H.R. 7006 – Reading Mode

1.

Short title, etc

(a)

In general

This Act may be cited as the Disaster Tax Relief Act of 2008.

(b)

Reference

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.

(c)

Table of contents

The table of contents of this Act is as follows:

Sec. 1. Short title, etc.

Sec. 2. Losses attributable to federally declared disasters.

Sec. 3. Expensing of qualified disaster expenses.

Sec. 4. Net operating losses attributable to federally declared disasters.

Sec. 5. Waiver of certain mortgage revenue bond requirements following federally declared disasters.

Sec. 6. Determination of standard mileage rate for charitable contributions deduction.

Sec. 7. Additional low income housing allocations.

Sec. 8. Private activity disaster bonds.

Sec. 9. Waiver of limitation on charitable contributions for disaster relief.

2.

Losses attributable to federally declared disasters

(a)

Waiver of adjusted gross income limitation

(1)

In general

Subsection (h) of section 165 is amended by redesignating paragraphs (3) and (4) as paragraphs (4) and (5), respectively, and by inserting after paragraph (2) the following new paragraph:

(3)

Special rule for losses in federally declared disasters

(A)

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—

(i)

such net disaster loss, and

(ii)

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.

(B)

Net disaster loss

For purposes of subparagraph (A), the term net disaster loss means the excess of—

(i)

the personal casualty losses—

(I)

attributable to a federally declared disaster occurring after December 31, 2007, and before January 1, 2012, and

(II)

occurring in a disaster area, over

(ii)

personal casualty gains.

(C)

Federally declared disaster

For purposes of this paragraph—

(i)

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.

(ii)

Disaster area

The term disaster area means the area so determined to warrant such assistance.

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(2)

Conforming amendments

(A)

Section 165(h)(4)(B) (as so redesignated) is amended by striking paragraph (2) and inserting paragraphs (2) and (3).

(B)

Section 165(i)(1) 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).

(C)

Section 165(i)(4) 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).

(D)

(i)

So much of subsection (h) of section 1033 as precedes subparagraph (A) of paragraph (1) thereof is amended to read as follows:

(h)

Special rules for property damaged by federally declared disasters

(1)

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—

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(ii)

Paragraph (2) of section 1033(h) is amended by striking investment and all that follows through “disaster” and inserting investment is located in a disaster area and is compulsorily or involuntarily converted as a result of a federally declared disaster.

(iii)

Paragraph (3) of section 1033(h) is amended to read as follows:

(3)

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).

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(iv)

Section 139(c)(2) is amended to read as follows:

(2)

federally declared disaster (as defined by section 165(h)(3)(C)(i)),

.

(v)

Subclause (II) of section 172(b)(1)(F)(ii) is amended by striking Presidentially declared disasters (as defined in section 1033(h)(3)) and inserting federally declared disasters (as defined by section 165(h)(3)(C)(i)).

(vi)

Subclause (III) of section 172(b)(1)(F)(ii) is amended by striking Presidentially declared disasters and inserting federally declared disasters.

(vii)

Subsection (a) of section 7508A 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)).

(b)

Increase in standard deduction by disaster casualty loss

(1)

In general

Paragraph (1) of section 63(c) 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:

(D)

the disaster loss deduction.

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(2)

Disaster loss deduction

Subsection (c) of section 63 is amended by adding at the end the following new paragraph:

(8)

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)).

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(3)

Allowance in computing alternative minimum taxable income

Subparagraph (E) of section 56(b)(1) 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)..

(c)

Increase in limitation on individual loss per casualty

Paragraph (1) of section 165(h) is amended by striking $100 and inserting $500 ($100 for taxable years beginning after December 31, 2011).

(d)

Effective dates

(1)

In general

Except as provided in paragraph (2), the amendments made by this section shall apply to—

(A)

taxable years beginning after December 31, 2007, and

(B)

the taxpayer’s last taxable year beginning before January 1, 2008, solely for purposes of determining the amount allowable as a deduction with respect to any net disaster loss (as defined in section 165(h)(3)(B) of the Internal Revenue Code of 1986) for such year by reason of an election under section 165(i) of such Code.

(2)

Increase in limitation on individual loss per casualty

The amendment made by subsection (c) shall apply to taxable years beginning after December 31, 2008.

3.

Expensing of qualified disaster expenses

(a)

In general

Part VI of subchapter B of chapter 1 is amended by inserting after section 198 the following new section:

198A.

Expensing of qualified disaster expenses

(a)

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.

