I
109th CONGRESS
1st Session
H. R. 4155
IN THE HOUSE OF REPRESENTATIVES
October 27, 2005
Mr. McCrery (for himself, Mr. Jefferson, Mr. Brady of Texas, Mr. Lewis of Georgia, Mr. Lewis of Kentucky, Mr. Baker, Mr. Alexander, Mr. Jindal, Mr. Melancon, and Mr. Pickering) introduced the following bill; which was referred to the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to provide tax benefits for the Gulf Opportunity Zone and certain areas affected by Hurricane Rita, and for other purposes.
Short title; etc
Short title
This Act may be cited as the Gulf Opportunity Zone Act of 2005
.
Amendment of 1986 Code
Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.
Table of contents
The table of contents of this Act is as follows:
Sec. 1. Short title; etc
Title I—Establishment of Gulf Opportunity Zone
Sec. 101. Tax benefits for Gulf Opportunity Zone
Sec. 102. Federal guarantee of certain State bonds
Title II—Tax benefits related to Hurricane Rita
Sec. 201. Extension of certain emergency tax relief for Hurricane Katrina to Hurricane Rita
Title III—Other provisions
Sec. 301. Secretarial authority to extend period during which traveling expenses are treated as incurred away from home in case of major disaster
Sec. 302. Gulf Coast Recovery Bonds
Establishment of Gulf Opportunity Zone
Tax benefits for Gulf Opportunity Zone
In general
Subchapter Y of chapter 1 is amended by adding at the end the following new part:
Tax benefits for Gulf Opportunity Zone
Sec. 1400M. Definitions
Sec. 1400N. Tax benefits for Gulf Opportunity Zone
Definitions
For purposes of this part—
Gulf Opportunity Zone
The terms Gulf Opportunity Zone and GO Zone mean that portion of the Hurricane Katrina disaster area determined by the President 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 Hurricane Katrina.
Hurricane Katrina disaster area
The term Hurricane Katrina disaster area means an area with respect to which a major disaster has been declared by the President before September 14, 2005, under section 401 of such Act by reason of Hurricane Katrina.
Rita GO Zone
The term Rita GO Zone means that portion of the Hurricane Rita disaster area determined by the President to warrant individual or individual and public assistance from the Federal Government under such Act by reason of Hurricane Rita.
Hurricane Rita disaster area
The term Hurricane Rita disaster area means an area with respect to which a major disaster has been declared by the President, before October 6, 2005, under section 401 of such Act by reason of Hurricane Rita.
Tax benefits for Gulf Opportunity Zone
Tax-exempt bond financing
In general
For purposes of this title—
any qualified Gulf Opportunity Zone Bond described in paragraph (2)(A)(i) shall be treated as an exempt facility bond, and
any qualified Gulf Opportunity Zone Bond described in paragraph (2)(A)(ii) shall be treated as a qualified mortgage bond.
Qualified Gulf Opportunity Zone Bond
For purposes of this subsection, the term qualified Gulf Opportunity Zone Bond means any bond issued as part of an issue if—
95 percent or more of the net proceeds (as defined in section 150(a)(3)) of such issue are to be used for qualified project costs, or
such issue meets the requirements of a qualified mortgage issue, except as otherwise provided in this subsection,
such bond is issued by the State of Alabama, Louisiana, or Mississippi, or any political subdivision thereof,
the Governor of such State designates such bond for purposes of this section, and
such bond is issued after the date of the enactment of this section and before January 1, 2011.
Limitations on amount of bonds
Aggregate amount designated
The maximum aggregate face amount of bonds which may be designated under this subsection with respect to any State shall not exceed the product of $2,500 multiplied by the portion of the State population which is in the Gulf Opportunity Zone (as determined on the basis of the most recent census estimate of resident population released by the Bureau of Census before August 28, 2005).
Movable property
No bonds shall be issued which are to be used for movable fixtures and equipment.
Qualified project costs
For purposes of this subsection, the term qualified project costs means the cost of acquisition, construction, reconstruction, and renovation of—
nonresidential real property and qualified residential rental property (as defined in section 142(d)) located in the Gulf Opportunity Zone, and
public utility property (as defined in section 168(i)(10)) located in the Gulf Opportunity Zone.
Special rules
In applying this title to any qualified Gulf Opportunity Zone Bond, the following modifications shall apply:
Section 142(d)(1) (defining qualified residential rental project) shall be applied—
by substituting 60 percent
for 50 percent
in subparagraph (A) thereof, and
by substituting 70 percent
for 60 percent
in subparagraph (B) thereof.
Section 143 (relating to mortgage revenue bonds: qualified mortgage bond and qualified veterans’ mortgage bond) shall be applied—
by treating only residences in the Gulf Opportunity Zone as owner-occupied residences,
by treating any residence in the Gulf Opportunity Zone as a targeted area residence, and
by substituting $150,000
for $15,000
in subsection (k)(4) thereof.
Except as provided in section 143, repayments of principal on financing provided by the issue of which such bond is a part may not be used to provide financing.
Section 146 (relating to volume cap) shall not apply.
Section 147(d)(2) (relating to acquisition of existing property not permitted) shall be applied by substituting 50 percent
for 15 percent
each place it appears.
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 which are part of an issue described in paragraph (2)(A)(i).
Section 57(a)(5) (relating to tax-exempt interest) shall not apply.
Separate issue treatment of portions of an issue
This subsection 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.
Advance refundings of certain tax-exempt bonds
In general
With respect to a bond described in paragraph (3) which is not a qualified 501(c)(3) bond, one additional advance refunding after the date of the enactment of this section and before January 1, 2011, shall be allowed under the applicable rules of section 149(d) if—
the Governor of the State designates the advance refunding bond for purposes of this subsection, and
the requirements of paragraph (5) are met.
