National Disaster Tax Relief Act of 2014 - Amends the Internal Revenue Code to provide tax relief for disasters declared in 2012, 2013, and 2014 by:
[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[S. 2634 Introduced in Senate (IS)]
113th CONGRESS
2d Session
S. 2634
To provide tax relief for major disaster areas declared in 2012, 2013,
and 2014, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
July 22, 2014
Mr. Pryor (for himself, Mr. Vitter, Mr. Schumer, Mr. Menendez, Mr.
Bennet, Ms. Landrieu, Mr. Udall of Colorado, Mrs. Gillibrand, Mr.
Rockefeller, and Mr. Booker) introduced the following bill; which was
read twice and referred to the Committee on Finance
_______________________________________________________________________
A BILL
To provide tax relief for major disaster areas declared in 2012, 2013,
and 2014, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``National Disaster
Tax Relief Act of 2014''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
TITLE I--TAX RELIEF RELATING TO DISASTERS IN 2012, 2013, AND 2014
Sec. 101. Expensing of qualified disaster expenses.
Sec. 102. Increased limitation on charitable contributions for disaster
relief.
Sec. 103. Losses attributable to disasters in 2012, 2013, and 2014.
Sec. 104. Net operating losses attributable to disasters in 2012, 2013,
and 2014.
Sec. 105. Waiver of certain mortgage revenue bond requirements
following 2012, 2013, and 2014 disasters.
Sec. 106. Increased expensing and bonus depreciation for qualified
disaster assistance property following
2012, 2013, and 2014 disasters.
Sec. 107. Increase in new markets tax credit for investments in
community development entities serving
2012, 2013, and 2014 disaster areas.
Sec. 108. Special rules for use of retirement funds in connection with
federally declared disasters in 2012, 2013,
or 2014.
Sec. 109. Additional exemption for housing qualified disaster displaced
individuals.
Sec. 110. Exclusions of certain cancellations of indebtedness by reason
of 2012, 2013, or 2014 disasters.
Sec. 111. Special rule for determining earned income of individuals
affected by federally declared disasters.
Sec. 112. Increase in rehabilitation credit for buildings in 2012,
2013, and 2014 disaster areas.
Sec. 113. Advanced refundings of certain tax-exempt bonds.
Sec. 114. Qualified disaster area recovery bonds.
Sec. 115. Additional low-income housing credit allocations.
Sec. 116. Facilitation of transfer of water leasing and water by mutual
ditch or irrigation companies in disaster
areas.
TITLE II--OTHER DISASTER TAX RELIEF PROVISIONS
Sec. 201. Exclusion for disaster mitigation payments received from
State and local governments.
Sec. 202. Natural disaster funds.
TITLE I--TAX RELIEF RELATING TO DISASTERS IN 2012, 2013, AND 2014
SEC. 101. EXPENSING OF QUALIFIED DISASTER EXPENSES.
(a) In General.--Section 198A(b)(2) of the Internal Revenue Code of
1986 is amended--
(1) by striking ``before January 1, 2010'' in subparagraph
(A) and inserting ``during the period beginning after December
31, 2007, and before January 1, 2010, or during the period
beginning after December 31, 2011, and before January 1,
2015'', and
(2) by striking ``before such date'' each place it appears
in subparagraphs (B) and (C) and inserting ``during any such
period''.
(b) Effective Date.--The amendment made by this section shall apply
to amounts paid or incurred after December 31, 2011, in connection with
disasters declared after such date.
SEC. 102. INCREASED LIMITATION ON CHARITABLE CONTRIBUTIONS FOR DISASTER
RELIEF.
(a) Individuals.--Paragraph (1) of section 170(b) of the Internal
Revenue Code of 1986 is amended by redesignating subparagraphs (F) and
(G) as subparagraphs (G) and (H), respectively, and by inserting after
subparagraph (E) the following new subparagraph:
``(F) Qualified disaster contributions.--
``(i) In general.--Any qualified disaster
contribution shall be allowed to the extent
that the aggregate of such contributions does
not exceed the excess of 80 percent of the
taxpayer's contribution base over the amount of
all other charitable contributions allowable
under this paragraph.
``(ii) Carryover.--If the aggregate amount
of contributions described in clause (i)
exceeds the limitation under clause (i), such
excess shall be treated (in a manner consistent
with the rules of subsection (d)(1)) as a
charitable contribution to which clause (i)
applies in each of the 5 succeeding years in
order of time.
``(iii) Coordination with other
subparagraphs.--For purposes of applying this
subsection and subsection (d)(1), contributions
described in clause (i) shall not be treated as
described in subparagraph (A) and such
subparagraph shall be applied without regard to
such contributions.
``(iv) Qualified disaster contributions.--
For purposes of this subparagraph, the term
`qualified disaster contribution' means any
charitable contribution if--
``(I) such contribution is for
relief efforts related to a federally
declared disaster (as defined in
section 165(h)(3)(C)(i)),
``(II) such contribution is made
during the period beginning on the
applicable disaster date with respect
to the disaster described in subclause
(I) and ending on December 31, 2014,
and
``(III) such contribution is made
in cash to an organization described in
subparagraph (A) (other than an
organization described in section
509(a)(3)).
Such term shall not include a contribution if
the contribution is for establishment of a new,
or maintenance in an existing, donor advised
fund (as defined in section 4966(d)(2)).
``(v) Applicable disaster date.--For
purposes of clause (iv)(II), the term
`applicable disaster date' means, with respect
to any federally declared disaster described in
clause (iv)(I), the date on which the disaster
giving rise to the Presidential declaration
described in section 165(h)(3)(C)(i) occurred.
``(vi) Substantiation requirement.--This
paragraph shall not apply to any qualified
disaster contribution unless the taxpayer
obtains from such organization to which the
contribution was made a contemporaneous written
acknowledgment (within the meaning of
subsection (f)(8)) that such contribution was
used (or is to be used) for a purpose described
in clause (iv)(III).''.
(b) Corporations.--
(1) In general.--Paragraph (2) of section 170(b) of the
Internal Revenue Code of 1986 is amended by redesignating
subparagraph (C) as subparagraph (D) and by inserting after
subparagraph (B) the following new subparagraph:
``(C) Qualified disaster contributions.--
``(i) In general.--Any qualified disaster
contribution shall be allowed to the extent
that the aggregate of such contributions does
not exceed the excess of 20 percent of the
taxpayer's taxable income over the amount of
charitable contributions allowed under
subparagraph (A).
``(ii) Carryover.--If the aggregate amount
of contributions described in clause (i)
exceeds the limitation under clause (i), such
excess shall be treated (in a manner consistent
with the rules of subsection (d)(1)) as a
charitable contribution to which clause (i)
applies in each of the 5 succeeding years in
order of time.
