(Roth IRA Web Site Editor's Note: See Amendments Related to Section 302 for Roth IRA technical corrections. Also see the section of the Revenue Provision at the end of this page.)
Conference Report Legislative Language for IRS Restructuring Bill, Title IV, Title V, and Title VI of H.R. 2676, the IRS Restructuring and Reform Act of 1998.
Parts of Title VI--Technical Corrections
SEC. 6005. AMENDMENTS RELATED TO TITLE III OF 1997 ACT.
(a) AMENDMENTS RELATED TO SECTION 301 OF 1997 ACT. --
(1) Section 219(g) of the 1986 Code is amended --
(A) by inserting "or the individual's spouse" after "individual" in
paragraph (1), and
(B) by striking paragraph (7) and inserting:
"(7) SPECIAL RULE FOR SPOUSES WHO ARE NOT ACTIVE PARTICIPANTS. -- If this subsection
applies to an individual for any taxable year solely because their spouse is an active
participant, then, in applying this subsection to the individual (but not their spouse) --
"(A) the applicable dollar amount under paragraph (3)(B)(i) shall be $150,000, and
"(B) the amount applicable under paragraph (2)(A)(ii) shall be $10,000."
(2) Paragraph (2) of section 301(a) of the 1997 Act is amended by inserting "after
'$10,000"' before the period.
(b) AMENDMENTS RELATED TO SECTION 302 OF 1997 ACT. --
(1) Section 408A(c)(3)(A) of the 1986 Code is amended by striking "shall be
reduced" and inserting "shall not exceed an amount equal to the amount
determined under paragraph (2)(A) for such taxable year, reduced".
(2) Section 408A(c)(3) of the 1986 Code (relating to limits based on modified adjusted
gross income) is amended --
(A) by inserting "or a married individual filing a separate return" after
"joint return" in subparagraph (A)(ii),
(B) in subparagraph (B) --
(i) by inserting ", for the taxable year of the distribution to which such
contribution relates" after "if", and
(ii) by striking "for such taxable year" in clause (i), and
(C) by striking "and the deduction under section 219 shall be taken into
account" in subparagraph (C)(i).
(3)(A) Section 408A(d)(2) of the 1986 Code (defining qualified distribution) is amended by
striking subparagraph (B) and inserting the following new subparagraph:
"(B) DISTRIBUTIONS WITHIN NONEXCLUSION PERIOD. -- A payment or distribution from a
Roth IRA shall not be treated as a qualified distribution under subparagraph (A) if such
payment or distribution is made within the 5-taxable year period beginning with the 1st
taxable year for which the individual made a contribution to a Roth IRA (or such
individual's spouse made a contribution to a Roth IRA) established for such
individual."
(B) Section 408A(d)(2) of the 1986 Code is amended by adding at the end the following new
subparagraph:
"(C) DISTRIBUTIONS OF EXCESS CONTRIBUTIONS AND EARNINGS.
-- The term 'qualified distribution' shall not include any distribution of any
contribution described in section
408(d)(4) and any net income allocable to the contribution."
(4) Section 408A(d)(3) of the 1986 Code (relating to rollovers from IRAs
other than Roth IRAs) is amended--
(A) by striking clause (iii) of subparagraph (a) and inserting:
"(iii) unless the taxpayer elects not to have this clause apply for any taxable year,
any amount required
to be included in gross income for such taxable year by reason of this paragraph for any
distribution before
January 1, 1999, shall be so included ratably over the 4-taxable year period beginning
with such taxable year.
Any election under clause (iii) for any distributions during a taxable year may not be
changed after the due date for such taxable year."; and
(B) by adding at the end the following new subparagraph:
"(F) SPECIAL RULES FOR CONTRIBUTIONS TO WHICH 4 YEAR AVERAGING APPLIES. -- In the
case of a qualified rollover contribution to a Roth IRA of a distribution to which
subparagraph (A)(iii) applied, the following rules shall apply:
"(i) ACCELERATION OF INCLUSION. --
"(I) IN GENERAL. -- The amount required to be included in gross income for each of
the first 3
taxable years in the 4-year period under subparagraph (a)(iii) shall be increased by the
aggregate distributions from Roth IRAs for such taxable year which are allocable under
paragraph (4)
to the portion of such qualified rollover contribution required to be included in gross
income under subparagraph (A)(i).
"(II) LIMITATION ON AGGREGATE AMOUNT INCLUDED. --
The amount required to be included in gross income for any taxable year under subparagraph
(A)(iii)
shall not exceed the aggregate amount required to be included in gross income under
subparagraph (a)(iii)
for all taxable years in the 4-year period (without regard to subclause (I)) reduced by
amounts included
for all preceding taxable years.
"(ii) DEATH OF DISTRIBUTEE. --
"(I) IN GENERAL. -- If the individual required to include amounts in gross income
under such
subparagraph dies before all of such amounts are included, all remaining amounts shall be
included in
gross income for the taxable year which includes the date of death.
"(II) SPECIAL RULE FOR SURVIVING SPOUSE. -- If the spouse of the individual described
in subclause
(I) acquires the individual's entire interest in any Roth IRA to which such qualified
rollover
contribution is properly allocable, the spouse may elect to treat the remaining amounts
described in
subclause (I) as includible in the spouse's gross income in the taxable years of the
spouse ending
with or within the taxable years of such individual in which such amounts would otherwise
have been
includible. Any such election may not be made or changed after the due date for the
spouse's taxable
year which includes the date of death.
