I
105TH CONGRESS
1ST SESSION
H. R. 3024
To amend the Internal Revenue Code of 1986 to provide for the establishment
of, and the deduction of contributions to, homeownership plans.
IN THE HOUSE OF REPRESENTATIVES
NOVEMBER 12, 1997
Mr. WEXLER introduced the following bill; which was referred to the
Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to provide
for the establishment of, and the deduction of contribu-
tions to, homeownership plans.
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 ‘‘Restore American
Dream Act of 1997’’.
SEC. 2. HOMEOWNERSHIP PLANS.
(a) IN GENERAL.—Part VII of subchapter B of chap-
ter I of the Internal Revenue Code of 1986 (relating to
additional itemized deductions for individuals) is amend-
ed—
(1) by redesignating section 222 as section 223;
and
(2) by inserting after section 221 the following
new section:
‘‘SEC. 222. HOMEOWNERSHIP PLANS.
‘‘(a) ALLOWANCE OF DEDUCTION.—In the case of an
individual, there shall be allowed as a deduction the
amounts paid in cash for the taxable year by or on behalf
of such individual to a homeownership plan established for
the benefit of the individual.
‘‘(b) LIMITATIONS.—
‘‘(1) MAXIMUM DEDUCTION.—The deduction al-
lowed by subsection (a) for the taxable year shall not
exceed the limitation of section 415(c) (relating to
limitation for defined contribution plans).
‘‘(2) DEDUCTION NOT TO EXCEED COMPENSA-
TION.—The deduction allowed under subsection (a)
for the taxable year shall not exceed an amount
equal to the compensation includible in the individ-
ual’s gross income for such taxable year.
‘‘(3) PERIOD FOR DEDUCTIONS.—No deduction
shall be allowed under subsection (a) for any con-
tribution made to a homeownership plan after the
contribution period.
‘‘(4) NUMBER OF PLANS.—If an individual is
the beneficiary of more than 1 homeownership plan
during any taxable year, no deduction shall be al-
lowed under subsection (a) for any amount paid for
such taxable year to any homeownership plan estab-
lished for the benefit of such individual.
‘‘(5) MARRIED INDIVIDUALS.—For purposes of
this section—
‘‘(A) TREATMENT.—Married individuals
filing either a joint return or separate returns
shall be considered to be 1 individual.
‘‘(B) ESTABLISHMENT OF PLAN.—A home-
ownership plan established for the benefit of
any married individual shall be deemed to be
established for the exclusive benefit of the indi-
vidual and such individual’s spouse.
‘‘(C) MERGER
OF
PLANS.—In the event
that 2 individuals for each of whose benefit a
homeownership plan has been established
should marry, the 2 plans shall be deemed to be
merged into 1 plan. Thereafter, subject to para-
graph (1), each individual may make contribu-
tions during the remainder of the contribution
period applicable to that individual.
‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) 
HOMEOWNERSHIP
PLAN.—The 
term
‘homeownership plan’ means a trust created or orga-
nized in the United States exclusively for the pur-
pose of paying qualified principal residence acquisi-
tion expenses of the account holder, but only if such
account holder meets the ownership limitations spec-
ified in paragraph (3) and only if the written gov-
erning instrument creating the trust meets the fol-
lowing requirements:
‘‘(A) No contribution will be accepted un-
less it is in cash.
‘‘(B) The trustee is a bank (as defined in
section 408(n)) or another person who dem-
onstrates to the satisfaction of the Secretary
that the manner in which the person will ad-
minister the trust will be consistent with the re-
quirements of this section.
‘‘(C) No part of the trust assets will be in-
vested in life insurance contracts.
‘‘(D) The assets of the trust shall be in-
vested in accordance with the direction of the
account holder.
‘‘(E) The assets of the trust will not be
commingled with other property except in a
common trust fund or common investment
fund.
‘‘(F) The interest of an individual in the
balance in his account is nonforfeitable.
‘‘(G) The entire interest of an individual
for whose benefit the trust is maintained will be
distributed to such individual at the end of the
contribution period.
‘‘(2) QUALIFIED PRINCIPAL RESIDENCE ACQUI-
SITION
EXPENSES.—The term ‘qualified principal
residence acquisition expense’ means an expense in-
curred by the taxpayer with respect to acquiring a
principal residence, including expenses for a down-
payment, interest, points, homeowners and mortgage
insurance, other closing costs, and other related
items.
‘‘(3) OWNERSHIP
LIMITATIONS.—The account
holder shall be an individual who, after attaining the
age of 19 (or in the case of a student has not at-
tained the age of 24), has never had a present own-
ership interest in a principal residence.