``(iii) Qualified disaster contribution.--
The term `qualified disaster contribution' has
the meaning given such term under paragraph
(2)(F)(iv).
``(iv) Substantiation requirement.--This
paragraph shall not apply to any qualified
disaster contribution unless the taxpayer
obtains from such organization to which the
contribution was made a contemporaneous written
acknowledgment (within the meaning of
subsection (f)(8)) that such contribution was
used (or is to be used) for a purpose described
in paragraph (1)(F)(iv)(III).''.
(2) Conforming amendments.--
(A) Subparagraph (A) of section 170(b)(2) of such
Code is amended by striking ``subparagraph (B)
applies'' and inserting ``subparagraphs (B) and (C)
apply''.
(B) Subparagraph (B) of section 170(b)(2) of such
Code is amended by striking ``subparagraph (A)'' and
inserting ``subparagraphs (A) and (C)''.
(c) Effective Date.--The amendments made by this section shall
apply to disasters arising in taxable years ending after December 31,
2011.
SEC. 103. LOSSES ATTRIBUTABLE TO DISASTERS IN 2012, 2013, AND 2014.
(a) Waiver of Adjusted Gross Income Limitation; Increase in
Standard Deduction by Disaster Casualty Loss.--Subclause (I) of section
165(h)(3)(B)(i) of the Internal Revenue Code of 1986 is amended by
striking ``before January 1, 2010'' and inserting ``during the period
beginning after December 31, 2007, and before January 1, 2010, or
during the period beginning after December 31, 2011, and before January
1, 2015''.
(b) Loss Allowed Whether or Not Individual Itemized Deductions.--
Section 62(a) of the Internal Revenue Code of 1986 is amended by
inserting after paragraph (21) the following new paragraph:
``(22) Disaster casualty losses.--Any net disaster loss (as
defined in section 165(h)(3)(B)).''.
(c) Technical Amendment.--Clause (i) of section 165(h)(3)(C) of the
Internal Revenue Code of 1986 is amended by inserting ``major'' after
``means any''.
(d) Effective Date.--The amendments made by this section shall
apply to disasters declared in taxable years beginning after December
31, 2011.
(e) Use of Amended Income Tax Returns To Take Into Account Receipt
of Certain Casualty Loss Grants by Disallowing Previously Taken
Casualty Loss Deductions.--
(1) In general.--Notwithstanding any other provision of the
Internal Revenue Code of 1986, if a taxpayer--
(A) claims a deduction for any taxable year with
respect to a casualty loss to a principal residence
(within the meaning of section 121 of such Code)
resulting from any federally declared disaster (as
defined in section 165(h)(3)(C) of such Code) occurring
during the period beginning after December 31, 2011,
and before January 1, 2015, and
(B) in a subsequent taxable year receives a grant
under any Federal or State program as reimbursement for
such loss,
such taxpayer may elect to file an amended income tax return
for the taxable year in which such deduction was allowed (and
for any taxable year to which such deduction is carried) and
reduce (but not below zero) the amount of such deduction by the
amount of such reimbursement.
(2) Time of filing amended return.--Paragraph (1) shall
apply with respect to any grant only if any amended income tax
returns with respect to such grant are filed not later than the
later of--
(A) the due date for filing the tax return for the
taxable year in which the taxpayer receives such grant,
or
(B) the date which is 1 year after the date of the
enactment of this Act.
(3) Waiver of penalties and interest.--Any underpayment of
tax resulting from the reduction under paragraph (1) of the
amount otherwise allowable as a deduction shall not be subject
to any penalty or interest under such Code if such tax is paid
not later than 1 year after the filing of the amended return to
which such reduction relates.
SEC. 104. NET OPERATING LOSSES ATTRIBUTABLE TO DISASTERS IN 2012, 2013,
AND 2014.
(a) In General.--Subclause (I) of section 172(j)(1)(A)(i) of the
Internal Revenue Code of 1986 is amended by striking ``before January
1, 2010'' and inserting ``during the period beginning after December
31, 2007, and before January 1, 2010, or during the period beginning
after December 31, 2011, and before January 1, 2015''.
(b) Effective Date.--The amendments made by this section shall
apply to losses arising in taxable years beginning after December 31,
2011, in connection with disasters declared after such date.
SEC. 105. WAIVER OF CERTAIN MORTGAGE REVENUE BOND REQUIREMENTS
FOLLOWING 2012, 2013, AND 2014 DISASTERS.
(a) In General.--Section 143(k) of the Internal Revenue Code of
1986 is amended--
(1) by redesignating paragraph (12), as added by section
709(a) of the Tax Extenders and Alternative Minimum Tax Relief
Act of 2008, as paragraph (13), and
(2) by striking ``before January 1, 2010'' in subparagraphs
(A)(i) and (B)(i) of such paragraph and inserting ``during the
period beginning after December 31, 2007, and before January 1,
2010, or during the period beginning after December 31, 2011,
and before January 1, 2015''.
(b) Effective Date.--The amendments made by this section shall
apply to disasters occurring after December 31, 2011.
SEC. 106. INCREASED EXPENSING AND BONUS DEPRECIATION FOR QUALIFIED
DISASTER ASSISTANCE PROPERTY FOLLOWING 2012, 2013, AND
2014 DISASTERS.
(a) In General.--Subclause (I) of section 168(n)(2)(A)(ii) of the
Internal Revenue Code of 1986 is amended by striking ``before January
1, 2010'' and inserting ``during the period beginning after December
31, 2007, and before January 1, 2010, or during the period beginning
after December 31, 2011, and before January 1, 2015''.
(b) Removal of Exclusion.--Section 168(n)(2)(B)(i) of such Code is
amended by inserting ``and'' at the end of subclause (I), by striking
``, and'' at the end of subclause (II) and inserting a period, and by
striking subclause (III).
(c) Effective Date.--The amendments made by this section shall
apply to property placed in service after December 31, 2011, with
respect to disasters declared after such date.
SEC. 107. INCREASE IN NEW MARKETS TAX CREDIT FOR INVESTMENTS IN
COMMUNITY DEVELOPMENT ENTITIES SERVING 2012, 2013, AND
2014 DISASTER AREAS.
(a) In General.--Subsection (f) of section 45D of the Internal
Revenue Code of 1986 is amended by adding at the end the following new
paragraph:
``(4) Increased special allocation for community
development entities serving 2012, 2013, and 2014 disaster
areas.--
``(A) In general.--In the case of each calendar
year which begins after 2012 and before 2017, the new
markets tax credit limitation shall be increased by an
amount equal to $500,000,000, to be allocated among
qualified community development entities to make
qualified low-income community investments within any
2012, 2013, or 2014 federally declared disaster area.
