To provide for the penalty-free use of retirement funds to provide foreclosure recovery relief for individuals with mortgages on their principal residences.

SA 4423. Mr. NELSON of Florida (for himself and Mr. Coleman)
submitted an amendment intended to be proposed by him to the bill H.R.
3221, moving the United States toward greater energy independence and
security, developing innovative new technologies, reducing carbon
emissions, creating green jobs, protecting consumers, increasing clean
renewable energy production, and modernizing our energy infrastructure,
and to amend the Internal Revenue Code of 1986 to provide tax
incentives for the production of renewable energy and energy
conservation; which was ordered to lie on the table; as follows:

At the end of title VI, insert the following:

SEC. __. PENALTY-FREE WITHDRAWALS FROM RETIREMENT PLANS FOR
FORECLOSURE RECOVERY RELIEF FOR INDIVIDUALS
WITH MORTGAGES ON THEIR PRINCIPAL RESIDENCES.

(a) In General.--Section 72(t) of the Internal Revenue Code
of 1986 shall not apply to any qualified foreclosure recovery
distribution.
(b) Limitations.--
(1) In general.--For purposes of this section, the
aggregate amount of distributions received by an individual
which may be treated as qualified foreclosure recovery
distributions for any taxable year shall not exceed the
lesser of--
(A) the individual's qualified mortgage expenditures for
the taxable year, or
(B) the excess (if any) of--
(i) $25,000, over
(ii) the aggregate amounts treated as qualified foreclosure
recovery distributions received by such individual for all
prior taxable years.
(2) Treatment of plan distributions.--If a distribution to
an individual would (without regard to paragraph (1)) be a
qualified foreclosure recovery distribution, a plan shall not
be treated as violating any requirement of the Internal
Revenue Code of 1986 merely because the plan treats such
distribution as a qualified foreclosure recovery
distribution, unless the aggregate amount of such
distributions from all plans maintained by the employer (and
any member of any controlled group which includes the
employer) to such individual exceeds $25,000.
(3) Controlled group.--For purposes of paragraph (2), the
term ``controlled group'' means any group treated as a single
employer under subsection (b), (c), (m), or (o) of section
414 of such Code.
(c) Amount Distributed May Be Repaid.--

[[Page S2550]]