‘‘(4) PRINCIPAL RESIDENCE.—The term ‘prin-
cipal residence’ has the same meaning as when used
in section 121.
‘‘(5) CONTRIBUTION PERIOD.—
‘‘(A) IN
GENERAL.—The term ‘contribu-
tion period’ means the 9-year period beginning
on the date on which the homeownership plan
is established.
‘‘(B) AFTER DEATH OR DIVORCE.—In the
case of plan treated as a homeownership plan
under paragraph (4) or (5) of subsection (d),
the contribution period shall be the remaining
portion of the 9-year period described in sub-
paragraph (A), determined by taking into ac-
count only the employment and enrollment of
the account holder. In no event may the con-
tribution period exceed 14 years.
‘‘(6) TIME
WHEN
CONTRIBUTIONS
DEEMED
MADE.—A taxpayer shall be deemed to have made a
contribution to a homeownership plan on the last
day of the preceding taxable year if the contribution
is made on account of such taxable year and is made
not later than the time prescribed by law for filing
the return for such taxable year (not including ex-
tensions thereof).
‘‘(d) TAX TREATMENT OF DISTRIBUTIONS.—
‘‘(1) AMOUNTS
USED
FOR
QUALIFIED
PRIN-
CIPAL
RESIDENCE
ACQUISITION
EXPENSES.—Any
amount paid or distributed out of a homeownership
plan which is used exclusively to pay qualified prin-
cipal residence acquisition expenses of the account
holder shall not be includible in gross income.
‘‘(2) INCLUSION OF AMOUNTS NOT USED FOR
QUALIFIED PRINCIPAL RESIDENCE ACQUISITION EX-
PENSES.—Any amount paid or distributed out of a
homeownership plan which is not used exclusively to
pay the qualified principal residence acquisition ex-
penses of the account holder shall be included in the
gross income of such holder.
‘‘(3) EXCESS CONTRIBUTIONS RETURNED BE-
FORE DUE DATE OF RETURN.—Paragraph (2) shall
not apply to the distribution of any contribution
made during a taxable year to a homeownership plan
to the extent that such contribution exceeds the
amount allowable as a deduction under subsection
(a) if—
‘‘(A) such distribution is received on or be-
fore the day prescribed by law (including exten-
sions of time) for filing such individual’s return
for such taxable year,
‘‘(B) such distribution is accompanied by
the amount of net income attributable to such
excess contribution.
Any net income described in subparagraph (B) shall
be included in the gross income of the individual for
the taxable year in which such excess contribution
was made.
‘‘(4) TRANSFER
OF
PLAN
INCIDENT
TO
DI-
VORCE.—The transfer to an individual’s spouse or
former spouse under a divorce or separation instru-
ment described in subparagraph (A) of section
71(b)(2) shall not be considered a taxable transfer
made by such individual notwithstanding any other
provision of this subtitle, and such interest at the
time of the transfer shall be treated as a home-
ownership plan of such spouse with respect to which
such spouse is the account holder. For purposes of
subsection (c)(1)(G), the spouse shall take into ac-
count the period such plan was held by the individ-
ual transferring the interest.
‘‘(5) 
TRANSFER
OF
PLAN
INCIDENT
TO
DEATH.—The transfer of a decedent’s interest in a
homeownership plan to such decedent’s spouse shall
not be considered a taxable transfer made by such
decedent notwithstanding any other provision of this
subtitle, and such interest at the time of the transfer
shall be treated as a homeownership plan of the sur-
viving spouse with respect to which such spouse is
the account holder. For purposes of subsection
(c)(1)(G), the surviving spouse shall take into ac-
count the period such plan was held by the decedent
transferring the interest.
‘‘(e) TAX TREATMENT OF PLANS.—
‘‘(1) EXEMPTION
FROM
TAX.—A homeowner-
ship plan shall be exempt from taxation under this
subtitle unless such plan has ceased to be a home-
ownership plan. Notwithstanding the preceding sen-
tence, any such plan shall be subject to the taxes im-
posed by section 511 (relating to imposition of tax
on unrelated business income of charitable, etc. or-
ganizations).
‘‘(2) LOSS OF EXEMPTION OF PLAN WHERE IN-
DIVIDUAL
ENGAGES
IN
PROHIBITED
TRANS-
ACTIONS.—
‘‘(A) IN GENERAL.—If, during any taxable
year of the individual for whose benefit the
homeownership plan is established, the individ-
ual engages in any transaction prohibited by
section 4975 with respect to the plan, the plan
shall cease to be a homeownership plan as of
the first day of such taxable year. For purposes
of this subparagraph, the individual for whose
benefit any plan was established is treated as
the creator of the plan.