"(G) SPECIAL RULE FOR APPLYING SECTION 72. --
"(i) IN GENERAL. -- If --
"(I) any portion of a distribution from a Roth IRA is properly allocable to a
qualified rollover
contribution described in this paragraph, and
"(II) such distribution is made within the 5-taxable year period beginning with the
taxable year
in which such contribution was made, then section 72(t) shall be applied as if such
portion were
includible in gross income.
"(ii) LIMITATION. -- Clause (i) shall apply only to the extent of the amount of the
qualified rollover
contribution includible in gross income under subparagraph (a)(i)."
(5)(A) Section 408A(d)(4) of the 1986 Code is amended to read as follows:
"(4) AGGREGATION AND ORDERING RULES. --
"(A) AGGREGATION RULES. -- Section 408(d)(2) shall be applied separately with respect
to Roth IRAs and other individual retirement plans.
"(B) ORDERING RULES. -- For purposes of applying this section and section 72 to any
distribution from a Roth IRA, such distribution shall be treated as made --
"(i) from contributions to the extent that the amount of such distribution, when
added to all previous distributions from the Roth IRA, does not exceed the aggregate
contributions to the Roth IRA, and
"(ii) from such contributions in the following order:
"(I) Contributions other than qualified rollover contributions to which paragraph (3)
applies.
"(II) Qualified rollover contributions to which paragraph (3) applies on a first-in,
first-out
basis.
Any distribution allocated to a qualified rollover contribution under clause (ii)(II)
shall be allocated
first to the portion of such contribution required to be included in gross income."
(B) Section 408A(d)(1) of the 1986 Code is amended to read as follows:
"(1) EXCLUSION. -- Any qualified distribution from a Roth IRA shall not be includible
in gross income."
(6)(A) Section 408A(d) of the 1986 Code (relating to distribution rules) is amended by
adding at the end the
following new paragraph:
"(6) TAXPAYER MAY MAKE ADJUSTMENTS BEFORE DUE DATE. --
"(A) IN GENERAL. -- Except as provided by the Secretary, if, on or before the due
date for any taxable year, a taxpayer transfers in a trustee-to-trustee transfer any
contribution to an individual retirement plan made during such taxable year from such plan
to any other individual retirement plan, then, for purposes of this chapter, such
contribution shall be treated as having been made to the transferee plan (and not the
transferor plan).
"(B) SPECIAL RULES. --
"(i) TRANSFER OF EARNINGS. -- Subparagraph (A) shall not apply to the transfer of any
contribution unless such transfer is accompanied by any net income allocable to such
contribution.
"(ii) NO DEDUCTION. -- Subparagraph (A) shall apply to the transfer of any
contribution only to the extent
no deduction was allowed with respect to the contribution to the transferor plan."
(B) Section 408A(d)(3) of the 1986 Code, as amended by this subsection, is amended by
striking subparagraph (D) and by redesignating subparagraphs (E), (F), and (G) as
subparagraphs (D), (E), and (F), respectively.
(7) Section 408A(d) of the 1986 Code, as amended by paragraph (6), is amended by adding at
the end the following new paragraph:
"(7) DUE DATE. -- For purposes of this subsection, the due date for any taxable year
is the date prescribed by law (including extensions of time) for filing the taxpayer's
return for such taxable year."
(8)(A) Section 4973(f) of the 1986 Code is amended --
(i) by striking "such accounts" in paragraph (1)(A) and inserting "Roth
IRAs", and
(ii) by striking "to the accounts" in paragraph (2)(B) and inserting "by
the individual to all individual
retirement plans".
(B) Section 4973(b) of the 1986 Code is amended --
(i) by inserting "a contribution to a Roth IRA or" after "other than"
in paragraph (1)(A), and
(ii) by inserting "(including the amount contributed to a Roth IRA)" after
"annuities" in paragraph (2)(C).
(C) Section 302(b) of the 1997 Act is amended by striking "Section 4973(b)" and
inserting "Section 4973".
(9) Section 408A of the 1986 Code is amended by adding at the end the following new
subsection:
"(f) INDIVIDUAL RETIREMENT PLAN. -- For purposes of this section --
"(1) a simplified employee pension or a simple retirement account may not be
designated as a Roth IRA, and
"(2) contributions to any such pension or account shall not be taken into account for
purposes of subsection (c)(2)(B)."
(c) AMENDMENTS RELATED TO SECTION 303 OF 1997 ACT. --
(1) Section 72(t)(8)(E) of the 1986 Code is amended --
(A) by striking "120 days" and inserting "120th day", and
(B) by striking "60 days" and inserting "60th day".
(2)(A) Section 402(c)(4) of the 1986 Code is amended by striking "and" at the
end of subparagraph (A), by striking the period at the end of subparagraph (B) and
inserting ", and", by inserting at the end the following new subparagraph:
"(C) any hardship distribution described in section 401(k)(2)(B)(i)(IV)."
(B) Section 403(b)(8)(B) of the 1986 Code is amended by inserting "(including
paragraph (4)(C) thereof)" after "section 402(c)".
(C) The amendments made by this paragraph shall apply to distributions after December 31,
1998.
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SEC. 7004. MODIFICATION OF AGI LIMIT FOR CONVERSIONS TO ROTH IRAS.
(a) IN GENERAL. -- Section 408A(c)(3)(C)(i) (relating to limits based on modified adjusted
gross income) is amended to read as follows:
"(i) adjusted gross income shall be determined in the same manner as under section
219(g)(3), except that--
"(I) any amount included in gross income under subsection (d)(3) shall not be taken
into account, and
"(II) any amount included in gross income by reason of a required distribution under
a provision described in paragraph (5) shall not be taken into account for purposes
of subparagraph (B)(i)."
(b) EFFECTIVE DATE. -- The amendment made by this section shall apply to taxable years
beginning after December 31, 2004.