text: 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.
target: 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.
feat_title: To amend the Internal Revenue Code of 1986 to permit penalty-free withdrawals from individual retirement accounts to purchase first homes or pay higher education expenses.