(b)

Qualified disaster expense

For purposes of this section, the term qualified disaster expense means any expenditure—

(1)

which is paid or incurred in connection with a trade or business or with business-related property,

(2)

which is—

(A)

for the abatement or control of hazardous substances that were released on account of a federally declared disaster,

(B)

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

(C)

for the repair of business-related property damaged as a result of a federally declared disaster, and

(3)

is otherwise chargeable to capital account.

(c)

Other definitions

For purposes of this section—

(1)

Business-related property

The term business-related property means property—

(A)

held by the taxpayer for use in a trade or business or for the production of income, or

(B)

described in section 1221(a)(1) in the hands of the taxpayer.

(2)

Federally declared disaster

The term federally declared disaster has the meaning given such term by section 165(h)(3)(C)(i), except that such term shall not include any disaster occurring before January 1, 2008, or after December 31, 2011.

(d)

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—

(1)

the deduction allowed by this section for such expense shall be treated as a deduction for depreciation, and

(2)

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.

(e)

Coordination with other provisions

Sections 198, 280B, and 468 shall not apply to amounts which are treated as expenses under this section.

(f)

Regulations

The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section.

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(b)

Clerical amendment

The table of sections for part VI of subchapter B of chapter 1 is amended by inserting after the item relating to section 198 the following new item:

Sec. 198A. Expensing of Qualified Disaster Expenses.

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(c)

Effective date

The amendments made by this section shall apply to amounts paid or incurred after December 31, 2007.

4.

Net operating losses attributable to federally declared disasters

(a)

In general

Paragraph (1) of section 172(b) is amended by adding at the end the following new subparagraph:

(J)

Certain losses attributable 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.

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(b)

Qualified disaster loss

Section 172 is amended by redesignating subsections (j) and (k) as subsections (k) and (l), respectively, and by inserting after subsection (i) the following new subsection:

(j)

Rules relating to qualified disaster losses

For purposes of this section—

(1)

In general

The term qualified disaster loss means the lesser of—

(A)

the sum of—

(i)

the losses allowable under section 165 for the taxable year—

(I)

attributable to a federally declared disaster (as defined in section 165(h)(3)(C)(i)) occurring after December 31, 2007, and before January 1, 2012, and

(II)

occurring in a disaster area (as defined in section 165(h)(3)(C)(ii)), and

(ii)

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

(B)

the net operating loss for such taxable year.

(2)

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.

(3)

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.

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(c)

Loss deduction allowed in computing alternative minimum taxable income

Subsection (d) of section 56 is amended by adding at the end the following new paragraph:

(3)

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.

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(d)

Conforming amendments

(1)

Clause (ii) of section 172(b)(1)(F) is amended by inserting or qualified disaster loss (as defined in subsection (j)) before the period at the end of the last sentence.

(2)

Paragraph (1) of section 172(i) 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)).

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(e)

Effective date

The amendments made by this section shall apply to net operating losses for taxable years beginning after December 31, 2007.

5.

Waiver of certain mortgage revenue bond requirements following federally declared disasters

(a)

In general

Paragraph (11) of section 143(k) is amended to read as follows:

(11)

Special rules for federally declared disasters

(A)

Principal residence destroyed

If the principal residence (within the meaning of section 121) of a taxpayer is—

(i)

rendered unsafe for use as a residence by reason of a federally declared disaster, or

(ii)

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,

then for the 2-year period beginning on the date of the disaster declaration, subsection (d)(1) shall not apply with respect to such taxpayer and subsection (e) shall be applied by substituting 110 for 90 in paragraph (1) thereof.

(B)

Principal residence damaged

(i)

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.

(ii)

Limitation

The aggregate owner-financing to which clause (i) applies shall not exceed the lesser of—

(I)

the cost of such repair or reconstruction, or

(II)

$150,000.

(C)

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), except that such term shall not include any disaster occurring before January 1, 2008, or after December 31, 2011.

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(b)

Effective date

The amendment made by subsection (a) shall apply to obligations issued after the date of the enactment of this Act.

6.

Determination of standard mileage rate for charitable contributions deduction

(a)

In General

Subsection (i) of section 170 (relating to standard mileage rate for use of passenger automobile) is amended by adding at the end the following new sentence: In the case of the use of a passenger automobile after the date of the enactment of this sentence and before January 1, 2012, the standard mileage rate shall be the rate determined by the Secretary, which rate shall not be less than the standard mileage rate used for purposes of section 213..

(b)

Effective Date

The amendment made by this section shall apply to taxable years ending after the date of the enactment of this Act.

7.

