I
110th CONGRESS
2d Session
H. R. 6640
IN THE HOUSE OF REPRESENTATIVES
July 29, 2008
Mr. Kind (for himself, Mr. Lewis of Georgia, Mr. Tanner, Mr. Meek of Florida, Mr. Davis of Alabama, Ms. Moore of Wisconsin, Mr. Sensenbrenner, Mr. Melancon, Mr. Cazayoux, Mr. Jefferson, Mr. Carnahan, Mr. Paul, Mr. Michaud, and Mr. Bishop of New York) 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 relief in the case of federally declared disasters.
Short title
This Act may be cited as the
Fair Disaster Tax Relief Act of
2008
.
Losses attributable to federally declared disasters
Waiver of adjusted gross income limitation
In general
Subsection (h) of section 165 of the Internal Revenue Code of 1986 is amended by redesignating paragraphs (3) and (4) as paragraphs (4) and (5), respectively, and by inserting after paragraph (2) the following new paragraph:
Special rule for losses in federally declared disasters
In general
If an individual has a net disaster loss for any taxable year, the amount determined under paragraph (2)(A)(ii) shall be the sum of—
such net disaster loss, and
so much of the excess referred to in the matter preceding clause (i) of paragraph (2)(A) (reduced by the amount in clause (i) of this subparagraph) as exceeds 10 percent of the adjusted gross income of the individual.
Net disaster loss
For purposes of subparagraph (A), the term net disaster loss means the excess of—
the personal casualty losses—
attributable to a federally declared disaster, and
occurring in a disaster area, over
personal casualty gains.
Federally declared disaster
For purposes of this paragraph—
Federally declared disaster
The term federally declared disaster means any disaster subsequently determined by the President of the United States to warrant assistance by the Federal Government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act.
Disaster area
The term disaster area means the area so determined to warrant such assistance.
.
Conforming amendments
Section
165(h)(4)(B) (as so redesignated) is amended by striking paragraph
(2)
and inserting paragraphs (2) and (3)
.
Section 165(i)(1)
of such Code is amended by striking loss
and all that follows
through Act
and inserting loss occurring in a disaster
area (as defined by clause (ii) of subsection (h)(3)(C)) and attributable to a
federally declared disaster (as defined by clause (i) of such
subsection)
.
Section 165(i)(4)
of such Code is amended by striking Presidentially declared disaster (as
defined by section 1033(h)(3))
and inserting federally declared
disaster (as defined by subsection (h)(3)(C)(i)
.
So much of subsection (h) of section 1033 of such Code as precedes subparagraph (A) of paragraph (1) thereof is amended to read as follows:
Special rules for property damaged by federally declared disasters
Principal residences
If the taxpayer’s principal residence or any of its contents is located in a disaster area and is compulsorily or involuntarily converted as a result of a federally declared disaster—
.
Paragraph (2) of section 1033(h)
of such Code is amended by striking investment
and all that
follows through “disaster” and inserting investment located in a
disaster area and compulsorily or involuntarily converted as a result of a
federally declared disaster
.
Paragraph (3) of section 1033(h) is amended to read as follows:
Federally declared disaster; disaster area
The terms ‘federally declared disaster’ and ‘disaster area’ shall have the respective meaning given such terms by section 165(h)(3)(C).
.
Section 139(c)(2) of such Code is amended to read as follows:
federally declared disaster (as defined by section 165(h)(3)(C)(i)),
.
Subclause (II) of section 172(b)(1)(F)(ii)
of such Code is amended by striking Presidentially declared disasters
(as defined in section 1033(h)(3))
and inserting federally
declared disasters (as defined by subsection (h)(3)(C)(i))
.
Subclause (III) of section 172(b)(1)(F)(ii)
of such Code is amended by striking Presidentially declared
disasters
and inserting federally declared
disasters
.
Subsection (a) of section 7508A
of such Code is amended by striking Presidentially declared disaster (as
defined in section 1033(h)(3))
and inserting federally declared
disaster (as defined by section 165(h)(3)(C)(i))
.
Increase in standard deduction by disaster casualty loss
In general
Paragraph (1) of section 63(c) of such Code (defining
standard deduction) is amended by striking and
at the end of
subparagraph (B), by striking the period at the end of subparagraph (C) and
inserting , and
, and by adding at the end the following new
subparagraph:
the disaster loss deduction.
.
Disaster loss deduction
Subsection (c) of section 63 of such Code is amended by adding at the end the following new paragraph:
Disaster loss deduction
For the purposes of paragraph (1), the term disaster loss deduction means the net disaster loss (as defined in section 165(h)(3)(B)).
.
Allowance in computing alternative minimum taxable income
Subparagraph (E) of section 56(b)(1) of
such Code (relating to standard deduction and deduction for personal exemptions
not allowed) is amended by adding at the end the following new sentence:
The preceding sentence shall not apply to so much of the standard
deduction as is determined under section 63(c)(1)(D).
.
Increase in limitation on individual loss per casualty
Paragraph (1) of section 165(h) of such
Code (relating to treatment of casualty gains and losses) is amended by
striking $100
and inserting $500
.
Effective dates
Except as provided by paragraph (2), the amendments made by this section shall apply to taxable years beginning after December 31, 2007.
The amendment made by subsection (c) shall apply to taxable years beginning after December 31, 2008.
Expensing of Qualified Disaster Expenses
In general
Part VI of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to itemized deductions for individuals and corporations) is amended by inserting after section 198 the following new section:
Expensing of Qualified Disaster Expenses
In general
A taxpayer may elect to treat any qualified disaster expenses which are paid or incurred by the taxpayer as an expense which is not chargeable to capital account. Any expense which is so treated shall be allowed as a deduction for the taxable year in which it is paid or incurred.
