The Honorable Rep. Schmidt, for himself, and for the Honorable Reps. Garwood and Cole introduced the following bill to the Committee on Appropriations & Finance
A BILL
To amend the Internal Revenue Code of 1986 to allow penalty free withdrawals from retirement plans for victims of federally declared natural disasters.


Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. PENALTY FREE WITHDRAWALS FROM RETIREMENT PLANS FOR VICTIMS OF FEDERALLY DECLARED NATURAL DISASTERS.

(a) IN GENERAL- Paragraph (2) of section 72(t) of the Internal Revenue Code of 1986 (relating to 10-percent additional tax on early distributions from qualified retirement plans) is amended by adding at the end the following new subparagraph:

`(G) DISTRIBUTIONS FROM RETIREMENT PLANS TO VICTIMS OF FEDERALLY DECLARED NATURAL DISASTERS-

`(i) IN GENERAL- Any qualified disaster-relief distribution.

`(ii) AMOUNT DISTRIBUTED MAY BE REPAID- Any individual who receives a qualified disaster-relief distribution may, at any time during the 5-year period beginning on the day after the date on which such distribution was made, make one or more contributions to an individual retirement plan of such individual in an aggregate amount not to exceed the amount of such distribution. The dollar limitations otherwise applicable to contributions to individual retirement plans shall not apply to any contribution made pursuant to the preceding sentence. No deduction shall be allowed for any contribution pursuant to this clause.

`(iii) QUALIFIED DISASTER-RELIEF DISTRIBUTION- For purposes of this subparagraph, the term `qualified disaster-relief distribution' means any distribution to an individual who has sustained a loss in excess of $100 as a result of a major disaster declared under the Robert T. Stafford Disaster Relief and Emergency Assistance Act--

`(I) if such distribution is made during the 1-year period beginning on the date such declaration is made, and

`(II) to the extent such distribution does not exceed the amount of such loss and is not compensated for by insurance or otherwise.

For purposes of subclause (II), the amount of any loss shall be determined using the greater of the fair market value of the property on the day before the date of such disaster or the adjusted basis of the property as provided in section 1011.'.

( EXEMPTION OF DISTRIBUTIONS FROM WITHHOLDING- Paragraph (4) of section 402� of the Internal Revenue Code of 1986 (relating to eligible rollover distribution) is amended by striking `and' at the end of subparagraph ( , by striking the period at the end of subparagraph � and inserting `, and', and by inserting at the end the following new subparagraph:

`(D) any qualified disaster-relief distribution (within the meaning of section 72(t)(2)(G)).'.

� CONFORMING AMENDMENTS-

(1) Section 401(k)(2)( (i) of the Internal Revenue Code of 1986 is amended by striking `or' at the end of subclause (III), by striking `and' at the end of subclause (IV) and inserting `or', and by inserting after subclause (IV) the following new subclause:

`(V) the date on which a period referred to in section 72(t)(2)(G)(iii)(I) begins (but only to the extent provided in section 72(t)(2)(G)), and'.

(2) Section 403( (7)(A)(ii) of such Code is amended by inserting `sustains a loss as a result of a major disaster declared under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (but only to the extent provided in section 72(t)(2)(G)),' before `or'.

(3) Section 403( (11) of such Code is amended by striking `or' at the end of subparagraph (A), by striking the period at the end of subparagraph ( and inserting `, or', and by inserting after subparagraph ( the following new subparagraph:

`� for distributions to which section 72(t)(2)(G) applies.'.

(d) EFFECTIVE DATE- The amendments made by this section shall apply to distributions received in taxable years beginning after December 31, 2003.