Certain private activity bonds
With respect to a bond described in paragraph (3) 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 section and before January 1, 2011, shall be allowed under the applicable rules of section 149(d) (notwithstanding paragraph (2) thereof) if the requirements of subparagraphs (A) and (B) of paragraph (1) are met.
Bonds described
A bond is described in this paragraph if such bond was outstanding on August 28, 2005, and is issued by the State of Alabama, Louisiana, or Mississippi, or a political subdivision thereof.
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 in the case of the State of Louisiana,
$2,250,000,000 in the case of the State of Mississippi, and
$1,125,000,000 in the case of the State of Alabama.
Additional requirements
The requirements of this paragraph are met with respect to any advance refunding of a bond described in paragraph (3) if—
no advance refundings of such bond would be allowed under this title on or after August 28, 2005,
the advance refunding bond is the only other outstanding bond with respect to the refunded bond, and
the requirements of section 148 are met with respect to all bonds issued under this subsection.
Low-income housing credit
Additional housing credit dollar amount
In general
For purposes of section 42, in the case of calendar years 2006, 2007, and 2008, the State housing credit ceiling of each State, any portion of which is located in the Gulf Opportunity Zone, shall be increased by the lesser of—
the aggregate housing credit dollar amount allocated by the State housing credit agency of such State to buildings located in the Gulf Opportunity Zone for such calendar year, or
the Gulf Opportunity housing amount for such State for such calendar year.
Gulf Opportunity housing amount
For purposes of subparagraph (A), the term Gulf Opportunity housing amount means, for any calendar year, the amount equal to the product of $18.00 multiplied by the portion of the State population which is in the Gulf Opportunity Zone (as determined on the basis of the most recent census estimate of resident population released by the Bureau of Census before August 28, 2005).
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 section 42(h)(3)(C) for any calendar year, any increase in the State housing credit ceiling under subparagraph (A) shall be treated as an amount described in clause (ii) of such section.
Difficult development area
In general
For purposes of section 42, in the case of property placed in service during 2006, 2007, or 2008, the Gulf Opportunity Zone—
shall be treated as a difficult development area designated under subclause (I) of section 42(d)(5)(C)(iii), and
shall not be taken into account for purposes of applying the limitation under subclause (II) of such section.
Application
Subparagraph (A) shall apply only to—
housing credit dollar amounts allocated during the period beginning on January 1, 2006, and ending on December 31, 2008, and
buildings placed in service during such period to the extent that paragraph (1) of section 42(h) does not apply to any building by reason of paragraph (4) thereof, but only with respect to bonds issued after December 31, 2005.
Special rule for applying income tests
In the case of property placed in service—
during 2006, 2007, or 2008,
in the Gulf Opportunity Zone, and
in a nonmetropolitan area (as defined in section 42(d)(5)(C)(iv)(IV)),
national nonmetropolitan median gross income (determined under rules similar to the rules of section 142(d)(2)(B))for
area median gross incomein subparagraphs (A) and (B) of section 42(g)(1).
Definitions
Any term used in this subsection which is also used in section 42 shall have the same meaning as when used in such section.
Special allowance for certain property acquired on or after August 28, 2005
Additional allowance
In the case of any qualified Gulf Opportunity Zone property—
the depreciation deduction provided by section 167(a) for the taxable year in which such property is placed in service shall include an allowance equal to 50 percent of the adjusted basis of such property, and
the adjusted basis of the qualified Gulf Opportunity Zone property shall be reduced by the amount of such deduction before computing the amount otherwise allowable as a depreciation deduction under this chapter for such taxable year and any subsequent taxable year.
Qualified Gulf Opportunity Zone property
For purposes of this subsection—
In general
The term qualified Gulf Opportunity Zone property means property—
which is described in section 168(k)(2)(A)(i), or
which is nonresidential real property or residential rental property,
substantially all of the use of which is in the Gulf Opportunity Zone and is in the active conduct of a trade or business by the taxpayer in such Zone,
the original use of which in the Gulf Opportunity Zone commences with the taxpayer on or after August 28, 2005,
which is acquired by the taxpayer by purchase (as defined in section 179(d)) on or after August 28, 2005, but only if no written binding contract for the acquisition was in effect before August 28, 2005, and
which is placed in service by the taxpayer on or before December 31, 2007 (December 31, 2008, in the case of nonresidential real property and residential rental property).
Exceptions
Alternative depreciation property
Such term shall not include any property described in section 168(k)(2)(D)(i).
Tax-exempt bond-financed property
Such term shall not include any property any portion of which is financed with the proceeds of any obligation the interest on which is exempt from tax under section 103.
Qualified revitalization buildings
Such term shall not include any qualified revitalization building with respect to which the taxpayer has elected the application of paragraph (1) or (2) of section 1400I(a).
Election out
If a taxpayer makes an election under this clause with respect to any class of property for any taxable year, this subsection shall not apply to all property in such class placed in service during such taxable year.
Special rules
For purposes of this subsection, rules similar to the rules of subparagraph (E) of section 168(k)(2) shall apply, except that such subparagraph shall be applied—
by substituting August 27, 2005
for September 10, 2001
each place it appears therein,
by substituting January 1, 2008
for January 1, 2005
in clause (i) thereof, and
by substituting qualified Gulf Opportunity Zone property
for qualified property
in clause (iv) thereof.
Allowance against alternative minimum tax
For purposes of this subsection, rules similar to the rules of section 168(k)(2)(G) shall apply.
Recapture
For purposes of this subsection, rules similar to the rules under section 179(d)(10) shall apply with respect to any qualified Gulf Opportunity Zone property which ceases to be qualified Gulf Opportunity Zone property.