Qualified disaster expense
For purposes of this section, the term qualified disaster expense means any expenditure—
which is paid or incurred in connection with a trade or business or with business-related property,
which is—
for the abatement or control of hazardous substances that were released on account of a federally declared disaster,
for the removal of debris from, or the demolition of structures on, real property which is business-related property damaged or destroyed as a result of a federally declared disaster, or
for the repair of business-related property damaged as a result of a federally declared disaster, and
is otherwise chargeable to capital account.
Other definitions
For purposes of this section—
Business-related property
The term business-related property means property—
held by the taxpayer for use in a trade or business or for the production of income, or
described in section 1221(a)(1) in the hands of the taxpayer.
Federally declared disaster
The term federally declared disaster has the meaning given such term by section 165(h)(3)(C)(i).
Deduction recaptured as ordinary income on sale, etc
Solely for purposes of section 1245, in the case of property to which a qualified disaster expense would have been capitalized but for this section—
the deduction allowed by this section for such expense shall be treated as a deduction for depreciation, and
such property (if not otherwise section 1245 property) shall be treated as section 1245 property solely for purposes of applying section 1245 to such deduction.
Coordination with other provisions
Sections 198, 280B, and 468 shall not apply to amounts which are treated as expenses under this section.
Regulations
The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section.
.
Clerical amendment
The table of sections for part VI of subchapter B of chapter 1 of such Code is amended by inserting after the item relating to section 198 the following new item:
.
Effective date
The amendments made by this section shall apply to amounts paid or incurred after December 31, 2007.
Net operating losses attributable to federally declared disasters
In general
Paragraph (1) of section 172(b) of the Internal Revenue Code of 1986 (relating to years to which loss may be carried) is amended by adding at the end the following new subparagraph:
Certain losses attributable to federally declared disasters
In the case of a taxpayer who has a qualified disaster loss (as defined in subsection (j)), such loss shall be a net operating loss carryback to each of the 5 taxable years preceding the taxable year of such loss.
.
Qualified disaster loss
Section 172 of such Code (relating to net operating loss deduction) is amended by redesignating subsections (j) and (k) as subsections (k) and (l), respectively, and by inserting after subsection (i) the following new subsection:
Rules relating to qualified disaster losses
For purposes of this section—
In general
The term qualified disaster loss means the lesser of—
the sum of—
the losses allowable under section 165 for the taxable year—
attributable to a federally declared disaster (as defined in section 165(h)(3)(C)(i)), and
occurring in a disaster area (as defined in section 165(h)(3)(C)(ii)), and
the deduction for the taxable year for qualified disaster expenses which is allowable under section 198A(a) or which would be so allowable if not otherwise treated as an expense, or
the net operating loss for such taxable year.
Coordination with subsection (b)(2)
For purposes of applying subsection (b)(2), a qualified disaster loss for any taxable year shall be treated in a manner similar to the manner in which a specified liability loss is treated.
Election
Any taxpayer entitled to a 5-year carryback under subsection (b)(1)(J) from any loss year may elect to have the carryback period with respect to such loss year determined without regard to subsection (b)(1)(J). Such election 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 net operating loss. Such election, once made for any taxable year, shall be irrevocable for such taxable year.
.
Loss deduction allowed in computing alternative minimum taxable income
Subsection (d) of section 56 of such Code (defining alternative tax net operating loss deduction) is amended by adding at the end the following new paragraph:
Net operating loss attributable to federally declared disasters
In the case of a taxpayer which has a qualified disaster loss (as defined by section 172(b)(1)(J)) for the taxable year, paragraph (1) shall be applied by increasing the amount determined under subparagraph (A)(ii)(I) thereof by the sum of the carrybacks and carryovers of such loss.
.
Conforming amendments
Clause (ii) of section 172(b)(1)(F) of such
Code is amended by inserting or qualified disaster loss (as defined in
subsection (j))
before the period at the end of the last
sentence.
Paragraph (1) of section 172(i) of such Code is amended by adding at the end the following new flush sentence:
Such term shall not include any qualified disaster loss (as defined in subsection (j)).
.
Effective date
The amendments made by this section shall apply to losses arising in taxable years beginning after December 31, 2007.
Waiver of certain mortgage revenue bond requirements following federally declared disasters
In general
Paragraph (11) of section 143(k) of the Internal Revenue Code of 1986 is amended to read as follows:
Special rules for federally declared disasters
Principal residence destroyed
If the principal residence (within the meaning of section 121) of a taxpayer is—
rendered unsafe for use as a residence by reason of a federally declared disaster, or
demolished or relocated by reason of an order of the government of a State or political subdivision thereof on account of a federally declared disaster,
110for
90in paragraph (1) thereof.
Principle residence damaged
In general
If the principal residence (within the meaning of section 121) of a taxpayer resulting from a federally declared disaster was damaged, any owner-financing provided in connection with the repair or reconstruction of such residence shall be treated as a qualified rehabilitation loan.
Limitation
The aggregate owner-financing to which clause (i) applies shall not exceed the lesser of—
the cost of such repair or reconstruction, or
$150,000.
Federally declared disaster
For purposes of this paragraph, the term federally declared disaster has the meaning given such term by section 165(h)(3)(C)(i).
.
Effective date
The amendment made by subsection (a) shall apply to disasters occurring after December 31, 2007.