article: SECTION 1. DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT PLANS MAY BE USED WITHOUT PENALTY TO PURCHASE FIRST HOMES OR TO PAY HIGHER EDUCATION EXPENSES. (a) In General.--Paragraph (2) of section 72(t) of the Internal Revenue Code of 1986 (relating to exceptions to 10-percent additional tax on early distributions from qualified retirement plans) is amended by adding at the end thereof the following new subparagraph: ``(D) Distributions from individual retirement plans for first home purchases or educational expenses.--Distributions to an individual from an individual retirement plan-- ``(i) which are qualified first-time homebuyer distributions (as defined in paragraph (6)); or ``(ii) to the extent such distributions do not exceed the qualified higher education expenses (as defined in paragraph (7)) of the taxpayer for the taxable year.'' (b) Definitions.--Section 72(t) of such Code is amended by adding at the end thereof the following new paragraphs: ``(6) Qualified first-time homebuyer distributions.--For purposes of paragraph (2)(D)(i)-- ``(A) In general.--The term `qualified first-time homebuyer distribution' means any payment or distribution received by an individual 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 acquisition costs with respect to a principal residence of a first-time homebuyer who is such individual 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 residence. Such term includes any usual or reasonable 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 individual if-- ``(I) such individual (and if married, such individual's spouse) had no present ownership interest in a principal residence during the 3-year period 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 entered into, or ``(II) on which construction or reconstruction of such a principal residence is commenced. ``(D) Special rule where delay in acquisition.--If any distribution from any individual retirement plan fails to meet the requirements of subparagraph (A) solely by reason of a delay or cancellation of the purchase or construction 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 section 408(d)(3)(A)(i) applies to any other amount. ``(7) Qualified higher education expenses.--For purposes of paragraph (2)(D)(ii)-- ``(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.'' (c) Effective Date.--The amendments made by this section shall apply to distributions received after the date of the enactment of this Act.
summary: Amends the Internal Revenue Code to allow penalty-free distributions from eligible individual retirement plans for qualified first-time home purchases or qualified higher education expenses.