I
104TH CONGRESS
1ST SESSION
H. R. 1040
To amend the Internal Revenue Code of 1986 to increase the deduction
for retirement savings, to permit nonemployed spouses a full IRA deduc-
tion, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 24, 1995
Mr. BAKER of California (for himself, Mr. STEARNS, Mr. LIPINSKI, Mr.
FORBES, Mr. CANADY, Mr. EMERSON, Mr. FIELDS of Texas, Mrs. MEY-
ERS of Kansas, Mr. SOLOMON, Mr. BACHUS, Mr. CALVERT, Mr.
HOSTETTLER, Mr. BAKER of Louisiana, Mr. ENGLISH of Pennsylvania,
Mr. WICKER, and Mr. MCCRERY) 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 increase
the 
deduction 
for 
retirement 
savings, 
to 
permit
nonemployed spouses a full IRA deduction, and for other
purposes.
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 ‘‘Family Reinvestment
Act of 1995’’.
SEC. 2. MODIFICATIONS TO IRA DEDUCTION.
(a) INCREASE IN MAXIMUM AMOUNT OF DEDUC-
TION.—Subparagraph (A) of section 219(b)(1) of the In-
ternal Revenue Code of 1986 (relating to maximum
amount of deduction) is amended by striking ‘‘$2,000’’
and inserting ‘‘$2,500’’.
(b) INCREASE IN INCOME PHASEOUT LEVELS.—
(1) IN GENERAL.—Subparagraph (B) of section
219(g)(3) of such Code is amended—
(A) by striking ‘‘$40,000’’ and inserting
‘‘$200,000’’, and
(B) by striking ‘‘$25,000’’ and inserting
‘‘$100,000’’.
(2) PHASEIN OF DEDUCTION BY REASON OF IN-
CREASE IN PHASEOUT LEVELS.—Paragraph (3) of
section 219(g) of such Code is amended by adding
at the end the following new subparagraph:
‘‘(C) PHASEIN OF DEDUCTION BY REASON
OF INCREASE IN PHASEOUT LEVELS.—In the
case of taxable years beginning before January
1, 2004—
‘‘(i) IN GENERAL.—In the case of a
taxpayer to whom this subparagraph ap-
plies for any taxable year, each of the dol-
lar limitations referred to in paragraph (1)
for such taxable year shall be treated as
being the limitation determined in accord-
ance with the following table:
‘‘In the case of taxable years
The limitation
beginning in:
is:
1995 ...............................................................
$
250
1996 ...............................................................
500
1997 ...............................................................
750
1998 ...............................................................
1,000
1999 ...............................................................
1,250
2000 ...............................................................
1,500
2001 ...............................................................
1,750
2002 ...............................................................
2,000
2003 ...............................................................
2,250.
‘‘(ii) TAXPAYERS TO WHOM SUBPARA-
GRAPH APPLIES.—This subparagraph shall
apply to any taxpayer whose adjusted
gross income for the taxable year ex-
ceeds—
‘‘(I) $50,000 in a case to which
subparagraph (B)(i) applies, and
‘‘(II) $35,000 in a case to which
subparagraph (B)(ii) applies.’’.
(c) IRA DEDUCTION ALLOWED TO NONEMPLOYED
SPOUSES.—Subsection (c) of section 219 of such Code is
amended to read as follows:
‘‘(c) SPECIAL RULES FOR CERTAIN MARRIED INDI-
VIDUALS.—
‘‘(1) IN GENERAL.—In the case of an individual
to whom this paragraph applies for the taxable year,
the limitation of paragraph (1) of subsection (b)
shall be equal to the lesser of—
‘‘(A) $2,500, or
‘‘(B) the sum of—
‘‘(i) the compensation includible in
such individual’s gross income for the tax-
able year, plus
‘‘(ii) the compensation includible in
the gross income of such individual’s
spouse for the taxable year reduced by the
amount allowable as a deduction under
subsection (a) to such spouse for such tax-
able year.
‘‘(2) INDIVIDUALS
TO
WHOM
PARAGRAPH
(1)
APPLIES.—Paragraph (1) shall apply to any individ-
ual if—
‘‘(A) such individual files a joint return for
the taxable year, and
‘‘(B) the amount of compensation (if any)
includible in such individual’s gross income for
the taxable year is less than the compensation
includible in the gross income of such individ-
ual’s spouse for the taxable year.’’
