) Qualified postsecondary educational
expenses.
‘‘(B) First-home purchase costs.
‘‘(C) 
Qualified 
business 
capitalization
costs.
‘‘(D) Qualified medical expenses.
‘‘(E) Qualified rollovers.
‘‘(3) 
QUALIFIED
POSTSECONDARY
EDU-
CATIONAL EXPENSES.—
‘‘(A) IN
GENERAL.—The term ‘qualified
postsecondary 
educational 
expenses’ 
means
postsecondary educational expenses paid to an
eligible educational institution.
‘‘(B) POSTSECONDARY EDUCATIONAL EX-
PENSES.—The term ‘postsecondary educational
expenses’ means tuition, fees, room, board,
books, supplies, and equipment required for the
enrollment or attendance of a student at an eli-
gible educational institution.
‘‘(C) ELIGIBLE
EDUCATIONAL
INSTITU-
TION.—The term ‘eligible educational institu-
tion’ means the following:
‘‘(i) INSTITUTION
OF
HIGHER
EDU-
CATION.—An institution described in sec-
tion 481(a)(1) or 1201(a) of the Higher
Education 
Act 
of 
1965 
(20 
U.S.C.
1088(a)(1), 1141(a)), as such sections are
in effect on the date of the enactment of
this section.
‘‘(ii) POSTSECONDARY
VOCATIONAL
EDUCATION SCHOOL.—An area vocational
education school (as defined in subpara-
graph (C) or (D) of section 521(4) of the
Carl D. Perkins Vocational and Applied
Technology Education Act (20 U.S.C.
2471(4))) which is in any State (as defined
in section 521(33) of such Act), as such
sections are in effect on the date of the en-
actment of this section.
‘‘(D) COORDINATION WITH SAVINGS BOND
PROVISIONS.—The amount of qualified post-
secondary educational expenses for any taxable
year shall be reduced by any amount excludable
from gross income under section 135.
‘‘(4) FIRST-HOME PURCHASE COSTS.—
‘‘(A) IN GENERAL.—The term ‘first-home
purchase costs’ means qualified acquisition
costs with respect to a qualified principal resi-
dence for a qualified first-time homebuyer.
‘‘(B) QUALIFIED
ACQUISITION
COSTS.—
The term ‘qualified acquisition costs’ means the
costs of acquiring, constructing, or reconstruct-
ing a residence. Such term includes any usual
or reasonable settlement, financing, or other
closing costs.
‘‘(C) QUALIFIED PRINCIPAL RESIDENCE.—
The term ‘qualified principal residence’ means a
principal residence (within the meaning of sec-
tion 1034), the qualified acquisition costs of
which do not exceed 100 percent of the average
area purchase price applicable to such residence
(determined in accordance with paragraphs (2)
and (3) of section 143(e)).
‘‘(D) 
QUALIFIED
FIRST-TIME
HOME-
BUYER.—
‘‘(i) IN GENERAL.—The term ‘quali-
fied first-time homebuyer’ means an indi-
vidual if such individual (and, in the case
of a married individual, the individual’s
spouse) has no present ownership interest
in a principal residence during the 3-year
period ending on the date of acquisition of
the principal residence to which this sub-
section applies.
‘‘(ii) DATE
OF
ACQUISITION.—The
term ‘date of acquisition’ means the date
on which a binding contract to acquire,
construct, or reconstruct the principal resi-
dence to which this subsection applies is
entered into.
‘‘(5) QUALIFIED
BUSINESS
CAPITALIZATION
COSTS.—
‘‘(A) IN
GENERAL.—The term ‘qualified
business capitalization costs’ means qualified
expenditures for the capitalization of a qualified
business pursuant to a qualified plan.
‘‘(B) 
QUALIFIED
EXPENDITURES.—The
term ‘qualified expenditures’ means expendi-
tures included in a qualified plan, including
capital, plant, equipment, working capital, and
inventory expenses.
‘‘(C) QUALIFIED
BUSINESS.—The term
‘qualified business’ means any business that
does not contravene any law or public policy (as
determined by the Secretary).
‘‘(D) QUALIFIED PLAN.—The term ‘quali-
fied plan’ means a business plan which—
‘‘(i) is approved by a financial institu-
tion, or by a nonprofit loan fund having
demonstrated fiduciary integrity,
‘‘(ii) includes a description of services
or goods to be sold, a marketing plan, and
projected financial statements, and
‘‘(iii) may require the eligible individ-
ual to obtain the assistance of an experi-
enced entrepreneurial advisor.