First-time Homebuyer Affordability Act of 1997 - Amends the Internal Revenue Code to make the tax on prohibited transactions inapplicable to a qualified home equity participation arrangement (one in which up to $10,000 in an individual retirement plan is used to acquire an ownership interest in a dwelling unit that is to be used as the principal residence for a first-time homebuyer). Requires such ownership interest to be a fee interest requiring full repayment. Defines "first-time homebuyer" as an individual on whose behalf an individual retirement plan is established (eligible participant) or a family member (child, parent, or grandparent) who had no present ownership interest in a principal residence during the 36-month period before the date of the arrangement.
(Sec. 4) Allows the use of amounts in an individual retirement plan to make loans of up to $10,000 to purchase a home for a first-time homebuyer on behalf of an eligible participant or a family member. Prohibits a related interest deduction. Requires repayment within 15 years.
[Congressional Bills 105th Congress]
[From the U.S. Government Printing Office]
[H.R. 2026 Introduced in House (IH)]
105th CONGRESS
1st Session
H. R. 2026
To amend the Internal Revenue Code of 1986 to provide assistance to
first-time homebuyers.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
June 24, 1997
Mr. Kennedy of Massachusetts (for himself, Mr. Bereuter, Mr. Canady of
Florida, Mr. Clyburn, Mr. Delahunt, Mr. Dellums, Mr. Evans, Mr. Fattah,
Mr. Filner, Mr. Fox of Pennsylvania, Mr. Frost, Ms. Hooley of Oregon,
Mr. Kanjorski, Ms. Kilpatrick, Ms. Lofgren, Mrs. Maloney of New York,
Mr. Sisisky, and Mr. Torres) 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 assistance to
first-time homebuyers.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``First-time Homebuyer Affordability
Act of 1997''.
SEC. 2. FINDINGS AND POLICY.
(a) Findings.--The Congress finds that--
(1) it is desirable to make funds available from individual
retirement plans to encourage first time home ownership, and
(2) the tax and penalty on the premature withdrawal of
funds from individual retirement plans are substantial
impediments to making such funds available for that purpose.
(b) Policy.--It is the policy of the Congress to remove impediments
to home investment by first-time homebuyers by permitting owners of
individual retirement plans to direct the trustees of such plans to
invest plan funds as home equity or debt in the homes of such owners or
in the home of family members who are first-time homebuyers.
SEC. 3. CERTAIN RETIREMENT PLANS AUTHORIZED TO MAKE EQUITY INVESTMENTS
IN PRINCIPAL RESIDENCES FOR FIRST-TIME HOMEBUYERS.
(a) Exemption From Prohibited Transaction Rules.--Section 4975 of
the Internal Revenue Code of 1986 (relating to tax on prohibited
transactions) is amended by redesignating subsections (h) and (i) as
subsections (i) and (j), respectively, and by inserting after
subsection (g) the following new subsection:
``(h) Special Rule for Home Equity Participation Arrangements.--
``(1) In general.--The prohibitions provided in subsection
(c) shall not apply to any qualified home equity participation
arrangement to the extent that the amount paid to acquire the
ownership interest referred to paragraph (2)(A) does not exceed
$10,000.
``(2) Qualified home equity participation arrangement.--For
purposes of this subsection--
``(A) In general.--The term `qualified home equity
participation arrangement' means an arrangement--
``(i) under which the trustee of an
individual retirement plan, at the direction of
the eligible participant, shall acquire an
ownership interest in any dwelling unit which
within a reasonable period of time (determined
at the time the arrangement is executed) is to
be used as the principal residence for a first-
time homebuyer, and
``(ii) which meets the requirements of
subparagraph (B) of this paragraph.
``(B) Ownership interest requirement.--An
arrangement shall meet the requirements of this
subparagraph if the ownership interest described in
subparagraph (A)--
``(i) is a fee interest in such property
(and, in the case of an arrangement which is
not otherwise at arm's length, the trustee's
fee interest would be reasonable in an arm's
length arrangement),
``(ii) by its terms requires repayment in
full upon the sale or other transfer of the
dwelling unit, and
``(iii) may not be used as security for any
loan secured by any interest in the dwelling
unit.