``(B) Allocation of increase.--The amount of the
increase in limitation under subparagraph (A) shall be
allocated by the Secretary under paragraph (2) to
qualified community development entities and shall give
priority to such entities with a record of having
successfully provided capital or technical assistance
to businesses or communities within any 2012, 2013, or
2014 federally declared disaster area or areas for
which the allocation is requested.
``(C) Application of carryforward.--Paragraph (3)
shall be applied separately with respect to the amount
of any increase under subparagraph (A).
``(D) 2012, 2013, or 2014 federally declared
disaster area.--For purposes of this paragraph, the
term `2012, 2013, or 2014 federally declared disaster
area' means any disaster area resulting from any
federally declared disaster occurring after December
31, 2011, and before January 1, 2015. For purposes of
the preceding sentence, the terms `federally declared
disaster' and `disaster area' have the meanings given
such terms in section 165(h)(3).''.
(b) Effective Date.--The amendments made by this section shall
apply to calendar years beginning after 2012.
SEC. 108. SPECIAL RULES FOR USE OF RETIREMENT FUNDS IN CONNECTION WITH
FEDERALLY DECLARED DISASTERS IN 2012, 2013, OR 2014.
(a) Tax-Favored Withdrawals From Retirement Plans.--
(1) In general.--Paragraph (2) of section 72(t) of the
Internal Revenue Code of 1986 is amended by adding at the end
the following new subparagraph:
``(H) Distributions from retirement plans in
connection with federally declared disasters during
2012, 2013, and 2014.--Any qualified 2012, 2013, or
2014 disaster recovery distribution.''.
(2) Qualified disaster recovery distribution.--Section
72(t) of such Code is amended by adding at the end the
following new paragraph:
``(11) Qualified 2012, 2013, or 2014 disaster recovery
distribution.--For purposes of paragraph (2)(H)--
``(A) In general.--Except as provided in
subparagraph (B), the term `qualified 2012, 2013, or
2014 disaster recovery distribution' means, with
respect to any federally declared disaster occurring
during 2012, 2013, or 2014, any distribution from an
eligible retirement plan made on or after the
applicable disaster date and before January 1, 2016, to
an individual whose principal place of abode on the
applicable disaster date, is located in the disaster
area and who has sustained an economic loss by reason
of such federally declared disaster.
``(B) Dollar limitation.--
``(i) In general.--For purposes of this
subsection, the aggregate amount of
distributions received by an individual with
respect to any federally declared disaster
occurring during 2012, 2013, or 2014 shall not
exceed $100,000.
``(ii) Treatment of plan distributions.--If
a distribution to an individual would (without
regard to clause (i)) be a qualified 2012,
2013, or 2014 disaster recovery distribution, a
plan shall not be treated as violating any
requirement of this title merely because the
plan treats such distribution as a qualified
2012, 2013, or 2014 disaster 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 with respect to any federally
declared disaster occurring during 2012, 2013,
or 2014 exceeds $100,000.
``(iii) Controlled group.--For purposes of
clause (ii), the term `controlled group' means
any group treated as a single employer under
subsection (b), (c), (m), or (o) of section
414.
``(C) Amount distributed may be repaid.--
``(i) In general.--Any individual who
receives a qualified 2012, 2013, or 2014
disaster 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), 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 2012, 2013, or
2014 disaster 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 2012, 2013, or 2014 disaster recovery
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 2012,
2013, or 2014 disaster recovery 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
2012, 2013, or 2014 disaster recovery
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 3-year period.--
``(i) In general.--In the case of any
qualified 2012, 2013, or 2014 disaster recovery
distribution, unless the taxpayer elects not to
have this paragraph 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.
``(ii) Special rule.--For purposes of
clause (i), rules similar to the rules of
subparagraph (E) of section 408A(d)(3) shall
apply.
``(E) Other definitions.--
``(i) Federally declared disaster; disaster
area.--The terms `federally declared disaster'
and `disaster area' have the meanings given
such terms under section 165(h)(3)(C).
``(ii) Applicable disaster date.--The term
`applicable disaster date' means, with respect
to any federally declared disaster, the date on
which such federally declared disaster occurs.
``(iii) Eligible retirement plan.--The term
`eligible retirement plan' shall have the
meaning given such term by section
402(c)(8)(B).
``(F) 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 2012 or 2013
disaster recovery distributions shall not be
treated as eligible rollover distributions.
``(ii) Qualified 2012, 2013, or 2014
disaster recovery distributions treated as
meeting plan distribution requirements.--For
purposes of this title, a qualified 2012, 2013,
or 2014 disaster 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).''.
(3) Effective date.--The amendments made by this subsection
shall apply to distributions with respect to disaster declared
after December 31, 2011.
(b) Loans From Qualified Plans.--
(1) In general.--Subsection (p) of section 72 of the
Internal Revenue Code of 1986 is amended by adding at the end
the following new paragraph:
``(6) Increase in limit on loans not treated as
distributions with respect to 2012, 2013, and 2014 disasters.--
``(A) In general.--In the case of any loan from a
qualified employer plan to a qualified individual made
during the applicable period--
``(i) clause (i) of paragraph (2)(A) shall
be applied by substituting `$100,000' for
`$50,000', and
``(ii) clause (ii) of such paragraph shall
be applied by substituting `the present value
of the nonforfeitable accrued benefit of the
employee under the plan' for `one-half of the
present value of the nonforfeitable accrued
benefit of the employee under the plan'.
``(B) Delay of repayment.--In the case of a
qualified individual with an outstanding loan on or
after the applicable disaster date from a qualified
employer plan--
``(i) if the due date pursuant to
subparagraph (B) or (C) of paragraph (2) for
any repayment with respect to such loan occurs
during the period beginning on the applicable
disaster date and ending on December 31, 2014,
such due date shall be delayed for 1 year,
``(ii) any subsequent repayments with
respect to any such loan shall be appropriately
adjusted to reflect the delay in the due date
under clause (i) and any interest accruing
during such delay, and
``(iii) in determining the 5-year period
and the term of a loan under subparagraph (B)
or (C) of paragraph (2), the period described
in clause (i) shall be disregarded.
``(C) Definitions.--For purposes of this
paragraph--
``(i) Qualified individual.--The term
`qualified individual' means, with respect to
any federally declared disaster occurring
during 2012, 2013, or 2014, an individual whose
principal place of abode on the applicable
disaster date is located in the disaster area
and who has sustained an economic loss by
reason of such federally declared disaster.