Increase in expensing under section 179
In general
For purposes of section 179—
the dollar amount in effect under section 179(b)(1) for the taxable year shall be increased by the lesser of—
$100,000, or
the cost of qualified section 179 Gulf Opportunity Zone property placed in service during the taxable year, and
the the dollar amount in effect under section 179(b)(2) for the taxable year shall be increased by the lesser of—
$600,000, or
the cost of qualified section 179 Gulf Opportunity Zone property placed in service during the taxable year.
Qualified section 179 Gulf Opportunity Zone property
For purposes of this subsection, the term qualified section 179 Gulf Opportunity Zone property means section 179 property (as defined in section 179(d)) which is qualified Gulf Opportunity Zone property (as defined in subsection (d)(2)).
Coordination with empowerment zones and renewal communities
For purposes of sections 1397A and 1400J, qualified section 179 Gulf Opportunity Zone property shall not be treated as qualified zone property or qualified renewal property, unless the taxpayer elects not to take such qualified section 179 Gulf Opportunity Zone property into account for purposes of this subsection.
Recapture
For purposes of this subsection, rules similar to the rules under section 179(d)(10) shall apply with respect to any qualified section 179 Gulf Opportunity Zone property which ceases to be qualified section 179 Gulf Opportunity Zone property.
Expensing for certain demolition and clean-up costs
In general
A taxpayer may elect to treat 50 percent of any qualified Gulf Opportunity Zone clean-up cost as an expense which is not chargeable to capital account. Any cost so treated shall be allowed as a deduction for the taxable year in which such cost is paid or incurred.
Qualified Gulf Opportunity Zone clean-up cost
For purposes of this subsection, the term qualified Gulf Opportunity Zone clean-up cost means any amount paid or incurred during the period beginning on August 28, 2005, and ending on December 31, 2007, for the removal of debris from, or the demolition of structures on, real property which is located in the Gulf Opportunity Zone and which is—
held by the taxpayer for use in a trade or business or for the production of income, or
property described in section 1221(a)(1) in the hands of the taxpayer.
Extension of expensing for environmental remediation costs
With respect to any qualified environmental remediation expenditure (as defined in section 198(b)) paid or incurred on or after August 28, 2005, in connection with a qualified contaminated site located in the Gulf Opportunity Zone, section 198 (relating to expensing of environmental remediation costs) shall be applied—
by substituting December 31, 2007
for December 31, 2005
, and
except as provided in section 198(d)(2), by treating petroleum products (as defined in section 4612(a)(3)) as a hazardous substance.
Increase in rehabilitation credit
In the case of qualified rehabilitation expenditures (as defined in section 47(c)) paid or incurred during the period beginning on August 28, 2005, and ending on December 31, 2008, with respect to any qualified rehabilitated building or certified historic structure (as defined in section 47(c)) located in the Gulf Opportunity Zone, subsection (a) of section 47 (relating to rehabilitation credit) shall be applied—
by substituting 13 percent
for 10 percent
in paragraph (1) thereof, and
by substituting 26 percent
for 20 percent
in paragraph (2) thereof.
Special rules for small timber producers
Increased expensing for qualified timber property
In the case of qualified timber property any portion of which is located in the Gulf Opportunity Zone or in that portion of the Rita GO Zone which is not part of the Gulf Opportunity Zone, the limitation under subparagraph (B) of section 194(b)(1) shall be increased by the lesser of—
the limitation which would (but for this subsection) apply under such subparagraph, or
the amount of reforestation expenditures (as defined in section 194(c)(3)) paid or incurred by the taxpayer with respect to such qualified timber property during the specified portion of the taxable year.
5 year NOL carryback of certain timber losses
For purposes of determining farming loss under section 172(i), income and deductions which are allocable to the specified portion of the taxable year and which are attributable to qualified timber property any portion of which is located in the Gulf Opportunity Zone or in that portion of the Rita GO Zone which is not part of the Gulf Opportunity Zone shall be treated as attributable to farming businesses.
Rules not applicable to large timber producers
Expensing
Paragraph (1) shall not apply to any taxpayer if such taxpayer holds more than 500 acres of qualified timber property at any time during the taxable year.
NOL carryback
Paragraph (2) shall not apply with respect to any qualified timber property unless—
such property was held by the taxpayer—
on August 28, 2005, in the case of qualified timber property any portion of which is located in the Gulf Opportunity Zone, or
on September 23, 2005, in the case of qualified timber property (other than property described in subclause (I)) any portion of which is located in that portion of the Rita GO Zone which is not part of the Gulf Opportunity Zone, and
such taxpayer held not more than 500 acres of qualified timber property on such date.
Aggregation rule
For purposes of subparagraphs (A) and (B), related persons shall be treated as one taxpayer. For purposes of the preceding sentence, the following shall be treated as related persons—
2 or more persons if the relationship between such persons would result in a disallowance of losses under section 267 or 707(b), and
2 or more persons which are members of the same controlled group (within the meaning of section 194(b)(2)(A)) of corporations.
Definitions
For purposes of this subsection—
Specified portion
The term specified portion means—
in the case of the Gulf Opportunity Zone, that portion of the taxable year which is on or after August 28, 2005, and before January 1, 2007, and
in the case of that portion of the Rita GO Zone which is not part of the Gulf Opportunity Zone, that portion of the taxable year which is on or after September 23, 2005, and before January 1, 2007.
Qualified timber property
The term qualified timber property has the meaning given such term in section 194(c)(1).
Special rule for Gulf Opportunity Zone public utility casualty losses
In general
The amount described in section 172(f)(1)(A) for any taxable year shall be increased by the Gulf Opportunity Zone public utility casualty loss for such taxable year.