Additional low income housing allocations

(a)

In general

Subsection (h) of section 42 of is amended by redesignating paragraph (8) as paragraph (9) and by inserting after paragraph (7) the following new paragraph:

(8)

Additional allocations for disasters

(A)

In general

In addition to any other allocation made under this subsection, the Secretary may, upon application by any State, make allocations of housing credit dollar amounts to such State for allocation to buildings in such State consistent with the requirements of subparagraph (C).

(B)

Limitations

The aggregate qualified disaster allocations made by the Secretary under this paragraph may not exceed $190,000,000. Any allocation which is terminated by the Secretary (by reason of disuse or otherwise) shall not be treated as having been allocated for purposes of the preceding sentence.

(C)

Disaster housing allocations

For purposes of this section—

(i)

In general

Allocations under this paragraph may be made by the Secretary only to States which include a disaster area.

(ii)

Priority for housing loss disaster areas

In making allocation under this paragraph, the Secretary shall give priority to housing loss disaster areas.

(iii)

Limitation to buildings located in housing loss disaster areas

Any allocation of housing credit dollar amounts under this paragraph may be allocated by such State (or a housing credit agency of such State) only to—

(I)

buildings located in a disaster area, and

(II)

in the case of any allocation made by reason of a priority under clause (ii), buildings located in the housing loss disaster area with respect to which such priority was given.

(iv)

Pro rata allocations

The allocations made by the Secretary under this paragraph shall be made ratably over the period described in subparagraph (F) unless the Secretary determines, on the basis of the severity or frequency of disasters, that a different allocation is appropriate.

(D)

Housing loss disaster area

For purposes of this paragraph, the term housing loss disaster area means any county or municipality—

(i)

with respect to which the Governor of the State in which such county or municipality is located demonstrates to the satisfaction of the Secretary that the lesser of—

(I)

1,000 dwelling units, or

(II)

10 percent of the dwelling units located in such county or municipality,

have been rendered uninhabitable by reason of damage to or destruction of such units caused by a federally declared disaster, and

(ii)

which is located in a disaster area.

(E)

Definitions and special rules

For purposes of this paragraph—

(i)

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).

(ii)

No effect on carryovers

An allocation of housing credit dollar amount to a State under this paragraph shall not be taken into account under paragraph (3).

(iii)

Consultation with FEMA

Any allocation made under this paragraph by the Secretary shall be made after consultation with the Director of the Federal Emergency Management Agency.

(F)

Termination

Allocations under this paragraph may be made only with respect to disasters occurring during the period beginning on January 1, 2008, and ending on December 31, 2011. No allocation under this paragraph may be made to any building after December 31, 2012.

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(b)

Effective date

The amendment made by this section shall apply to allocations made after the date of the enactment of this Act.

8.

Private activity disaster bonds

(a)

In general

Section 144 is amended by adding at the end the following new subsection:

(d)

Qualified disaster bond

(1)

In general

For purposes of this part, the term qualified disaster bond means any bond issued as part of an issue if—

(A)

95 percent or more of the net proceeds of the issue are to be used for the replacement, repair, reconstruction, or renovation of property of a character subject to the allowance for depreciation which was damaged or destroyed as a result of a federally declared disaster, and

(B)

such bond is designated by a State for purposes of this subsection.

(2)

Designation of bonds

(A)

Designation by State

The maximum aggregate face amount of bonds designated under paragraph (1)(B) by any State may not exceed the bond limitation allocated to such State by the Secretary under subparagraph (B).

(B)

Allocation of bond limitation

(i)

In general

The Secretary may, upon application by any State, make allocation of bond limitation to such State if such State includes a disaster area.

(ii)

Limitation

The aggregate amount of bond limitation allocated to the States by the Secretary under clause (i) may not exceed $13,000,000,000. Any allocation which is terminated by the Secretary (by reason of disuse or otherwise) shall not be treated as having been allocated for purposes of the preceding sentence.

(iii)

Priority for business loss disaster areas

In making allocation under this subsection, the Secretary shall give priority to business loss disaster areas.

(iv)

Limitation to buildings located in business loss disaster areas

Any allocation of bond limitation under this subsection may be used by such State only to issue bonds with respect to—

(I)

property located in a disaster area, and

(II)

in the case of any allocation made by reason of a priority under clause (iii), property located in the business loss disaster area with respect to which such priority was given.

(v)

Pro rata allocations

The allocations made by the Secretary under this subparagraph shall be made ratably over the period described in paragraph (5) unless the Secretary determines, on the basis of the severity or frequency of disasters, that a different allocation is appropriate.