``(ii) Applicable period.--The applicable
period is the period beginning on the
applicable disaster date and ending on December
31, 2014.
``(iii) Federally declared disaster;
disaster area.--The terms `federally declared
disaster' and `disaster area' have the meanings
given such terms under section 165(h)(3)(C).
``(iv) Applicable disaster date.--The term
`applicable disaster date' means, with respect
to any federally declared disaster, the date on
which such federally declared disaster
occurs.''.
(2) Effective date.--The amendment made by this subsection
shall apply to loans made with respect to disaster declared
after December 31, 2011.
(c) 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 any provision of, or
amendment made by, this section, or pursuant to
any regulation issued by the Secretary or the
Secretary of Labor under any provision of, or
amendment made by, this section, and
(ii) on or before the last day of the first
plan year beginning on or after January 1,
2015, or such later date as the Secretary may
prescribe.
In the case of a governmental plan (as defined in
section 414(d)), 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 that the
provisions of, and amendments made by,
this section or the regulation
described in subparagraph (A)(i) takes
effect (or in the case of a plan or
contract amendment not required by the
provisions of, or amendments made by,
this section or such regulation, the
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.
SEC. 109. ADDITIONAL EXEMPTION FOR HOUSING QUALIFIED DISASTER DISPLACED
INDIVIDUALS.
(a) In General.--Section 151 of the Internal Revenue Code of 1986
is amended by adding at the end the following new subsection:
``(g) Additional Exemption for Certain Disaster-Displaced
Individuals.--
``(1) In general.--In the case of any taxable year
beginning in 2012, 2013, or 2014, there shall be allowed an
exemption of $500 for each qualified disaster-displaced
individual with respect to the taxpayer for the taxable year.
``(2) Limitations.--
``(A) Dollar limitation.--The exemption under
paragraph (1) shall not exceed $2,000, reduced by the
amount of the exemption under this subsection for all
prior taxable years.
``(B) Individuals taken into account only once.--An
individual shall not be taken into account under
paragraph (1) if such individual was taken into account
under this subsection by the taxpayer for any prior
taxable year.
``(C) Identifying information required.--An
individual shall not be taken into account under
paragraph (1) for a taxable year unless the taxpayer
identification number of such individual is included on
the return of the taxpayer for such taxable year.
``(3) Qualified disaster-displaced individual.--
``(A) In general.--For purposes of this subsection,
the term `qualified disaster-displaced individual'
means, with respect to any taxpayer for any taxable
year, any qualified individual if such individual is
provided housing free of charge by the taxpayer in the
principal residence of the taxpayer for a period of 60
consecutive days which ends in such taxable year. Such
term shall not include the spouse or any dependent of
the taxpayer.
``(B) Qualified individual.--The term `qualified
individual' means any individual who--
``(i) on the date of a federally declared
disaster occurring during 2012, 2013, or 2014
maintained such individual's principal place of
abode in the disaster area declared with
respect to such disaster, and
``(ii) was displaced from such principal
place of abode by reason of the federally
declared disaster.
For purposes of the preceding sentence, the terms
`federally declared disaster' and `disaster area' have
the meanings given such terms in section 165(h)(3).
``(4) Compensation for housing.--No deduction shall be
allowed under this subsection if the taxpayer receives any rent
or other amount (from any source) in connection with the
providing of such housing.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2011.
SEC. 110. EXCLUSIONS OF CERTAIN CANCELLATIONS OF INDEBTEDNESS BY REASON
OF 2012, 2013, OR 2014 DISASTERS.
(a) In General.--Section 108 of the Internal Revenue Code of 1986
is amended by adding at the end the following new subsection:
``(j) Discharge of Indebtedness for Individuals Affected by 2012,
2013, and 2014 Disasters.--
``(1) In general.--Except as provided in paragraph (2),
gross income shall not include any amount which (but for this
subsection) would be includible in gross income by reason of
any discharge (in whole or in part) of indebtedness of a
natural person described in paragraph (3) by an applicable
entity (as defined in section 6050P(c)(1)) during the
applicable period.
``(2) Exceptions for business indebtedness.--Paragraph (1)
shall not apply to any indebtedness incurred in connection with
a trade or business.
``(3) Persons described.--A natural person is described in
this paragraph if the principal place of abode of such person
on the applicable disaster date was located in the disaster
area with respect to any federally declared disaster occurring
during 2012, 2013, or 2014.
``(4) Applicable period.--For purposes of this subsection,
the term `applicable period' means the period beginning on the
applicable disaster date and ending on the date which is 14
months after such date.
``(5) Other definitions.--For purposes of this subsection--
``(A) Federally declared disaster; disaster area.--
The terms `federally declared disaster' and `disaster
area' have the meanings given such terms under section
165(h)(3)(C).
``(B) Applicable disaster date.--The term
`applicable disaster date' means, with respect to any
federally declared disaster, the date on which such
federally declared disaster occurs.''.
(b) Effective Date.--This section shall apply to discharges made on
or after December 31, 2011.
SEC. 111. SPECIAL RULE FOR DETERMINING EARNED INCOME OF INDIVIDUALS
AFFECTED BY FEDERALLY DECLARED DISASTERS.
(a) In General.--Section 32 of the Internal Revenue Code of 1986 is
amended by adding at the end the following new subsection:
``(n) Special Rule for Determining Earned Income of Taxpayers
Affected by Federally Declared Disasters.--
``(1) In general.--In the case of a qualified individual
with respect to any federally declared disaster occurring
during 2012, 2013, or 2014, if the earned income of the
taxpayer for the taxable year which includes the applicable
disaster date is less than the earned income of the taxpayer
for the preceding taxable year, the credit allowed under this
section and section 24(d) may, at the election of the taxpayer,
be determined by substituting--
``(A) such earned income for the preceding taxable
year, for
``(B) such earned income for the taxable year which
includes the applicable date.
``(2) Qualified individual.--For purposes of this
subsection, the term `qualified individual' means, with respect
to any federally declared disaster occurring during 2012, 2013,
or 2014, any individual whose principal place of abode on the
applicable disaster date, was located--
``(A) in any portion of a disaster area determined
by the President to warrant individual or individual
and public assistance under the Robert T. Stafford
Disaster Relief and Emergency Assistance Act by reason
of the federally declared disaster, or
``(B) in any portion of the disaster area not
described in subparagraph (A) and such individual was
displaced from such principal place of abode by reason
of the federally declared disaster.