Gulf Opportunity Zone public utility casualty loss
For purposes of this subsection, the term Gulf Opportunity Zone public utility casualty loss means any casualty loss of public utility property (as defined in section 168(i)(10)) located in the Gulf Opportunity Zone if—
such loss is allowed as a deduction under section 165 for the taxable year,
such loss is by reason of Hurricane Katrina, and
the taxpayer elects the application of this subsection with respect to such loss.
Reduction for gains from involuntary conversion
The amount of Gulf Opportunity Zone public utility casualty loss which would (but for this paragraph) be taken into account under paragraph (1) for any taxable year shall be reduced by the amount of any gain recognized by the taxpayer for such year from the involuntary conversion by reason of Hurricane Katrina of public utility property (as so defined) located in the Gulf Opportunity Zone.
Coordination with general disaster loss rules
Section 165(i) shall not apply to any Gulf Opportunity Zone public utility casualty loss to the extent such loss is taken into account under paragraph (1).
Election
Any election under paragraph (2)(C) shall be made in such manner as may be prescribed by the Secretary and shall be made by the due date (including extensions of time) for filing the taxpayer’s return for the taxable year of the loss. Such election, once made for any taxable year, shall be irrevocable for such taxable year.
Special NOL carryback of cost recovery deductions for qualified GO Zone property
In general
For purposes of section 172, the GO Zone cost recovery loss for any taxable year ending on or after August 28, 2005, and before January 1, 2009, shall be a net operating loss carryback to each of the 5 taxable years preceding the taxable year of the loss.
GO Zone cost recovery loss
For purposes of this subsection, the term GO Zone cost recovery loss means, with respect to any taxable year, the lesser of—
the aggregate amount of the deductions allowed under sections 167 and 168 with respect to qualified Gulf Opportunity Zone property (as defined in subsection (d)(2), but without regard to subparagraph (B)(iv) thereof) which is placed in service during such taxable year, or
the excess of—
the net operating loss for such taxable year, over
the specified liability loss for such taxable year to which a 10-year carryback applies under section 172(b)(1)(C).
Coordination with ordering rule
For purposes of applying section 172(b)(2), a GO Zone cost recovery loss to which paragraph (1) applies shall be treated in a manner similar to the manner in which a specified liability loss is treated.
Election out
A rule similar to the rule of section 172(j) shall apply for purposes of this subsection.
Credit to holders of Gulf tax credit bonds
Allowance of credit
If a taxpayer holds a Gulf tax credit bond on one or more credit allowance dates of the bond occurring during any taxable year, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of the credits determined under paragraph (2) with respect to such dates.
Amount of credit
In general
The amount of the credit determined under this paragraph with respect to any credit allowance date for a Gulf tax credit bond is 25 percent of the annual credit determined with respect to such bond.
Annual credit
The annual credit determined with respect to any Gulf tax credit bond is the product of—
the credit rate determined by the Secretary under subparagraph (C) for the day on which such bond was sold, multiplied by
the outstanding face amount of the bond.
Determination
For purposes of subparagraph (B), with respect to any Gulf tax credit bond, the Secretary shall determine daily or cause to be determined daily a credit rate which shall apply to the first day on which there is a binding, written contract for the sale or exchange of the bond. The credit rate for any day is the credit rate which the Secretary or the Secretary’s designee estimates will permit the issuance of Gulf tax credit bonds with a specified maturity or redemption date without discount and without interest cost to the issuer.
Credit allowance date
For purposes of this subsection, the term credit allowance date means March 15, June 15, September 15, and December 15. Such term also includes the last day on which the bond is outstanding.
Special rule for issuance and redemption
In the case of a bond which is issued during the 3-month period ending on a credit allowance date, the amount of the credit determined under this paragraph with respect to such credit allowance date shall be a ratable portion of the credit otherwise determined based on the portion of the 3-month period during which the bond is outstanding. A similar rule shall apply when the bond is redeemed or matures.
Limitation based on amount of tax
The credit allowed under paragraph (1) for any taxable year shall not exceed the excess of—
the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over
the sum of the credits allowable under part IV of subchapter A (other than subpart C and this subsection).
Gulf tax credit bond
For purposes of this subsection—
In general
The term Gulf tax credit bond means any bond issued as part of an issue if—
the bond is issued by the State of Alabama, Louisiana, or Mississippi,
95 percent or more of the proceeds of such issue are to be used to—
pay principal, interest, or premiums on qualified bonds issued by such State or any political subdivision of such State, or
make a loan to any political subdivision of such State to pay principal, interest, or premiums on qualified bonds issued by such political subdivision,
the Governor of such State designates such bond for purposes of this subsection,
the bond is a general obligation of such State and is in registered form (within the meaning of section 149(a)),
the maturity of such bond does not exceed 2 years, and
the bond is issued after December 31, 2005, and before January 1, 2007.
State matching requirement
A bond shall not be treated as a Gulf tax credit bond unless—
the issuer of such bond pledges as of the date of the issuance of the issue an amount equal to the face amount of such bond to be used for payments described in subclause (I) of subparagraph (A)(ii), or loans described in subclause (II) of such subparagraph, as the case may be, with respect to the issue of which such bond is a part, and
any such payment or loan is made in equal amounts from the proceeds of such issue and from the amount pledged under clause (i).
Aggregate limit on bond designations
The maximum aggregate face amount of bonds which may be designated under this subsection by the Governor of a State shall not exceed—
$200,000,000 in the case of the State of Louisiana,
$100,000,000 in the case of the State of Mississippi, and
$50,000,000 in the case of the State of Alabama.
Special rules relating to arbitrage
A bond which is part of an issue shall not be treated as a Gulf tax credit bond unless, with respect to the issue of which the bond is a part, the issuer satisfies the arbitrage requirements of section 148 with respect to proceeds of the issue and any loans made with such proceeds.
Qualified bond
For purposes of this subsection—
In general
The term qualified bond means any obligation of a State or political subdivision thereof which was outstanding on August 28, 2005.