(3)

Business loss disaster area

For purposes of this subsection, the term business loss disaster area means any county or municipality—

(A)

with respect to which the Governor of the State in which such county or municipality is located demonstrates to the satisfaction of the Secretary that business property located in such county or municipality has sustained damages by reason of a federally declared disaster of at least the lesser of—

(i)

$50,000,000, or

(ii)

5 percent of the value of all such business property (determined immediately before such disaster on the basis of property tax records or such other method as the Secretary determines appropriate), and

(B)

which is located in a disaster area.

(4)

Definitions and special rules

For purposes of this subsection—

(A)

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).

(B)

Certain uses prohibited

A bond which is part of an issue shall not be treated as a qualified disaster bond if any proceeds of such issue are to be used for any property described in section 1400N(p)(3).

(C)

Consultation with FEMA

Any allocation made under this subsection by the Secretary shall be made after consultation with the Director of the Federal Emergency Management Agency.

(5)

Termination

Allocations under this subsection may be made only—

(A)

before December 31, 2012, and

(B)

with respect to disasters occurring during the period beginning on January 1, 2008, and ending on December 31, 2011.

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(b)

Exemption from alternative minimum tax

(1)

Subparagraph (C) of section 57(a)(5) is amended by redesignating clauses (iv) and (v) as clauses (v) and (vi) and by inserting after clause (iii) the following new clause:

(iv)

Exception for qualified disaster bonds

For purposes of clause (i), the term private activity bond shall not include any qualified disaster bond (as defined in section 144(d)).

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(2)

Clause (iii) of section 56(g)(4)(B) is amended—

(A)

by striking section 57(a)(5)(C)(iii) and inserting clause (iii) or (iv) of section 57(a)(5)(C), and

(B)

by striking housing in the heading thereof.

(c)

Conforming amendments

(1)

Section 141(e)(1) is amended by striking or at the end of subparagraph (F), by striking the period at the end of subparagraph (G) and inserting , or, and by adding at the end the following new subparagraph:

(H)

qualified disaster bond.

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(2)

Section 146(g) is amended by striking and at the end of paragraph (3), by striking the period at the end of paragraph (4) and inserting , and, and by inserting after paragraph (4) the following new paragraph:

(5)

any qualified disaster bond.

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(3)

The heading of section 144 is amended by inserting ; qualified disaster bond after qualified redevelopment bond.

(d)

Effective date

The amendments made by this section shall apply to obligations issued after the date of the enactment of this Act.

9.

Waiver of limitation on charitable contributions for disaster relief

(a)

In general

Section 170(b) is amended by adding at the end the following new paragraph:

(3)

Waiver of limitation in case of disaster relief

(A)

In general

Except as otherwise provided in subparagraph (B), paragraphs (1) and (2) shall not apply to qualified disaster contributions and such contributions shall not be taken into account for purposes of applying such paragraphs or subsection (d) to other contributions.

(B)

Treatment of excess contributions

For purposes of this section—

(i)

Individuals

In the case of an individual—

(I)

Limitation

Any qualified disaster 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 over the amount of all other charitable contributions allowable under paragraph (1).

(II)

Carryover

If the aggregate amount of qualified disaster contributions made in the contribution year (within the meaning of subsection (d)(1)) exceeds the limitation of subclause (I), such excess shall be added to the excess described in the portion of subparagraph (A) of such subsection which precedes clause (i) thereof for purposes of applying such subsection.

(ii)

Corporations

In the case of a corporation—

(I)

Limitation

Any qualified disaster 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)) over the amount of all other charitable contributions allowable under such paragraph.

(II)

Carryover

Rules similar to the rules of clause (i)(II) shall apply for purposes of this clause.

(C)

Exception to overall limitation on itemized deductions

So much of any deduction allowed under this section as does not exceed the qualified disaster contributions paid during the taxable year shall not be treated as an itemized deduction for purposes of section 68.

(D)

Qualified disaster contributions

(i)

In general

For purposes of this subsection, the term qualified disaster contribution means any charitable contribution if—

(I)

such contribution is paid during the period beginning on the date of the enactment of this paragraph, and ending on December 31, 2009, in cash to an organization described in paragraph (1)(A) (other than an organization described in section 509(a)(3)),

(II)

such contribution is for relief efforts related to a federally declared disaster (as defined in section 165(h)(3)(C)(i)), and

(III)

the taxpayer has elected the application of this subsection with respect to such contribution.

(ii)

Exception

Such term shall not include a contribution if the contribution is for establishment of a new, or maintenance in a donor advised fund (as defined in section 4966(d)(2)).

(iii)

Application of election to partnerships and S corporations

In the case of a partnership or S corporation, the election under clause (i)(III) shall be made separately by each partner or shareholder.

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(b)

Effective date

The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.