``(3) Other definitions.--For purposes of this paragraph--
``(A) Federally declared disaster; disaster area.--
The terms `federally declared disaster' and `disaster
area' have the meanings given such terms under section
165(h)(3)(C).
``(B) Applicable disaster date.--The term
`applicable disaster date' means, with respect to any
federally declared disaster, the date on which such
federally declared disaster occurs.
``(4) Special rules.--
``(A) Application to joint returns.--For purposes
of paragraph (1), in the case of a joint return for a
taxable year which includes the disaster date--
``(i) such paragraph shall apply if either
spouse is a qualified individual, and
``(ii) the earned income of the taxpayer
for the preceding taxable year shall be the sum
of the earned income of each spouse for such
preceding taxable year.
``(B) Uniform application of election.--Any
election made under paragraph (1) shall apply with
respect to both sections 24(d) and this section.
``(C) Errors treated as mathematical error.--For
purposes of section 6213, an incorrect use on a return
of earned income pursuant to paragraph (1) shall be
treated as a mathematical or clerical error.
``(D) No effect on determination of gross income,
etc.--Except as otherwise provided in this subsection,
this title shall be applied without regard to any
substitution under paragraph (1).''.
(b) Child Tax Credit.--Section 24(d) of the Internal Revenue Code
of 1986 is amended by adding at the end the following new paragraph:
``(5) Special rule for determining earned income of
taxpayers affected by federally declared disasters.--For
election by qualified individuals with respect to certain
federally declared disasters to substitute earned income from
the preceding taxable year, see section 32(n).''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2011.
SEC. 112. INCREASE IN REHABILITATION CREDIT FOR BUILDINGS IN 2012,
2013, AND 2014 DISASTER AREAS.
(a) In General.--Section 47 of the Internal Revenue Code of 1986 is
amended by adding at the end the following new subsection:
``(e) Special Rule for Expenditures Made in Connection With Certain
Disasters.--
``(1) In general.--In the case of qualified rehabilitation
expenditures paid or incurred during the applicable period with
respect to any qualified rehabilitated building or certified
historic structure located in a disaster area with respect to
any federally declared disaster occurring in 2012, 2013, or
2014, subsection (a) shall be applied--
``(A) by substituting `13 percent' for `10 percent'
in paragraph (1) thereof, and
``(B) by substituting `26 percent' for `20 percent'
in paragraph (2) thereof.
``(2) Definitions.--For purposes of this subsection--
``(A) Federally declared disaster; disaster area.--
The terms `federally declared disaster' and `disaster
area' have the meanings given such terms under section
165(h)(3)(C).
``(B) Applicable period.--The term `applicable
period' means the period beginning on the applicable
disaster date and ending on December 31, 2015.
``(C) Applicable disaster date.--The term
`applicable disaster date' means, with respect to any
federally declared disaster, the date on which such
federally declared disaster occurs.''.
(b) Effective Date.--The amendments made by this section shall
apply to amounts paid or incurred after December 31, 2011.
SEC. 113. ADVANCED REFUNDINGS OF CERTAIN TAX-EXEMPT BONDS.
(a) In General.--Section 149(d) of the Internal Revenue Code of
1986 is amended by redesignating paragraph (7) as paragraph (8) and by
inserting after paragraph (6) the following new paragraph:
``(7) Special rule with respect to certain natural
disasters.--
``(A) In general.--With respect to a bond described
in subparagraph (C), one additional advance refunding
after the date of the enactment of this paragraph and
before January 1, 2018, shall be allowed under the
rules of this subsection if--
``(i) the Governor of the State designates
the advance refunding bond for purposes of this
subsection, and
``(ii) the requirements of subparagraph (E)
are met.
``(B) Certain private activity bonds.--With respect
to a bond described in subparagraph (C) which is an
exempt facility bond described in paragraph (1) or (2)
of section 142(a), one advance refunding after the date
of the enactment of this paragraph and before January
1, 2018, shall be allowed under the applicable rules of
this subsection (notwithstanding paragraph (2) thereof)
if the requirements of clauses (i) and (ii) of
subparagraph (A) are met.
``(C) Bonds described.--A bond is described in this
paragraph if, with respect to any federally declared
disaster, such bond--
``(i) was outstanding on the applicable
disaster date, and
``(ii) is issued by an applicable State or
a political subdivision thereof.
``(D) Aggregate limit.--The maximum aggregate face
amount of bonds which may be designated under this
subsection by the Governor of a State shall not exceed
$4,500,000,000.
``(E) Additional requirements.--The requirements of
this subparagraph are met with respect to any advance
refunding of a bond described in subparagraph (C) if--
``(i) no advance refundings of such bond
would be allowed under this title on or after
the applicable disaster date,
``(ii) the advance refunding bond is the
only other outstanding bond with respect to the
refunded bond, and
``(iii) the requirements of section 148 are
met with respect to all bonds issued under this
paragraph.
``(F) Definitions.--For purposes of this
subsection--
``(i) Federally declared disaster; disaster
area.--The terms `federally declared disaster'
and `disaster area' have the meanings given
such terms under section 165(h)(3)(C).
``(ii) Applicable disaster date.--The term
`applicable disaster date' means, with respect
to any federally declared disaster, the date on
which such federally declared disaster occurs.
``(iii) Applicable state.--The term
`applicable State' means, with respect to any
federally declared disaster, any State in which
a portion of the disaster area is located.''.
SEC. 114. QUALIFIED DISASTER AREA RECOVERY BONDS.
(a) In General.--Subpart A of part IV of subchapter B of chapter 1
of the Internal Revenue Code of 1986 is amended by inserting after
section 146 the following new section:
``SEC. 146A. QUALIFIED DISASTER AREA RECOVERY BONDS.
``(a) In General.--For purposes of this title, any qualified
disaster area recovery bond shall--
``(1) be treated as an exempt facility bond, and
``(2) not be subject to section 146.
``(b) Qualified Disaster Area Recovery Bond.--For purposes of this
section, the term `qualified disaster area recovery bond' means any
bond issued as part of an issue if--
``(1) 95 percent or more of the net proceeds of such issue
are to be used for qualified project costs,
``(2) such bond is issued by a State or any political
subdivision thereof any part of which is in a qualified
disaster area,
``(3) the Governor of the issuing State designates such
bond for purposes of this section, and
``(4) such bond is issued after the date of the enactment
of this section and before January 1, 2017.
``(c) Limitation on Amount of Bonds.--
``(1) In general.--The maximum aggregate face amount of
bonds which may be designated under this section by any State
shall not exceed $10,000,000,000.
``(2) Movable property.--No bonds shall be issued which are
to be used for movable fixtures and equipment.