(1) In general.--Any individual who receives a qualified
foreclosure recovery distribution may, at any time during the
3-year period beginning on the day after the date on which
such distribution was received, make one or more
contributions in an aggregate amount not to exceed the amount
of such distribution to an eligible retirement plan 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) of the
Internal Revenue Code of 1986, as the case may be.
(2) Treatment of repayments of distributions from eligible
retirement plans other than iras.--For purposes of such Code,
if a contribution is made pursuant to paragraph (1) with
respect to a qualified foreclosure recovery 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 foreclosure recovery distribution in an
eligible rollover distribution (as defined in section
402(c)(4) of such Code) 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 such Code, if a contribution is made pursuant
to paragraph (1) with respect to a qualified foreclosure
recovery distribution from an individual retirement plan (as
defined by section 7701(a)(37) of such Code), then, to the
extent of the amount of the contribution, the qualified
foreclosure recovery distribution shall be treated as a
distribution described in section 408(d)(3) of such Code and
as having been transferred to the eligible retirement plan in
a direct trustee to trustee transfer within 60 days of the
distribution.
(4) Application to eligible retirement plans.--
(A) In general.--Nothing in this section shall be treated
as requiring an eligible retirement plan to accept any
contributions described in this subsection.
(B) Qualification.--An eligible retirement plan shall not
be treated as violating any requirement of Federal law solely
by reason of the acceptance of contributions described in
this subparagraph.
(d) Definitions.--For purposes of this section--
(1) Qualified foreclosure recovery distribution.--The term
``qualified foreclosure recovery distribution'' means any
distribution to an individual from an eligible retirement
plan which is made--
(A) on or after the date of the enactment of this Act and
before January 1, 2010, and
(B) during a taxable year during which the individual has
qualifying mortgage expenditures.
(2) Qualifying mortgage expenditures.--
(A) In general.--The term ``qualifying mortgage
expenditures'' means any of the following expenditures:
(i) Payment of principal or interest on an applicable
mortgage.
(ii) Payment of costs paid or incurred in refinancing, or
modifying the terms of, an applicable mortgage.
(B) Applicable mortgage.--The term ``applicable mortgage''
means a mortgage which--
(i) was entered into after December 31, 1999, and before
the date of the enactment of this Act, and
(ii) constitutes a security interest in the principal
residence of the mortgagor.
(C) Joint filers.--In the case of married individuals
filing a joint return under section 6013 of the Internal
Revenue Code of 1986, the qualifying mortgage expenditures of
the taxpayer may be allocated between the spouses in such
manner as they elect.
(3) Eligible retirement plan.--The term ``eligible
retirement plan'' shall have the meaning given such term by
section 402(c)(8)(B) of such Code.
(4) Principal residence.--The term ``principal residence''
has the same meaning as when used in section 121 of such
Code.
(e) Income Inclusion Spread Over 3-Year Period for
Qualified Foreclosure Recovery Distributions.--
(1) In general.--In the case of any qualified foreclosure
recovery distribution, unless the taxpayer elects not to have
this subsection apply for any taxable year, any amount
required to be included in gross income for such taxable year
shall be so included ratably over the 3-taxable year period
beginning with such taxable year.
(2) Special rule.--For purposes of paragraph (1), rules
similar to the rules of subparagraph (E) of section
408A(d)(3) of the Internal Revenue Code of 1986 shall apply.
(f) Special Rules.--
(1) Exemption of distributions from trustee to trustee
transfer and withholding rules.--For purposes of sections
401(a)(31), 402(f), and 3405 of the Internal Revenue Code of
1986, qualified foreclosure recovery distributions shall not
be treated as eligible rollover distributions.
(2) Qualified foreclosure recovery distributions treated as
meeting plan distribution requirements.--For purposes of such
Code, a qualified foreclosure recovery distribution shall be
treated as meeting the requirements of sections
401(k)(2)(B)(i), 403(b)(7)(A)(ii), 403(b)(11), and
457(d)(1)(A) of such Code.
(3) Substantially equal periodic payments.--A qualified
foreclosure recovery distribution--
(A) shall be disregarded in determining whether a payment
is a part of a series of substantially equal periodic payment
under section 72(t)(2)(A)(iv) of such Code, and
(B) shall not constitute a change in substantially equal
periodic payments under section 72(t)(4) of such Code.
(g) Provisions Relating to Plan Amendments.--
(1) In general.--If this subsection applies to any
amendment to any plan or annuity contract, such plan or
contract shall be treated as being operated in accordance
with the terms of the plan during the period described in
paragraph (2)(B)(i).
(2) Amendments to which subsection applies.--
(A) In general.--This subsection shall apply to any
amendment to any plan or annuity contract which is made--
(i) pursuant to the provisions this section, or pursuant to
any regulation issued by the Secretary of the Treasury or the
Secretary of Labor under this section, and
(ii) on or before the last day of the first plan year
beginning on or after January 1, 2010, or such later date as
the Secretary of the Treasury may prescribe.

In the case of a governmental plan (as defined in section
414(d) of the Internal Revenue Code of 1986), clause (ii)
shall be applied by substituting the date which is 2 years
after the date otherwise applied under clause (ii).
(B) Conditions.--This subsection shall not apply to any
amendment unless--
(i) during the period--

(I) beginning on the date the legislative or regulatory
amendment described in subparagraph (A)(i) takes effect (or
in the case of a plan or contract amendment not required by
such legislative or regulatory amendment, any later effective
date specified by the plan), and
(II) ending on the date described in subparagraph (A)(ii)
(or, if earlier, the date the plan or contract amendment is
adopted),

the plan or contract is operated as if such plan or contract
amendment were in effect; and
(ii) such plan or contract amendment applies retroactively
for such period.
______