Exception for private activity bonds
Such term shall not include any private activity bond.
Exception for advance refundings
Such term shall not include any bond—
which is designated as an advance refunding bond under subsection (b)(1), or
with respect to which there is any outstanding bond to refund such bond.
Credit included in gross income
Gross income includes the amount of the credit allowed to the taxpayer under this subsection (determined without regard to paragraph (3)) and the amount so included shall be treated as interest income.
Other definitions and special rules
For purposes of this subsection—
Bond
The term bond includes any obligation.
Partnership; S corporation; and other pass-thru entities
In general
Under regulations prescribed by the Secretary, in the case of a partnership, trust, S corporation, or other pass-thru entity, rules similar to the rules of section 41(g) shall apply with respect to the credit allowable under paragraph (1).
No basis adjustment
In the case of a bond held by a partnership or an S corporation, rules similar to the rules under section 1397E(i) shall apply.
Bonds held by regulated investment companies
If any Gulf tax credit bond is held by a regulated investment company, the credit determined under paragraph (1) shall be allowed to shareholders of such company under procedures prescribed by the Secretary.
Reporting
Issuers of Gulf tax credit bonds shall submit reports similar to the reports required under section 149(e).
Credit treated as nonrefundable bondholder credit
For purposes of this title, the credit allowed by this subsection shall be treated as a credit allowable under subpart H of part IV of subchapter A of this chapter.
.
Conforming amendments
Paragraph (2) of section 54(c) is amended by inserting , section 1400N(l),
after subpart C
.
Subparagraph (A) of section 6049(d)(8) is amended—
by inserting or 1400N(l)(6)
after section 54(g)
, and
by inserting or 1400N(l)(2)(D), as the case may be
after section 54(b)(4)
.
So much of subchapter Y of chapter 1 as precedes section 1400L is amended to read as follows:
Short-term regional benefits
Part I—Tax benefits for New York Liberty Zone
Part II—Tax benefits for Gulf Opportunity Zone
Tax benefits for New York Liberty Zone
Sec. 1400L. Tax benefits for New York Liberty Zone
.
The item relating to subchapter Y in the table of subchapters for chapter 1 is amended to read as follows:
Subchapter Y—Short-term regional benefits
.
Effective date
In general
Except as provided in paragraph (2), the amendments made by this section shall apply to taxable years ending on or after August 28, 2005.
Carrybacks
Subsections (i)(2), (j), and (k) of section 1400N of the Internal Revenue Code of 1986 (as added by this section) shall apply to losses arising in such taxable years.
Federal guarantee of certain State bonds
State bonds described
This section shall apply to a bond issued as part of an issue if—
the issue of which such bond is part is an issue of the State of Alabama, Louisiana, or Mississippi,
the bond is a general obligation of the issuing State and is in registered form,
the proceeds of the bond are distributed to one or more political subdivisions of the issuing State,
the maturity of such bond does not exceed 5 years,
the bond is issued after the date of the enactment of this Act and before January 1, 2008, and
the bond is designated by the Secretary of the Treasury for purposes of this section.
Application
In general
The Secretary of the Treasury may only designate a bond for purposes of this section pursuant to an application submitted to the Secretary by the State which demonstrates the need for such designation on the basis of the criteria specified in paragraph (2).
Criteria
For purposes of paragraph (1), the criteria specified in this paragraph are—
the loss of revenue base of one or more political subdivisions of the State by reason of Hurricane Katrina,
the need for resources to fund infrastructure within, or operating expenses of, any such political subdivision,
the lack of access of such political subdivision to capital, and
any other criteria as may be determined by the Secretary.
Guidance for submission and consideration of applications
The Secretary of the Treasury shall prescribe regulations or other guidance which provide for the time and manner for the submission and consideration of applications under this subsection.
Federal guarantee
A bond described in subsection (a) is guaranteed by the United States in an amount equal to 50 percent of the outstanding principal with respect to such bond.
Aggregate limit on bond designations
The maximum aggregate face amount of bonds which may be issued under this section shall not exceed $3,000,000,000.
Tax benefits related to Hurricane Rita
Extension of certain emergency tax relief for Hurricane Katrina to Hurricane Rita
In general
Part II of subchapter Y of chapter 1 (as added by this Act) is amended by adding at the end the following new sections:
Special rules for use of retirement funds
Tax-favored withdrawals from retirement plans
In general
Section 72(t) shall not apply to any qualified hurricane distribution.
Aggregate dollar limitation
In general
For purposes of this subsection, the aggregate amount of distributions received by an individual which may be treated as qualified hurricane distributions for any taxable year shall not exceed the excess (if any) of—
$100,000, over
the aggregate amounts treated as qualified hurricane distributions received by such individual for all prior taxable years.
Treatment of plan distributions
If a distribution to an individual would (without regard to subparagraph (A)) be a qualified hurricane distribution, a plan shall not be treated as violating any requirement of this title merely because the plan treats such distribution as a qualified hurricane 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 $100,000.
Controlled group
For purposes of subparagraph (B), the term controlled group means any group treated as a single employer under subsection (b), (c), (m), or (o) of section 414.
Amount distributed may be repaid
In general
Any individual who receives a qualified hurricane 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.
Treatment of repayments of distributions from eligible retirement plans other than IRAs
For purposes of this title, if a contribution is made pursuant to subparagraph (A) with respect to a qualified hurricane 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 hurricane 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.
Treatment of repayments for distributions from IRAs
For purposes of this title, if a contribution is made pursuant to subparagraph (A) with respect to a qualified hurricane 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 hurricane 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.