``(3) Treatment of current refunding bonds.--Paragraph (1)
shall not apply to any bond (or series of bonds) issued to
refund a qualified disaster area recovery bond, if--
``(A) the average maturity date of the issue of
which the refunding bond is a part is not later than
the average maturity date of the bonds to be refunded
by such issue,
``(B) the amount of the refunding bond does not
exceed the outstanding amount of the refunded bond, and
``(C) the net proceeds of the refunding bond are
used to redeem the refunded bond not later than 90 days
after the date of the issuance of the refunding bond.
For purposes of subparagraph (A), average maturity shall be
determined in accordance with section 147(b)(2)(A).
``(d) Qualified Project Costs.--For purposes of this section, the
term `qualified project costs' means the cost of acquisition,
construction, reconstruction, and renovation of--
``(1) residential rental property (as defined in section
142(d)),
``(2) nonresidential real property (including fixed
improvements associated with such property),
``(3) a facility described in paragraph (2) or (3) of
section 142(a), or
``(4) public utility property (as defined in section
168(i)(10)),
which is located in a qualified disaster area and was damaged or
destroyed by reason of a federally declared disaster.
``(e) Special Rules.--In applying this title to any qualified
disaster area recovery bond, the following modifications shall apply:
``(1) Section 147(d) (relating to acquisition of existing
property not permitted) shall be applied by substituting `50
percent' for `15 percent' each place it appears.
``(2) Section 148(f)(4)(C) (relating to exception from
rebate for certain proceeds to be used to finance construction
expenditures) shall apply to the available construction
proceeds of bonds issued under this section. For purposes of
the preceding sentence, the following spending requirements
shall apply in lieu of the requirements in clause (ii) of such
section:
``(A) 40 percent of such available construction
proceeds are spent for the governmental purposes of the
issue within the 2-year period beginning on the date
the bonds are issued,
``(B) 60 percent of such proceeds are spent for
such purposes within the 3-year period beginning on
such date,
``(C) 80 percent of such proceeds are spent for
such purposes within the 4-year period beginning on
such date, and
``(D) 100 percent of such proceeds are spent for
such purposes within the 5-year period beginning on
such date.
``(3) Repayments of principal on financing provided by the
issue--
``(A) may not be used to provide financing, and
``(B) must be used not later than the close of the
1st semiannual period beginning after the date of the
repayment to redeem bonds which are part of such issue.
The requirement of subparagraph (B) shall be treated as met
with respect to amounts received within 5 years after the date
of issuance of the issue (or, in the case of a refunding bond,
the date of issuance of the original bond) if such amounts are
used by the close of such 5 years to redeem bonds which are
part of such issue.
``(4) Section 57(a)(5) shall not apply.
``(f) Separate Issue Treatment of Portions of an Issue.--This
section shall not apply to the portion of an issue which (if issued as
a separate issue) would be treated as a qualified bond or as a bond
that is not a private activity bond (determined without regard to
paragraph (1)), if the issuer elects to so treat such portion.
``(g) Qualified Disaster Area; Federally Declared Disaster.--
``(1) Qualified disaster area.--The term `qualified
disaster area' means any area determined to warrant individual
or individual and public assistance from the Federal Government
under the Robert T. Stafford Disaster Relief and Emergency
Assistance Act by reason of a federally declared disaster
occurring during the period beginning after December 31, 2011,
and before January 1, 2015.
``(2) Federally declared disaster.--The term `federally
declared disaster' has the meaning given to such term under
section 165(h)(3)(C).''.
(b) Clerical Amendment.--The table of sections for subpart A of
part IV of subchapter B of chapter 1 of such Code is amended by
inserting after the item relating to section 146 the following new
item:
``Sec. 146A. Qualified disaster area recovery bonds.''.
(c) Effective Date.--The amendments made by this section shall
apply to obligations issued after the date of the enactment of this
Act.
SEC. 115. ADDITIONAL LOW-INCOME HOUSING CREDIT ALLOCATIONS.
(a) In General.--Paragraph (3) of section 42(h) of the Internal
Revenue Code of 1986 (relating to limitation on aggregate credit
allowable with respect to projects located in a State) is amended by
adding at the end the following new subparagraph:
``(J) Increase in state housing credit for states
damaged by natural disasters.--
``(i) In general.--In the case of calendar
year 2015, the State housing credit ceiling of
each State any portion of which includes any
portion of a qualifying disaster area shall be
increased by so much of the aggregate housing
credit dollar amount as does not exceed the
applicable limitation allocated by the State
housing credit agency of such State for such
calendar year to buildings located in
qualifying disaster areas.
``(ii) Applicable limitation.--For purposes
of clause (i), the applicable limitation is the
greater of--
``(I) $8 multiplied by the
population of the qualifying disaster
areas in such State, or
``(II) 50 percent of the State
housing credit ceiling (determined
without regard to this subparagraph)
for 2014.
``(iii) Applicable percentage.--For
purposes of this section, the applicable
percentage with respect to any building to
which amounts allocated under clause (i) shall
be determined under subsection (b)(2), except
that subparagraph (A) thereof shall be applied
by substituting `January 1, 2015' for `January
1, 2014'.
``(iv) Allocations treated as made first
from additional allocation amount for purposes
of determining carryover.--For purposes of
determining the unused State housing credit
ceiling under subparagraph (C) for any calendar
year, any increase in the State housing credit
ceiling under clause (i) shall be treated as an
amount described in clause (ii) of such
subparagraph.
``(v) Qualifying disaster area.--For
purposes of this subparagraph, the term
`qualifying federally declared disaster area'
means--
``(I) each county which is
determined to warrant individual or
individual and public assistance from
the Federal Government under a
qualifying natural disaster declaration
described in clause (vi)(I), and
``(II) each county not described in
subclause (I) which is included in the
geographical area covered by a
qualifying natural disaster declaration
described in subclause (II) or (III) of
clause (vi).
``(vi) Qualifying natural disaster
declaration.--For purposes of clause (v), the
term `qualifying natural disaster declaration'
means--
``(I) a federally declared disaster
(as defined in section 165(h)(3)(C))
occurring during the period beginning
after December 31, 2011, and before
January 1, 2015,
``(II) a natural disaster declared
by the Secretary of Agriculture in 2011
due to damaging weather and other
conditions relating to Hurricane Irene
or Tropical Storm Lee under section
321(a) of the Consolidated Farm and
Rural Development Act (7 U.S.C.
1961(a)), or
``(III) a major disaster or
emergency designated by the President
in 2011 due to damaging weather and
other conditions relating to Hurricane
Irene or Tropical Storm Lee under the
Robert T. Stafford Disaster Relief and
Emergency Assistance Act (42 U.S.C.
