To amend the Internal Revenue Code of 1986 to exclude from gross income amounts distributed from tax-favored accounts during a period of unemployment.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Unemployment Assistance Act of 
2009''.

SEC. 2. EXCLUSION FROM GROSS INCOME OF UNEMPLOYMENT DISTRIBUTIONS FROM 
              TAX-FAVORED ACCOUNTS.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code is amended by inserting after section 139B the 
following new section:

``SEC. 139C. DISTRIBUTIONS FROM TAX-FAVORED ACCOUNT DURING PERIODS OF 
              UNEMPLOYMENT.

    ``(a) In General.--Gross income shall not include any qualified 
unemployment distribution from a tax-favored account.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Qualified unemployment distribution.--
                    ``(A) In general.--The term `qualified unemployment 
                distribution' means, with respect to an individual, any 
                distribution from a tax-favored account of such 
                individual to the extent such distribution--
                            ``(i) is made during a period of 
                        unemployment which does not exceed 2 years, and
                            ``(ii) is used during such period by the 
                        individual to pay qualified living expenses, 
                        qualified health care expenses, or qualified 
                        education or job training expenses.
                    ``(B) Qualified living expenses.--The term 
                `qualified living expenses' means any of the following 
                expenses of the taxpayer: rent, acquisition 
                indebtedness (as defined in section 164(h)(3)(B)), 
                groceries, repairs with respect to a vehicle or 
                principal residence (within the meaning of section 121) 
                of the taxpayer, and any other such necessary and 
                common expenses of the individuals. Such term shall not 
                include any prepayment of rent or acquisition 
                indebtedness.
                    ``(C) Qualified health care expenses.--The term 
                `qualified health care expenses' means amounts paid by 
                such individual for medical care (as defined in section 
                213(d) for such individual, the spouse of such 
                individual, and any dependent (as defined in section 
                152, determined without regard to subsections (b)(1), 
                (b)(2), and (d)(1)(B) thereof) of such individual, but 
                only to the extent such amounts are not compensated for 
                by insurance or otherwise.
                    ``(D) Qualified education or job training 
                expenses.--The term `qualified education or job 
                training expenses' means any expenses which would (but 
                for subsection (c)) be qualified tuition and related 
                expenses for purposes of section 25A(c) (relating to 
                Lifetime Learning Credit).
            ``(2) Tax-favored account.--The term `tax-favored account' 
        means any of the following:
                    ``(A) An eligible retirement plan (as defined in 
                section 402(c)(8)(B)).
                    ``(B) A health savings account described in section 
                223.
                    ``(C) A Roth IRA.
                    ``(D) A qualified tuition program described in 
                section 529.
    ``(c) Amount Distributed May Be Repaid.--
            ``(1) In general.--Any individual who receives a qualified 
        unemployment distribution may make one or more contributions in 
        an aggregate amount not to exceed the amount of such 
        distribution to a tax-favored account of which such individual 
        is a beneficiary and to which a rollover contribution of such 
        distribution could be made under section 402(c), 403(a)(4), 
        403(b)(8), 408(d)(3), or 457(e)(16), 223(f)(5), or 
        529(c)(3)(C), as the case may be.
            ``(2) Treatment of repayments of distributions from 
        eligible retirement plans other than iras.--For purposes of 
        this title, if a contribution is made pursuant to subparagraph 
        (A) with respect to a qualified unemployment distribution from 
        an eligible retirement plan other than an individual retirement 
        plan, then the taxpayer shall, to the extent of the amount of 
        the contribution, be treated as having received the qualified 
        unemployment distribution in an eligible rollover distribution 
        (as defined in section 402(c)(4)) and as having transferred the 
        amount to the eligible retirement plan in a direct trustee to 
        trustee transfer within 60 days of the distribution.
            ``(3) Treatment of repayments for distributions from 
        iras.--For purposes of this title, if a contribution is made 
        pursuant to subparagraph (A) with respect to a qualified 
        unemployment distribution from an individual retirement plan 
        (as defined by section 7701(a)(37)), then, to the extent of the 
        amount of the contribution, the qualified unemployment 
        distribution shall be treated as a distribution described in 
        section 408(d)(3) and as having been transferred to the 
        eligible retirement plan in a direct trustee to trustee 
        transfer within 60 days of the distribution.
            ``(4) Other tax-favored accounts.--For purposes of this 
        title, if a contribution is made pursuant to subparagraph (A) 
        with respect to a qualified unemployment distribution--
                    ``(A) from a health savings account described in 
                section 223, or
                    ``(B) from a qualified tuition program described in 
                section 529
        then, to the extent of the amount of the contribution, the 
        qualified unemployment distribution shall be treated as a 
        distribution described in section 529(c)(3)(C) or 223(f)(5), as 
        the case may be, and as having been transferred to such account 
        or program, as the case may be, within 60 days of the 
        distribution.
    ``(d) Denial of Double Benefit.--Any qualified unemployment 
distribution with respect to any expense described in (b)(1)(A)(ii) 
which is excluded from gross income under this section shall not be 
taken into account in determining any deduction or credit under this 
chapter relating to such an expense.''.
    (b) Conforming Amendment.--Paragraph (2) of section 72(t) of such 
Code is amended by adding at the end the following new subparagraph:
                    ``(H) Unemployment distributions.--Any distribution 
                excludable from gross income under section 139C 
                (relating to distributions from tax-favored account 
                during periods of unemployment).''.
    (c) Clerical Amendment.--The table of sections for part III of 
subchapter B of chapter 1 of such Code is amended by inserting after 
the item relating to section 139B the following new section:

``Sec. 139C. Distributions from tax-favored account during periods of 
                            unemployment.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to distributions made after the date of the enactment of this 
Act.

Summary: Unemployment Assistance Act of 2009 - Amends the Internal Revenue Code to exclude from gross income amounts distributed from tax-exempt retirement plans, health savings accounts, Roth individual retirement accounts (IRAs), and qualified tuition programs to pay for certain living, health care and education or job training expenses of a taxpayer during a period of unemployment not exceeding two years.