(d) INFLATION ADJUSTMENTS.—Subsection (f) of
section 219 of such Code is amended by adding at the
end thereof the following new paragraph:
‘‘(8) INFLATION ADJUSTMENTS.—In the case of
a taxable year beginning in a calendar year after
2004, each dollar amount set forth in subsections
(b)(1)(A), (c)(1)(A), and (g)(3)(B) shall be in-
creased by an amount equal to—
‘‘(A) such dollar amount, multiplied by
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for such calendar
year by substituting ‘calendar year 2003’ for
‘calendar year 1992’ in subparagraph (B)
thereof.
If any increase determined under the preceding sen-
tence is not a multiple of $100, such increase shall
be rounded to the nearest multiple of $100.’’
(e) CONFORMING AMENDMENTS.—
(1) Subsections (a)(1) and (b) of section 408(a)
of such Code are each amended by striking
‘‘$2,000’’ and inserting ‘‘the dollar limitation in ef-
fect under section 219(b)(1)(A)’’.
(2) Subparagraph (A) of section 408(d)(5) of
such Code is amended by striking ‘‘$2,250’’ and in-
serting ‘‘the dollar limitation in effect under section
219(b)(1)(A)’’.
(3) Subsection (j) of section 408 of such Code
is amended by striking ‘‘the $2,000 amounts con-
tained’’ and inserting ‘‘the dollar limitations referred
to’’.
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1994.
SEC. 3. REPAYABLE DISTRIBUTIONS FROM INDIVIDUAL RE-
TIREMENT ACCOUNTS FOR EDUCATIONAL
EXPENSES AND FIRST-TIME HOMEBUYERS.
(a) GENERAL RULE.—Section 408 of the Internal
Revenue Code of 1986 (relating to individual retirement
accounts) is amended by redesignating subsection (p) as
subsection (q) and by inserting after subsection (o) the
following new subsection:
‘‘(p) REPAYABLE DISTRIBUTIONS FROM INDIVIDUAL
RETIREMENT ACCOUNTS FOR EDUCATIONAL EXPENSES
AND FIRST-TIME HOMEBUYERS.—
‘‘(1) IN GENERAL.—Notwithstanding any other
provision of this section, gross income shall not in-
clude any qualified distribution.
‘‘(2) REPAYMENT REQUIREMENT.—
‘‘(A) ADDITION TO TAX.—If the required
recontributions made by the taxpayer during
the repayment period are less than the total re-
quired repayment, the tax imposed by this
chapter for the last taxable year in the repay-
ment period shall be increased by the amount
determined under subparagraph (B).
‘‘(B) DETERMINATION OF AMOUNT.—The
amount determined under this subparagraph
shall be an amount which bears the same ratio
to the adjusted tax amount as—
‘‘(i) the required recontributions dur-
ing the repayment period, bear to
‘‘(ii) the total required repayment.
‘‘(C) TOTAL REQUIRED REPAYMENT.—For
purposes of this paragraph, the term ‘total re-
quired repayment’ means the sum of—
‘‘(i) the qualified distribution, plus
‘‘(ii) interest on the non-recontributed
balance of such distribution for the repay-
ment period computed at the prime rate
and compounded annually.
‘‘(D) REPAYMENT PERIOD.—For purposes
of this paragraph, the term ‘repayment period’
means, with respect to any qualified distribu-
tion, the taxable year in which such distribution
is received and the 15 succeeding taxable years
(10 succeeding taxable years in the case of a
qualified distribution described in paragraph
(3)(B)).
‘‘(E) ADJUSTED TAX AMOUNT.—For pur-
poses of this paragraph, the term ‘adjusted tax
amount’ means, with respect to any qualified
distribution, the sum of—
‘‘(i) the aggregate reduction in the tax
imposed by this chapter for the taxable
year in which such distribution is received
by reason of the exclusion under paragraph
(1), and
‘‘(ii) interest on the amount of such
reduction for the repayment period com-
puted at the prime rate and compounded
annually.