‘‘(B) PLAN
TREATED
AS
DISTRIBUTING
ALL ITS ASSETS.—In any case in which any
plan ceases to be a homeownership plan by rea-
son of subparagraph (A), on the first day of
any taxable year, subsection (d)(1) shall be ap-
plied as if there were a distribution on such
first day in an amount equal to the fair market
value (on such first day) of all assets in the
plan (on such first day).
‘‘(3) EFFECT
OF
PLEDGING
PLAN
AS
SECU-
RITY.—If, during any taxable year, an individual for
whose benefit a homeownership plan is established
uses the plan or any portion thereof as security for
a loan, the portion so used shall be treated as dis-
tributed to such individual.
‘‘(4) EFFECT OF ACQUISITION OF PRINCIPAL
RESIDENCE.—
‘‘(A) IN GENERAL.—In the event that the
individual for whose benefit a homeownership
plan is established acquires a principal resi-
dence in any taxable year, such plan shall cease
to be a homeownership plan and all assets in
the plan shall be treated as distributed to such
individual on the first day of such taxable year.
‘‘(B) SPECIAL RULES UPON MARRIAGE.—
For purposes of subparagraph (A), an individ-
ual for whose benefit a homeownership plan is
established shall not be treated as having ac-
quired a principal residence if, after the estab-
lishment of such plan, such individual—
‘‘(i) marries an individual who owns a
principal residence, but
‘‘(ii) does not obtain an ownership in-
terest in such residence.
‘‘(f) ADDITIONAL TAX ON CERTAIN AMOUNTS IN-
CLUDED IN GROSS INCOME.—
‘‘(1) DISTRIBUTION NOT USED FOR PURCHASE
OF
PRINCIPAL
RESIDENCE.—The tax imposed by
this chapter on the account holder for any taxable
year in which there is a payment or distribution
from a homeownership plan of such holder which is
includible in gross income under subsection (d)(2)
shall be increased by 10 percent of the amount
which is so includible.
‘‘(2) DISABILITY OR DEATH CASES.—Paragraph
(1) shall not apply if the distribution is made after
the individual for whose benefit the homeownership
plan is established becomes disabled within the
meaning of section 72(m)(7) or dies.
‘‘(g) CUSTODIAL ACCOUNTS.—For purposes of this
section, a custodial account shall be treated as a trust if
the assets of such account are held by a bank (as defined
in section 408(n)) or another person who demonstrates,
to the satisfaction of the Secretary, that the manner in
which he will administer the account will be consistent
with the requirements of this section, and if the custodial
account would, except for the fact that it is not a trust,
constitute a homeownership plan described in subsection
(c). For purposes of this title, in the case of a custodial
account treated as a trust by reason of the preceding sen-
tence, the custodian of such account shall be treated as
the trustee thereof.
‘‘(h) REPORTS.—The trustee of a homeownership
plan shall make such reports regarding such plan to the
Secretary and to the individual for whose benefit the plan
is maintained with respect to contributions, distributions,
and such other matters as the Secretary may require
under regulations. The reports required by this subsection
shall be filed at such time and in such manner and fur-
nished to such individuals at such time and in such man-
ner as may be required by those regulations.
‘‘(i) PLANS ESTABLISHED BY EMPLOYERS.—A trust
created or organized in the United States by an employer
for the exclusive benefit of the employees of the employer
shall be treated as a homeownership plan, but only if the
written governing instrument creating the plan meets the
following requirements:
‘‘(1) GENERAL
REQUIREMENTS
FOR
HOME-
OWNERSHIP PLANS.—The plan satisfies the require-
ments of subparagraphs (A) through (G) of sub-
section (c)(1).
‘‘(2) SEPARATE ACCOUNTING.—There is a sepa-
rate accounting for the interest of each employee.
The assets of the trust may be held in a common
fund for the account of all employees who have an
interest in the trust.
‘‘(3) ADDITIONAL
REQUIREMENTS.—The plan
satisfies requirements, established in regulations is-
sued by the Secretary, similar to the requirements
set forth in paragraphs (2) through (8) of section
408(k) (other than paragraph (2)(B)).’’
(b) ALLOWANCE OF DEDUCTION IN ARRIVING AT AD-
JUSTED GROSS INCOME.—Paragraph (7) of section 62(a)
of such Code (relating to retirement savings) is amend-
ed—