Definitions
For purposes of this subsection—
Qualified hurricane distribution
Except as provided in paragraph (2), the term qualified hurricane distribution means—
any distribution from an eligible retirement plan made on or after August 25, 2005, and before January 1, 2007, to an individual whose principal place of abode on August 28, 2005, is located in the Hurricane Katrina disaster area and who has sustained an economic loss by reason of Hurricane Katrina, and
any distribution (which is not described in clause (i)) from an eligible retirement plan made on or after September 23, 2005, and before January 1, 2007, to an individual whose principal place of abode on September 23, 2005, is located in the Hurricane Rita disaster area and who has sustained an economic loss by reason of Hurricane Rita.
Eligible retirement plan
The term eligible retirement plan shall have the meaning given such term by section 402(c)(8)(B).
Income inclusion spread over 3-year period
In general
In the case of any qualified hurricane 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.
Special rule
For purposes of subparagraph (A), rules similar to the rules of subparagraph (E) of section 408A(d)(3) shall apply.
Special rules
Exemption of distributions from trustee to trustee transfer and withholding rules
For purposes of sections 401(a)(31), 402(f), and 3405, qualified hurricane distributions shall not be treated as eligible rollover distributions.
Qualified hurricane distributions treated as meeting plan distribution requirements
For purposes this title, a qualified hurricane 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).
Recontributions of withdrawals for home purchases
Recontributions
In general
Any individual who received a qualified distribution may, during the applicable period, make one or more contributions in an aggregate amount not to exceed the amount of such qualified distribution to an eligible retirement plan (as defined in section 402(c)(8)(B)) 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), or 408(d)(3), as the case may be.
Treatment of repayments
Rules similar to the rules of subparagraphs (B) and (C) of subsection (a)(3) shall apply for purposes of this subsection.
Qualified distribution
For purposes of this subsection—
In general
The term qualified distribution means any qualified Katrina distribution and any qualified Rita distribution.
Qualified Katrina distribution
The term qualified Katrina distribution means any distribution—
described in section 401(k)(2)(B)(i)(IV), 403(b)(7)(A)(ii) (but only to the extent such distribution relates to financial hardship), 403(b)(11)(B), or 72(t)(2)(F),
received after February 28, 2005, and before August 29, 2005, and
which was to be used to purchase or construct a principal residence in the Hurricane Katrina disaster area, but which was not so purchased or constructed on account of Hurricane Katrina.
Qualified Rita distribution
The term qualified Rita distribution means any distribution (other than a qualified Katrina distribution)—
described in section 401(k)(2)(B)(i)(IV), 403(b)(7)(A)(ii) (but only to the extent such distribution relates to financial hardship), 403(b)(11)(B), or 72(t)(2)(F),
received after February 28, 2005, and before September 24, 2005, and
which was to be used to purchase or construct a principal residence in the Hurricane Rita disaster area, but which was not so purchased or constructed on account of Hurricane Rita.
Applicable period
For purposes of this subsection, the term applicable period means—
with respect to any qualified Katrina distribution, the period beginning on August 25, 2005, and ending on February 28, 2006, and
with respect to any qualified Rita distribution, the period beginning on September 23, 2005, and ending on February 28, 2006.
Loans from qualified plans
Increase in limit on loans not treated as distributions
In the case of any loan from a qualified employer plan (as defined under section 72(p)(4)) to a qualified individual made during the applicable period—
clause (i) of section 72(p)(2)(A) shall be applied by substituting $100,000
for $50,000
, and
clause (ii) of such section 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
.
Delay of repayment
In the case of a qualified individual with an outstanding loan on or after the qualified beginning date from a qualified employer plan (as defined in section 72(p)(4))—
if the due date pursuant to subparagraph (B) or (C) of section 72(p)(2) for any repayment with respect to such loan occurs during the period beginning on the qualified beginning date and ending on December 31, 2006, such due date shall be delayed for 1 year,
any subsequent repayments with respect to any such loan shall be appropriately adjusted to reflect the delay in the due date under paragraph (1) and any interest accruing during such delay, and
in determining the 5-year period and the term of a loan under subparagraph (B) or (C) of section 72(p)(2), the period described in subparagraph (A) shall be disregarded.
Qualified individual
For purposes of this subsection—
In general
The term qualified individual means any qualified Hurricane Katrina individual and any qualified Hurricane Rita individual.
Qualified Hurricane Katrina individual
The term qualified Hurricane Katrina individual means an individual whose principal place of abode on August 28, 2005, is located in the Hurricane Katrina disaster area and who has sustained an economic loss by reason of Hurricane Katrina.
Qualified Hurricane Rita individual
The term qualified Hurricane Rita individual means an individual (other than a qualified Hurricane Katrina individual) whose principal place of abode on September 23, 2005, is located in the Hurricane Rita disaster area and who has sustained an economic loss by reason of Hurricane Rita.
Applicable period; qualified beginning date
For purposes of this subsection—
Hurricane Katrina
In the case of any qualified Hurricane Katrina individual—
the applicable period is the period beginning on September 24, 2005, and ending on December 31, 2006, and
the qualified beginning date is August 25, 2005.
Hurricane Rita
In the case of any qualified Hurricane Rita individual—
the applicable period is the period beginning on the date of the enactment of this subsection and ending on December 31, 2006, and
the qualified beginning date is September 23, 2005.
Provisions relating to plan amendments
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).
Amendments to which subsection applies
In general
This subsection shall apply to any amendment to any plan or annuity contract which is made—
pursuant to this section, or pursuant to any regulation issued by the Secretary or the Secretary of Labor under this section, and
on or before the last day of the first plan year beginning on or after January 1, 2007, or such later date as the Secretary may prescribe.
Conditions
This subsection shall not apply to any amendment unless—
during the period—
beginning on the date that 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 this section or such regulation, the effective date specified by the plan), and
ending on the date described in subparagraph (A)(ii) (or, if earlier, the date the plan or contract amendment is adopted),
such plan or contract amendment applies retroactively for such period.