``(3) Definitions.--For purposes of this subsection--
``(A) Eligible participant.--The term `eligible
participant' means an individual on whose behalf an
individual retirement plan is established.
``(B) First-time homebuyer.--The term `first-time
homebuyer' means an individual who--
``(i) is an eligible participant or
qualified family member, and
``(ii) had (and if married, such
individual's spouse had) no present ownership
interest in a principal residence at any time
during the 36-month period before the date of
the arrangement.
``(C) Qualified family member.--The term `qualified
family member' means a child (as defined in section
151(c)(3)), parent, or grandparent of the eligible
participant (or such participant's spouse). Section
152(b)(2) shall apply in determining if an individual
is a parent or grandparent of an eligible participant
(or such participant's spouse).
``(D) Acquisition; etc.--
``(i) Acquisition.--The term `acquisition'
includes construction, reconstruction, and
improvement related to such acquisition.
``(ii) Acquisition cost.--The term
`acquisition cost' has the meaning given such
term by section 143(k)(3).
``(E) Principal residence.--The term `principal
residence' has the same meaning as when used in section
1034.''.
(b) Effective Date.--The amendment made by this section shall apply
to arrangements entered into after the date of the enactment of this
Act.
SEC. 4. LOANS USED TO ACQUIRE PRINCIPAL RESIDENCES FOR FIRST-TIME
HOMEBUYERS.
(a) Individual Retirement Plans.--Section 408(e) of the Internal
Revenue Code of 1986 (relating to tax treatment of accounts and
annuities) is amended by adding at the end thereof the following new
paragraph:
``(7) Loans used to purchase a home for first-time
homebuyers.--
``(A) In general.--Paragraph (3) shall not apply to
any qualified home purchase loan made by an individual
retirement plan.
``(B) Qualified home purchase loan.--For purposes
of this paragraph, the term `qualified home purchase
loan' means a loan--
``(i) made by the trustee of an individual
retirement plan at the direction of the
individual on whose behalf such plan is
established,
``(ii) the proceeds of which are used for
the acquisition of a dwelling unit which within
a reasonable period of time (determined at the
time the loan is made) is to be used as the
principal residence for a first-time homebuyer,
``(iii) which by its terms requires
repayment in full not later than the earlier
of--
``(I) the date which is 15 years
after the date of acquisition of the
dwelling unit, or
``(II) the date of the sale or
other transfer of the dwelling unit,
``(iv) which by its terms treats any amount
remaining unpaid in the taxable year beginning
after the period described in clause (iii) as
distributed in such taxable year to the
individual on whose behalf such plan is
established and subject to section 72(t)(1),
and
``(v) which bears interest from the date of
the loan at a rate not less than 2 percentage
points below, and not more than 2 percentage
points above, the rate for comparable United
States Treasury obligations on such date.
Nothing in this paragraph shall be construed to require
such a loan to be secured by the dwelling unit.
``(C) Limitation on amount of loans.--The amount of
borrowings to which paragraph (3) does not apply by
reason of this paragraph shall not exceed $10,000.
``(D) Denial of interest deduction.--No deduction
shall be allowed under this chapter for interest on any
qualified home purchase loan.
``(E) Definitions.--For purposes of this
paragraph--
``(i) First-time homebuyer.--The term
`first-time homebuyer' has the meaning given
such term by section 4975(h)(3)(B).
``(ii) Acquisition.--The term `acquisition'
has the meaning given such term by section
4975(h)(3)(D)(i).
``(iii) Principal residence.--The term
`principal residence' has the same meaning as
when used in section 1034.
``(iv) 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 (B) applies is
entered into, or
``(II) on which construction,
reconstruction, or improvement of such
a principal residence is commenced.''.
(b) Prohibited Transaction.--Section 4975(d) of the Internal
Revenue Code of 1986 (relating to exemptions from tax on prohibited
transactions) is amended by striking ``or'' at the end of paragraph
(14), by striking the period at the end of paragraph (15) and inserting
``; or'', and by inserting after paragraph (15) the following new
paragraph:
``(16) any loan that is a qualified home purchase loan (as
defined in section 408(e)(7)(B)).''.
(c) Effective Date.--The amendments made by this section shall
apply to loans made after the date of the enactment of this Act.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
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