‘‘(F) PRIME RATE.—For purposes of this
paragraph, the term ‘prime rate’ means the av-
erage predominant prime rate quoted by com-
mercial banks to large business, as determined
by the Board of Governors of the Federal Re-
serve System.
‘‘(3) QUALIFIED DISTRIBUTION.—For purposes
of this paragraph, the term ‘qualified distribution’
means any distributions to an individual from an in-
dividual retirement plan—
‘‘(A) if such distributions are qualified
first-time homebuyer distributions, or
‘‘(B) to the extent such distributions do
not exceed the qualified higher education ex-
penses of the taxpayer for the taxable year in
which received.
The term ‘qualified distribution’ shall not include
any distribution to the extent such distribution re-
duces the balance of the amounts in individual re-
tirement plans of the taxpayer below $1,000.
‘‘(4) QUALIFIED FIRST-TIME HOMEBUYER DIS-
TRIBUTIONS.—For purposes of this subsection—
‘‘(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 the spouse, child, or grandchild of
such individual.
‘‘(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 paragraph:
‘‘(i) FIRST-TIME
HOMEBUYER.—The
term ‘first-time homebuyer’ means any in-
dividual if—
‘‘(I) such individual (and if mar-
ried, such individual’s spouse) had no
present ownership interest in a prin-
cipal residence during the 3-year pe-
riod ending on the date of acquisition
of the principal residence to which
this paragraph applies, and
‘‘(II) subsection (a)(6), (h), or
(k) of section 1034 did not suspend
the running of any period of time
specified in section 1034 with respect
to such individual on the day before
the date the distribution is applied
pursuant to subparagraph (A)(ii).
‘‘(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 subsection
(d)(3)(A)(i) (determined by substituting ‘120
days’ for ‘60 days’ in such section), except
that—
‘‘(i) subsection (d)(3)(B) shall not be
applied to such contribution, and
‘‘(ii) such amount shall not be taken
into account in determining whether sub-
section (d)(3)(A)(i) applies to any other
amount.
‘‘(5) QUALIFIED
HIGHER
EDUCATION
EX-
PENSES.—For purposes of this subsection:
‘‘(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) the taxpayer’s child (as defined
in section 151(c)(3)) or grandchild,
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.
‘‘(6) RECONTRIBUTION
OF
QUALIFIED
DIS-
TRIBUTIONS.—
‘‘(A) IN
GENERAL.—If an individual re-
ceived a qualified distribution, such individual
shall make required recontributions to an indi-
vidual retirement plan in the manner provided
in this paragraph.
‘‘(B) 
METHOD
OF
MAKING
RECON-
TRIBUTION.—Any required recontribution—
‘‘(i) shall be made during the repay-
ment period for the qualified distribution,
‘‘(ii) shall not exceed the required re-
payment amount reduced by any prior
recontribution under this paragraph with
respect to such distribution, and
‘‘(iii) shall be made by making a pay-
ment in cash for the benefit of such indi-
vidual to an individual retirement plan.
An individual making a required recontribution
under this paragraph shall designate (in the
manner prescribed by the Secretary) such con-
tribution as a required recontribution under
this paragraph and shall specify the qualified
distribution 
in 
respect 
of 
which 
such
recontribution is being made.
‘‘(C) TREATED AS ROLLOVER CONTRIBU-
TION.—For purposes of this title, any required
recontribution under this paragraph shall be
treated as a rollover contribution described in
subsection (d)(3).
‘‘(7) OTHER SPECIAL RULES.—
‘‘(A) BASIS RULES NOT AFFECTED.—The
tax treatment under this chapter of any dis-
tribution (other than a qualified distribution)
shall be determined as if this subsection had
not been enacted.
‘‘(B) AGGREGATION RULES.—For purposes
of this subsection—
‘‘(i) all qualified distributions de-
scribed in paragraph (3)(A) received by an
individual during a taxable year shall be
treated as a single distribution so de-
scribed, and
‘‘(ii) all qualified distributions de-
scribed in paragraph (3)(B) received by an
individual during a taxable year shall be
treated as a single distribution so de-
scribed.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to distributions received in taxable
years beginning after December 31, 1994.
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