by adding at the end thereof the following new para-
graph:
‘‘(6) QUALIFIED
HIGHER
EDUCATION
EX-
PENSES.—For purposes of paragraph (2)(D)—
‘‘(A) IN
GENERAL.—The term ‘qualified
higher education expenses’ means tuition, fees,
books, supplies, and equipment required for the
enrollment or attendance of—
‘‘(i) the taxpayer,
‘‘(ii) the taxpayer’s spouse, or
‘‘(iii) a child (as defined in section
151(c)(3)) of the taxpayer,
at an eligible educational institution (as defined
in section 135(c)(3)).
‘‘(B) COORDINATION WITH SAVINGS BOND
PROVISIONS.—The amount of qualified higher
education expenses for any taxable year shall be
reduced by any amount excludable from gross
income under section 135.’’
(b) CATASTROPHIC ILLNESS EXPENSES.—Subpara-
graph (A) of section 72(t)(3) of such Code is amended
to read as follows:
‘‘(A) CERTAIN EXCEPTIONS NOT TO APPLY
TO INDIVIDUAL RETIREMENT PLANS.—
‘‘(i) IN
GENERAL.—Except as pro-
vided in clause (ii), subparagraphs (A)(v),
(B), and (C) of paragraph (2) shall not
apply to distributions from an individual
retirement plan.
‘‘(ii) DISTRIBUTIONS
FOR
MEDICAL
EXPENSES FROM CERTAIN INDIVIDUAL RE-
TIREMENT PLANS.—Subparagraph (B) of
paragraph (2) shall apply to distributions
from an individual retirement plan if the
adjusted gross income of the distributee
for the taxable year in which the distribu-
tion occurs does not exceed the applicable
limitation under paragraph (2)(D).’’
(c) PENALTY-FREE DISTRIBUTIONS FOR CERTAIN
UNEMPLOYED INDIVIDUALS.—Paragraph (2) of section
72(t) of such Code (as amended by the preceding provi-
sions of this section) is amended further by adding at the
end the following new subparagraph:
‘‘(E) DISTRIBUTIONS TO UNEMPLOYED IN-
DIVIDUALS.—A distribution from an individual
retirement plan to an individual after separa-
tion from employment, if—
‘‘(i) such individual has received un-
employment compensation for 12 consecu-
tive weeks under any Federal or State un-
employment compensation law by reason of
such separation, and
‘‘(ii) such distributions are made dur-
ing any taxable year during which such un-
employment compensation is paid or the
succeeding taxable year.’’
(d) EXPENSES FOR FIRST-TIME HOMEBUYERS.—
(1) IN
GENERAL.—Paragraph (2) of section
72(t) of such Code (as amended by the preceding
provisions of this section) is amended further by
adding at the end the following new subparagraph:
‘‘(F) DISTRIBUTIONS
FROM
INDIVIDUAL
RETIREMENT
PLANS
FOR
FIRST-TIME
HOME-
BUYERS.—
‘‘(i) IN
GENERAL.—Distributions to
an individual from an individual retirement
plan which are qualified first-time home-
buyer distributions (as defined in para-
graph (7)).
‘‘(ii) 
ADJUSTED
GROSS
INCOME
LIMIT.—Clause (i) shall apply to distribu-
tions from an individual retirement plan
only if the adjusted gross income of the
distributee for the taxable year in which
the distribution occurs does not exceed—
‘‘(I) $60,000 in the case of an
unmarried individual,
‘‘(II) $80,000 in the case of a
joint return, and
‘‘(III) $40,000 in the case of a
married individual filing a separate
return.’’
(2) DEFINITION.—Section 72(t) of such Code
(as amended by the preceding provisions of this sec-
tion) is amended further by adding at the end the
following new paragraph:
‘‘(7) QUALIFIED FIRST-TIME HOMEBUYER DIS-
TRIBUTIONS.—For 
purposes 
of 
paragraph
(2)(F)(i)—
‘‘(A) IN
GENERAL.—The term ‘qualified
first-time homebuyer distribution’ means any
payment or distribution received by an individ-
ual to the extent such payment or distribution
is used by the individual before the close of the
60th day after the day on which such payment
or distribution is received to pay qualified ac-
quisition costs with respect to a principal resi-
dence of a first-time homebuyer who is such in-
dividual or such individual’s spouse.
‘‘(B) QUALIFIED
ACQUISITION
COSTS.—
For purposes of this paragraph, the term
‘qualified acquisition costs’ means the costs of
acquiring, constructing, or reconstructing a res-
idence. Such term includes any usual or reason-
able settlement, financing, or other closing
costs.
‘‘(C) FIRST-TIME
HOMEBUYER; 
OTHER
DEFINITIONS.—For purposes of this para-
graph—
‘‘(i) FIRST-TIME
HOMEBUYER.—The
term ‘first-time homebuyer’ means any in-
dividual if such individual (and if married,
such individual’s spouse) had no present
ownership interest in a principal residence
during the 10-year period ending on the
date of acquisition of the principal resi-
dence to which this paragraph applies.
‘‘(ii) 
PRINCIPAL
RESIDENCE.—The
term ‘principal residence’ has the same
meaning as when used in section 1034.
‘‘(iii) DATE
OF
ACQUISITION.—The
term ‘date of acquisition’ means the date—
‘‘(I) on which a binding contract
to acquire the principal residence to
which subparagraph (A) applies is en-
tered into, or
‘‘(II) on which construction or re-
construction of such a principal resi-
dence is commenced.
‘‘(D) SPECIAL RULE WHERE DELAY IN AC-
QUISITION.—If any distribution from any indi-
vidual retirement plan fails to meet the require-
ments of subparagraph (A) solely by reason of
a delay or cancellation of the purchase or con-
struction of the residence, the amount of the
distribution may be contributed to an individual
retirement 
plan 
as 
provided 
in 
section
408(d)(3)(A)(i) (determined by substituting
‘120 days’ for ‘60 days’ in such section), except
that—
‘‘(i) section 408(d)(3)(B) shall not be
applied to such contribution, and
‘‘(ii) such amount shall not be taken
into account in determining whether sec-
tion 408(d)(3)(A)(i) applies to any other
amount.’’
(e) CONFORMING AMENDMENTS.—