Employment relief
Employee retention credit for employers affected by Hurricane Katrina
In general
For purposes of section 38, in the case of an eligible employer, the Hurricane Katrina employee retention credit for any taxable year is an amount equal to 40 percent of the qualified wages with respect to each eligible employee of such employer for such taxable year. For purposes of the preceding sentence, the amount of qualified wages which may be taken into account with respect to any individual shall not exceed $6,000.
Definitions
For purposes of this subsection—
Eligible employer
The term eligible employer means any employer—
which conducted an active trade or business on August 28, 2005, in the GO Zone, and
with respect to whom the trade or business described in clause (i) is inoperable on any day after August 28, 2005, and before January 1, 2006, as a result of damage sustained by reason of Hurricane Katrina.
Eligible employee
The term eligible employee means with respect to an eligible employer an employee whose principal place of employment on August 28, 2005, with such eligible employer was in the GO Zone.
Qualified wages
The term qualified wages means wages (as defined in section 51(c)(1), but without regard to section 3306(b)(2)(B)) paid or incurred by an eligible employer with respect to an eligible employee on any day after August 28, 2005, and before January 1, 2006, which occurs during the period—
beginning on the date on which the trade or business described in subparagraph (A) first became inoperable at the principal place of employment of the employee immediately before Hurricane Katrina, and
ending on the date on which such trade or business has resumed significant operations at such principal place of employment.
Credit not allowed for large businesses
The term eligible employer shall not include any trade or business for any taxable year if such trade or business employed an average of more than 200 employees on business days during the taxable year.
Certain rules to apply
For purposes of this subsection, rules similar to the rules of sections 51(i)(1), 52, and 280C(a) shall apply.
Employee not taken into account more than once
An employee shall not be treated as an eligible employee for purposes of this subsection for any period with respect to any employer if such employer is allowed a credit under section 51 with respect to such employee for such period.
Employee retention credit for employers affected by Hurricane Rita
In general
For purposes of section 38, in the case of an eligible employer, the Hurricane Rita employee retention credit for any taxable year is an amount equal to 40 percent of the qualified wages with respect to each eligible employee of such employer for such taxable year. For purposes of the preceding sentence, the amount of qualified wages which may be taken into account with respect to any individual shall not exceed $6,000.
Definitions
For purposes of this subsection—
Eligible employer
The term eligible employer means any employer—
which conducted an active trade or business on September 23, 2005, in the Rita GO Zone, and
with respect to whom the trade or business described in clause (i) is inoperable on any day after September 23, 2005, and before January 1, 2006, as a result of damage sustained by reason of Hurricane Rita.
Eligible employee
The term eligible employee means with respect to an eligible employer an employee whose principal place of employment on September 23, 2005, with such eligible employer was in the Rita GO Zone.
Qualified wages
The term qualified wages means wages (as defined in section 51(c)(1), but without regard to section 3306(b)(2)(B)) paid or incurred by an eligible employer with respect to an eligible employee on any day after September 23, 2005, and before January 1, 2006, which occurs during the period—
beginning on the date on which the trade or business described in subparagraph (A) first became inoperable at the principal place of employment of the employee immediately before Hurricane Rita, and
ending on the date on which such trade or business has resumed significant operations at such principal place of employment.
Credit not allowed for large businesses
The term eligible employer shall not include any trade or business for any taxable year if such trade or business employed an average of more than 200 employees on business days during the taxable year.
Certain rules to apply
For purposes of this subsection, rules similar to the rules of sections 51(i)(1), 52, and 280C(a) shall apply.
Employee not taken into account more than once
An employee shall not be treated as an eligible employee for purposes of this subsection for any period with respect to any employer if such employer is allowed a credit under subsection (a) or section 51 with respect to such employee for such period.
Additional tax relief provisions
Temporary suspension of limitations on charitable contributions
In general
Except as otherwise provided in paragraph (2), section 170(b) shall not apply to qualified contributions and such contributions shall not be taken into account for purposes of applying subsections (b) and (d) of section 170 to other contributions.
Treatment of excess contributions
For purposes of section 170—
Individuals
In the case of an individual—
Limitation
Any qualified contribution shall be allowed only to the extent that the aggregate of such contributions does not exceed the excess of the taxpayer’s contribution base (as defined in subparagraph (F) of section 170(b)(1)) over the amount of all other charitable contributions allowed under section 170(b)(1).
Carryover
If the aggregate amount of qualified contributions made in the contribution year (within the meaning of section 170(d)(1)) exceeds the limitation of clause (i), such excess shall be added to the excess described in the portion of subparagraph (A) of such section which precedes clause (i) thereof for purposes of applying such section.
Corporations
In the case of a corporation—
Limitation
Any qualified contribution shall be allowed only to the extent that the aggregate of such contributions does not exceed the excess of the taxpayer’s taxable income (as determined under paragraph (2) of section 170(b)) over the amount of all other charitable contributions allowed under such paragraph.
Carryover
Rules similar to the rules of subparagraph (A)(ii) shall apply for purposes of this subparagraph.
Exception to overall limitation on itemized deductions
So much of any deduction allowed under section 170 as does not exceed the qualified contributions paid during the taxable year shall not be treated as an itemized deduction for purposes of section 68.
Qualified contributions
In general
For purposes of this subsection, the term qualified contribution means any charitable contribution (as defined in section 170(c)) if—
such contribution is paid during the period beginning on August 28, 2005, and ending on December 31, 2005, in cash to an organization described in section 170(b)(1)(A) (other than an organization described in section 509(a)(3)),
in the case of a contribution paid by a corporation, such contribution is for relief efforts related to Hurricane Katrina or Hurricane Rita, and
the taxpayer has elected the application of this subsection with respect to such contribution.
