I
107TH CONGRESS
1ST SESSION
H. R. 2308
To amend the Internal Revenue Code of 1986 and the Employee Retirement
Income Security Act of 1974 to allow investments by certain retirement
plans in principal residences of children and grandchildren of participants
who are first-time homebuyers.
IN THE HOUSE OF REPRESENTATIVES
JUNE 25, 2001
Mr. WATKINS of Oklahoma (for himself and Mrs. THURMAN) introduced the
following bill; which was referred to the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 and the Em-
ployee Retirement Income Security Act of 1974 to allow
investments by certain retirement plans in principal resi-
dences of children and grandchildren of participants who
are first-time homebuyers.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘First-time Homebuyer
Down Payment Assistance Act’’.
SEC. 2. EQUITY INVESTMENTS IN PRINCIPAL RESIDENCES
FOR FIRST-TIME HOMEBUYERS BY CERTAIN
RETIREMENT PLANS.
(a) EXEMPTION OF INVESTMENT FROM PROHIBITED
TRANSACTION RULES.—Section 4975 of the Internal Rev-
enue Code of 1986 (relating to tax on prohibited trans-
actions) is amended by redesignating subsections (h) and
(i) as subsections (i) and (j), respectively, and by inserting
after subsection (g) the following new subsection:
‘‘(h) SPECIAL RULE FOR HOME EQUITY PARTICIPA-
TION ARRANGEMENTS.—
‘‘(1) IN GENERAL.—The prohibitions provided
in subsection (c) shall not apply to any qualified
home equity participation arrangement to the extent
that the amount paid to acquire the ownership inter-
est referred to paragraph (2)(A) does not exceed
$10,000.
‘‘(2) QUALIFIED HOME EQUITY PARTICIPATION
ARRANGEMENT.—For purposes of this subsection—
‘‘(A) IN
GENERAL.—The term ‘qualified
home equity participation arrangement’ means
an arrangement—
‘‘(i) under which the trustee of a
qualified plan, at the direction of the eligi-
ble participant, shall acquire an ownership
interest in any dwelling unit which within
a reasonable period of time (determined at
the time the arrangement is executed) is to
be used as the principal residence for a
first-time homebuyer, and
‘‘(ii) which meets the requirements of
subparagraph (B).
‘‘(B) OWNERSHIP
INTEREST
REQUIRE-
MENT.—An arrangement shall meet the re-
quirements of this subparagraph if the owner-
ship interest described in subparagraph (A)—
‘‘(i) is a fee interest in such property
(and, in the case of an arrangement which
is not otherwise at arm’s length, the trust-
ee’s fee interest would be reasonable in an
arm’s length arrangement),
‘‘(ii) by its terms requires repayment
in full upon the sale or other transfer of
the dwelling unit, and
‘‘(iii) may not be used as security for
any loan secured by any interest in the
dwelling unit.
‘‘(3) DEFINITIONS.—For purposes of this
subsection—
‘‘(A) ELIGIBLE
PARTICIPANT.—The term
‘eligible participant’ means an individual on
whose behalf a qualified plan is established.
‘‘(B) QUALIFIED PLAN.—The term ‘quali-
fied plan’ means an individual retirement plan
or qualified cash or deferred arrangement de-
scribed in section 401(k).
‘‘(C) FIRST-TIME HOMEBUYER.—The term
‘first-time homebuyer’ means an individual
who—
‘‘(i) is an eligible participant or quali-
fied family member, and
‘‘(ii) had (and if married, such indi-
vidual’s spouse had) no present ownership
interest in a principal residence at any
time during the 2-year period before the
date of the arrangement.
‘‘(D) QUALIFIED
FAMILY
MEMBER.—The
term ‘qualified family member’ means a child
(as defined in section 151(c)(3)) or grandchild
of the eligible participant (or such participant’s
spouse). Section 152(b)(2) shall apply in deter-
mining if an individual is a child or grandchild
of an eligible participant (or such participant’s
spouse).