5121 et seq.).''.
(b) Effective Date.--The amendment made by this section shall take
effect on the date of the enactment of this Act.
SEC. 116. FACILITATION OF TRANSFER OF WATER LEASING AND WATER BY MUTUAL
DITCH OR IRRIGATION COMPANIES IN DISASTER AREAS.
(a) In General.--Paragraph (12) of section 501(c) of the Internal
Revenue Code of 1986 is amended by adding at the end the following new
subparagraph:
``(I) Treatment of mutual ditch or irrigation
companies in certain disaster areas.--
``(i) In general.--In the case of a
qualified mutual ditch or irrigation company or
like organization, subparagraph (A) shall be
applied without taking into account any income
received or accrued during the applicable
period--
``(I) from the sale, lease, or
exchange of fee or other interests in
real property, including interests in
water,
``(II) from the sale or exchange of
stock in a mutual ditch or irrigation
company or like organization or
contract rights for the delivery or use
of water,
``(III) from the investment of
proceeds from sales, leases, or
exchanges under subclauses (I) and
(II), or
``(IV) from the United States, or a
State or local government, resulting
from the federally declared disaster,
except that any income received under subclause
(I), (II), (III), or (IV) which is distributed
or expended for expenses (other than for
operations, maintenance, and capital
improvements) of the qualified mutual ditch or
irrigation company or like organization shall
be treated as nonmember income in the year in
which it is distributed or expended.
``(ii) Qualified mutual ditch or irrigation
company or like organization.--For purposes of
this paragraph--
``(I) In general.--The term
`qualified mutual ditch or irrigation
company or like organization' means any
mutual ditch or irrigation company or
like organization to a mutual ditch or
irrigation company that diverted,
delivered, transported, stored, or used
its water for agricultural irrigation
purposes on its own or through its
shareholders in a qualified disaster
area during 2012, 2013, or 2014.
``(II) Qualified asset.--The term
`qualified asset' means any real
property or tangible personal property
used in the mutual ditch or irrigation
company's (or like organization's)
system.
``(III) Multiple areas.--Under
regulations, if the qualified assets of
any mutual ditch or irrigation company
or like organization are located in
more than 1 qualified disaster area,
all such areas shall be treated as 1
area and if more than 1 federally
declared disaster is involved, the date
on which the last of such disasters
occurred shall be the date used for
purposes of this paragraph.
``(iii) Applicable period.--For purposes of
this paragraph, the term `applicable period'
means the taxable year in which the federally
declared disaster occurred and the 5 following
taxable years.
``(iv) Other definitions.--
``(I) Qualified disaster area.--The
term `qualified disaster area' means
any area determined to warrant
individual or individual and public
assistance from the Federal Government
under the Robert T. Stafford Disaster
Relief and Emergency Assistance Act by
reason of a federally declared disaster
occurring during the period beginning
on January 1, 2012, and ending on
December 31, 2014.
``(II) Federally declared
disaster.--The term `federally declared
disaster' has the meaning given to such
term under section 165(h)(3)(C).''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to taxable years ending after December 31, 2011.
TITLE II--OTHER DISASTER TAX RELIEF PROVISIONS
SEC. 201. EXCLUSION FOR DISASTER MITIGATION PAYMENTS RECEIVED FROM
STATE AND LOCAL GOVERNMENTS.
(a) In General.--Paragraph (2) of section 139(g) of the Internal
Revenue Code of 1986 is amended by inserting ``, or any other amount
which is paid by a State or local government or agency or
instrumentality thereof,'' after ``(as in effect on such date)''.
(b) Effective Date.--The amendment made by this section shall apply
to payments received after the date of the enactment of this Act.
SEC. 202. NATURAL DISASTER FUNDS.
(a) Natural Disaster Fund.--Subpart C of part II of subchapter E of
chapter 1 of the Internal Revenue Code of 1986 is amended by inserting
after section 468B the following new section:
``SEC. 468C. SPECIAL RULES FOR NATURAL DISASTER FUNDS.
``(a) In General.--If a qualified taxpayer elects the application
of this section, there shall be allowed as a deduction for any taxable
year the amount of payments made by the taxpayer to a natural disaster
fund during such taxable year.
``(b) Natural Disaster Fund.--The term `natural disaster fund'
means a fund meeting the following requirements:
``(1) Designation.--The taxpayer designates--
``(A) the fund as a natural disaster fund in the
manner prescribed by the Secretary, and
``(B) the line or lines of business to which the
fund applies.
``(2) Segregation.--The assets of the fund are segregated
from other assets of the taxpayer.
``(3) Investments.--
``(A) The assets of the fund are maintained in one
or more qualified accounts and are invested only in--
``(i) deposits with banks whose deposits
are insured subject to applicable limits by the
Federal Deposit Insurance Corporation, or
``(ii) in stock or other securities in
which the fund would be permitted to invest if
it were a capital construction fund subject to
the investment limitations of paragraphs (2)
and (3) of section 7518(b)(2).
``(B) All investment earnings (including gains and
losses) from investments of the fund become part of the
fund.
``(4) Contributions to the fund.--The fund does not accept
any deposits (or other amounts) other than cash payments with
respect to which a deduction is allowable under subsection (a)
and earnings (including gains and losses) from fund
investments.
``(5) Purpose.--The fund is established and maintained for
the purposes of covering costs, expenses, and losses (including
business interruption losses) resulting from a Federally
declared natural disaster to the extent such costs are not
covered by insurance.
``(6) Maximum balance.--The balance of the fund does not
exceed the lesser of--
``(A) the sum of--
``(i) 150 percent of the maximum
deductible, and
``(ii) 100 percent of the maximum co-
insurance (to the extent not taken into account
in clause (i)),
that, in the case of a Federally declared natural
disaster resulting in losses, the taxpayer could be
expected to pay with respect to property and business
interruption insurance maintained by the taxpayer for
the line of business to which the fund applies and that
would cover losses resulting from a Federally declared
natural disaster, and
``(B) the maximum loss under any insurance coverage
that the taxpayer could reasonably expect to occur for
the line of business in the case of a severe natural
disaster.
``(7) Financial statements.--The fund or the balance of the
fund is recorded in the taxpayer's financial statements in
accordance with generally accepted accounting principles and
not as a current asset and the footnotes to the taxpayer's
financial statements include a short description of the fund
and its purposes.
``(8) Insurance.--The taxpayer property insurance
maintained by the qualified taxpayer applies to 75 percent or
more of the property used--
``(A) in the qualified taxpayer's line of business
to which the fund relates, and
``(B) in the United States.
