Waiver of 10 percent penalty on withdrawals from qualified retirement plans upon receipt of notice of foreclosure on a principal residence

(a)

In general

Paragraph (2) of section 72(t) of the Internal Revenue Code of 1986 (relating to subsection not to apply to certain distributions) is amended by adding at the end the following new subparagraph:

(H)

Qualified foreclosure distributions

Distributions to an individual which are qualified foreclosure distributions (as defined in paragraph (11)). Distributions shall not be taken into account under the preceding sentence if such distributions are described in subparagraph (A), (C), (D), (E), (F), or (G) or to the extent paragraph (1) does not apply to such distributions by reason of subparagraph (B).

(b)

Qualified foreclosure distributions

Subsection (t) of section 72 of such Code (relating to 10 percent additional tax on early distributions from qualified retirement plans) is amended by adding at the end the following new paragraph:

(11)

Qualified foreclosure distributions

For purposes of paragraph (2)(H)— (A)

In general

The term qualified foreclosure distribution means any payment or distribution received after July 31, 2007, and before January 1, 2011, by an individual after the individual has received a foreclosure notice relating to any mortgage on the principal residence (within the meaning of section 121) of the individual. (B)

Limitation

The amount of payments or distributions received by an individual which may be treated as qualified foreclosure distributions for any taxable year shall not exceed the excess (if any) of— (i)$30,000, over (ii)the aggregate amounts treated as qualified foreclosure distributions with respect to such individual for all prior taxable years. (C)

Amount distributed may be repaid

(i)

In general

Any individual who receives a qualified foreclosure distribution may, at any time during the 5-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), as the case may be. (ii)

Treatment of repayments of distributions from eligible retirement plans other than IRAs

For purposes of this title, if a contribution is made pursuant to clause (i) with respect to a qualified foreclosure 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 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. (iii)

Treatment of repayments for distributions from IRAs

For purposes of this title, if a contribution is made pursuant to clause (i) with respect to a qualified foreclosure 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 foreclosure 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. (D)

Income inclusion spread over 5-year period

(i)

In general

In the case of any qualified foreclosure distribution, unless the taxpayer elects not to have this subparagraph 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 5-taxable-year period beginning with such taxable year. (ii)

Special rule

For purposes of clause (i), rules similar to the rules of subparagraph (E) of section 408A(d)(3) shall apply. (E)

Special rules

(i)

Exemption of distributions from trustee to trustee transfer and withholding rules

For purposes of sections 401(a)(31), 402(f), and 3405, qualified foreclosure distributions shall not be treated as eligible rollover distributions. (ii)

Qualified foreclosure distributions treated as meeting plan distribution requirements

For purposes this title, a qualified foreclosure 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).

(c)

Effective date

The amendments made by this section shall take effect on the date of the enactment of this Act.