Exception
Such term shall not include a contribution if the contribution is for establishment of a new, or maintenance in an existing, segregated fund or account with respect to which the donor (or any person appointed or designated by such donor) has, or reasonably expects to have, advisory privileges with respect to distributions or investments by reason of the donor’s status as a donor.
Application of election to partnerships and S corporations
In the case of a partnership or S corporation, the election under subparagraph (A)(iii) shall be made separately by each partner or shareholder.
Suspension of certain limitations on personal casualty losses
Paragraphs (1) and (2)(A) of section 165(h) shall not apply to losses described in section 165(c)(3)—
which arise in the Hurricane Katrina disaster area on or after August 25, 2005, and which are attributable to Hurricane Katrina, or
which arise in the Hurricane Rita disaster area on or after September 23, 2005, and which are attributable to Hurricane Rita.
Required exercise of authority under section 7508A
In the case of any taxpayer determined by the Secretary to be affected by the Presidentially declared disaster relating to Hurricane Katrina or Hurricane Rita, any relief provided by the Secretary under section 7508A shall be for a period ending not earlier than February 28, 2006.
Special rule for determining earned income
In general
In the case of a qualified individual, if the earned income of the taxpayer for the taxable year which includes the applicable date is less than the earned income of the taxpayer for the preceding taxable year, the credits allowed under sections 24(d) and 32 may, at the election of the taxpayer, be determined by substituting—
such earned income for the preceding taxable year, for
such earned income for the taxable year which includes the applicable date.
Qualified individual
For purposes of this subsection—
In general
The term qualified individual means any qualified Hurricane Katrina individual and any qualified Hurricane Rita individual.
Qualified Hurricane Katrina individual
The term qualified Hurricane Katrina individual means any individual whose principal place of abode on August 25, 2005, was located—
in the GO Zone, or
in the Hurricane Katrina disaster area (but outside the GO Zone) and such individual was displaced from such principal place of abode by reason of Hurricane Katrina.
Qualified Hurricane Rita individual
The term qualified Hurricane Rita individual means any individual (other than a qualified Hurricane Katrina individual) whose principal place of abode on September 23, 2005, was located—
in the Rita GO Zone, or
in the Hurricane Rita disaster area (but outside the Rita GO Zone) and such individual was displaced from such principal place of abode by reason of Hurricane Rita.
Applicable date
For purposes of this subsection, the term applicable date means—
in the case of a qualified Hurricane Katrina individual, August 25, 2005, and
in the case of a qualified Hurricane Rita individual, September 23, 2005.
Earned income
For purposes of this subsection, the term earned income has the meaning given such term under section 32(c).
Special rules
Application to joint returns
For purposes of paragraph (1), in the case of a joint return for a taxable year which includes the applicable date—
such paragraph shall apply if either spouse is a qualified individual, and
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.
Uniform application of election
Any election made under paragraph (1) shall apply with respect to both section 24(d) and section 32.
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.
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).
Secretarial authority to make adjustments regarding taxpayer and dependency status
With respect to taxable years beginning in 2005 or 2006, the Secretary may make such adjustments in the application of the internal revenue laws as may be necessary to ensure that taxpayers do not lose any deduction or credit or experience a change of filing status by reason of temporary relocations by reason of Hurricane Katrina or Hurricane Rita. Any adjustments made under the preceding sentence shall ensure that an individual is not taken into account by more than one taxpayer with respect to the same tax benefit.
.
Conforming amendments
Subsection (b) of section 38 is amended by striking and
at the end of paragraph (25), by striking the period at the end of paragraph (26) and inserting a comma, and by adding at the end the following new paragraphs:
the Hurricane Katrina employee retention credit determined under section 1400P(a), and
the Hurricane Rita employee retention credit determined under section 1400P(b).
.
The table of sections for part II of subchapter Y of chapter 1 is amended by adding at the end the following new items:
Sec. 1400O. Special rules for use of retirement funds
Sec. 1400P. Employment relief
Sec. 1400Q. Additional tax relief provisions
.
The heading for such part is amended by striking Gulf Opportunity Zone
and inserting hurricane relief
.
The following provisions of the Katrina Emergency Tax Relief Act of 2005 are hereby repealed:
Title I.
Sections 202, 301, 402, 403(b), 406, and 407.
Other provisions
Secretarial authority to extend period during which traveling expenses are treated as incurred away from home in case of major disaster
In general
Section 162 (relating to trade or business expenses) is amended by redesignating subsection (q) as subsection (r) and by inserting after subsection (p) the following new subsection:
Limitation on traveling expenses
In general
For purposes of subsection (a)(2), the taxpayer shall not be treated as being temporarily away from home during any period of employment if such period exceeds 1 year.
Authority to extend in case of major disaster
In the case of a taxpayer who is away from home in pursuit of a trade or business by reason of a disaster which the President has declared to be a major disaster under section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, the Secretary may extend the 1-year period referred to in paragraph (1) for a period not exceeding 1 additional year.
Exception for certain Federal employees designated by the Attorney General
Paragraph (1) shall not apply to any Federal employee during any period for which such employee is certified by the Attorney General (or the designee thereof) as traveling on behalf of the United States in temporary duty status to investigate or prosecute, or provide support services for the investigation or prosecution of, a Federal crime.
.
Conforming amendment
Subsection (a) of section 162 is amended by striking the last two sentences.
Effective date
The amendments made by this section shall apply to amounts paid or incurred after the date of the enactment of this Act.
Gulf Coast Recovery Bonds
It is the sense of the Congress that the Secretary of the Treasury, or the Secretary’s delegate, should designate one or more series of bonds or certificates (or any portion thereof) issued under section 3105 of title 31, United States Code, as Gulf Coast Recovery Bonds
in response to Hurricanes Katrina and Rita.