``(c) Qualified Taxpayer.--For purposes of this section, the term
`qualified taxpayer' means any taxpayer that--
``(1) actively conducts a trade or business, and
``(2) maintains property insurance with respect to such
trade or business that insures against losses in natural
disasters.
``(d) Failure To Meet Requirements.--If a fund that was a natural
disaster fund ceases to meet any of the requirements of subsection (b)
or a taxpayer who has a natural disaster fund ceases to meet the
requirement of subsection (c), the entire balance of the fund shall be
deemed distributed in a nonqualified distribution at the time the fund
ceases to meet such requirements.
``(e) Taxation of Fund.--
``(1) In general.--The earnings (including gains and
losses) from the investment and reinvestment of amounts held in
the fund shall not be taken into account in determining the
gross income of the taxpayer that owns the fund.
``(2) Not a separate taxpayer.--A natural disaster fund
shall not be considered a separate taxpayer for purposes of
this subtitle.
``(f) Taxation of Distributions From the Fund.--
``(1) Qualified distributions.--For purposes of this
chapter, qualified distributions shall be treated in the same
manner as proceeds from property or business interruption
insurance.
``(2) Nonqualified distributions.--
``(A) In general.--In the case of any taxable year
for which there is a nonqualified distribution--
``(i) such nonqualified distributions shall
be excluded from the gross income of the
taxpayer, and
``(ii) the tax imposed by this chapter
(determined without regard to this subsection)
shall be increased by the product of the amount
of such nonqualified distribution and the
highest rate of tax specified in section 1
(section 11 in the case of a corporation).
``(B) Tax benefit rule; coordination with deduction
for net operating losses.--Rules similar to the rules
of subparagraphs (B) and (C) of section 7518(g)(6)
shall apply for purposes of this paragraph.
``(3) Additional tax.--The tax imposed by this chapter for
any taxable year on any taxpayer that a owns natural disaster
fund shall be increased by the greater of--
``(A) 20 percent of the amount of any non-qualified
distributions from the fund in the taxable year, and
``(B) an amount equal to interest, at the
underpayment rate established under section 6621, on
the nonqualified distribution from the time the amount
is added to the fund to the time the amount is
distributed.
``(4) Interest calculation.--For purposes of calculating
interest under paragraph (3)(B)--
``(A) all investment earnings (including gains or
losses) in taxable year shall be treated as added to
the fund on the last day of the taxable year, and
``(B) amounts distributed from the fund shall be
treated as distributed on a first-in, first-out basis.
``(g) Definitions.--For purposes of this section--
``(1) Federally declared natural disaster.--The term
`Federally declared natural disaster' means a natural disaster
that is determined by Presidential declaration under the Robert
T. Stafford Disaster Relief and Emergency Assistance Act to
warrant individual or individual and public assistance under
such Act.
``(2) Nonqualified distribution.--The term `nonqualified
distribution' means a distribution from a natural disaster fund
other than a qualified distribution.
``(3) Qualified account.--The term `qualified account'
means an account with a bank (as defined in section 581) or a
brokerage account but only if the investments of such accounts
are limited to those permitted by subsection (b)(3) and no
investments are made in a related person (as defined in section
465(b)(3)(C)) to the taxpayer.
``(4) Qualified distribution.--
``(A) In general.--The term `qualified
distribution' means with respect to natural disaster
fund an amount equal to the excess of--
``(i) costs, expenses, and losses
(including losses of a type reimbursable by
proceeds of business interruption insurance)
incurred by the taxpayer as a result of the
Federally declared natural disaster with
respect to the line or lines of business for
which the fund was designated, over
``(ii) the proceeds of property and
business interruption insurance paid for the
benefit of the taxpayer with respect to costs,
expenses, and losses described in clause (i).
``(B) Limitation.--A distribution from a natural
disaster fund shall not be treated as a qualified
distribution if such distribution is allocated to a
Federally declared natural disaster occurring more than
3 years before the date of such distribution.
``(h) Special Rules.--For purposes of this section--
``(1) No double counting.--Any portion of any deductible or
coinsurance taken into account under subsection (b)(6) in
determining the maximum balance for a natural disaster fund
shall not be taken into account in determining the maximum
balance for another natural disaster fund.
``(2) Excess balance.--
``(A) In general.--If the balance of a natural
disaster fund exceeds the maximum balance permitted by
subsection (b)(6) by reason of investment earnings or a
reduction in the maximum balance, the account shall not
cease to be a natural disaster fund as the result of
exceeding such limit if the excess is distributed
within 120 days of the date that such excess first
occurred.
``(B) Treatment of distributions of excess
balance.--In the case of any distribution of the excess
balance of a natural disaster fund within 120 days of
the date that such excess first occurred--
``(i) paragraphs (2) and (3) of subsection
(f) shall not apply to the distribution of such
excess if distributed within such period, and
``(ii) the amount of such distribution
shall be included in the gross income of the
taxpayer in the year such distribution was
made.
``(C) Anti-abuse rule.--Subparagraph (B) shall not
apply in the case of any reduction in the maximum
balance resulting from any action of the taxpayer the
primary purpose of which was to reduce the maximum
balance to enable a distribution that would not be
subject to the maximum tax rate calculation or the
additional tax.
``(3) Certain asset acquisitions.--The transfer of a
natural disaster fund (or the portion of a natural disaster
fund) from one person to another person shall not constitute a
nonqualified distribution if--
``(A) such transfer is part of a transaction--
``(i) to which section 381 applies,
``(ii) the transferee acquires
substantially all of the assets of the
transferor used in the line or lines of
business for which the fund was designated,
``(iii) the transferee acquires
substantially all of the assets of the
transferor used in one, but not all, of the
lines of business for which the fund was
designated, or
``(iv) the transferee acquires
substantially all of the transferor's assets
located in a geographical area and used in a
line of business for which the fund was
designated, and
``(B) the transferee elects to treat the acquired
natural disaster fund (or portion thereof) as a natural
disaster fund for the line of business for which the
transferor had previously designated the fund and as a
continuation of the fund (or pro rata portion thereof)
for purposes of determining the additional tax imposed
by subsection (f)(4).
``(i) Regulations.--The Secretary shall prescribe such regulations
as may be necessary or appropriate to carry out the provisions of this
section.''.
(b) Clerical Amendment.--The table of sections for subpart C of
part II of subchapter E of chapter 1 of the Internal Revenue Code of
1986 is amended by inserting after the item relating to section 468B
the following new item:
``Sec. 468C. Special rules for natural disaster funds.''.
(c) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2013.
<all>
Introduced in Senate
Read twice and referred to the Committee on Finance.
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