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Title II — Disaster tax relief

S. 617 · 116th Congress · Feb 28, 2019 · Lineage

II Disaster tax relief

Sec. 201 Definitions

For purposes of this title—
(1)
Qualified disaster area—
(A)
In general— The term “qualified disaster area” means any area with respect to which a major disaster was declared after January 1, 2018, and before March 1, 2019, by the President under section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act if the incident period of the disaster with respect to which such declaration is made begins before January 1, 2019.
(B)
Exception— Such term shall not include the California wildfire disaster area (as defined in section 20101 of subdivision 2 of division B of the Bipartisan Budget Act of 2018).
(2)
Qualified disaster zone— The term “qualified disaster zone” means that portion of any qualified disaster area which was determined by the President after January 1, 2018, and before March 1, 2019, 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 the qualified disaster with respect to such disaster area.
(3)
Qualified disaster— The term “qualified disaster” means, with respect to any qualified disaster area, the disaster by reason of which a major disaster was declared with respect to such area.
(4)
Incident period— The term “incident period” means, with respect to any qualified disaster, the period specified by the Federal Emergency Management Agency as the period during which such disaster occurred (except that for purposes of this title such period shall not be treated as beginning before January 1, 2018, or ending after December 31, 2018).

Sec. 202 Special disaster-related rules for use of retirement funds

(a)
Tax-favored withdrawals from retirement plans—
(1)
In general— Section 72(t) of the Internal Revenue Code of 1986 shall not apply to any qualified disaster distribution.
(2)
Aggregate dollar limitation—
(A)
In general— For purposes of this subsection, the aggregate amount of distributions received by an individual which may be treated as qualified disaster distributions for any taxable year shall not exceed the excess (if any) of—
(i)
$100,000, over
(ii)
the aggregate amounts treated as qualified disaster distributions received by such individual for all prior taxable years.
(B)
Treatment of plan distributions— If a distribution to an individual would (without regard to subparagraph (A)) be a qualified disaster distribution, a plan shall not be treated as violating any requirement of the Internal Revenue Code of 1986 merely because the plan treats such distribution as a qualified disaster 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.
(C)
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 of the Internal Revenue Code of 1986.
(D)
Special rule for individuals affected by more than one disaster— The limitation of subparagraph (A) shall be applied separately with respect to distributions made with respect to each qualified disaster.
(3)
Amount distributed may be repaid—
(A)
In general— Any individual who receives a qualified disaster distribution may, at any time during the 3-year period beginning on the day after the date on which such distribution was received, make 1 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), of the Internal Revenue Code of 1986, as the case may be.
(B)
Treatment of repayments of distributions from eligible retirement plans other than IRAs— For purposes of the Internal Revenue Code of 1986, if a contribution is made pursuant to subparagraph (A) with respect to a qualified disaster 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 disaster distribution in an eligible rollover distribution (as defined in section 402(c)(4) of such Code) and as having transferred the amount to the eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution.
(C)
Treatment of repayments of distributions from IRAs— For purposes of the Internal Revenue Code of 1986, if a contribution is made pursuant to subparagraph (A) with respect to a qualified disaster distribution from an individual retirement plan (as defined by section 7701(a)(37) of such Code), then, to the extent of the amount of the contribution, the qualified disaster distribution shall be treated as a distribution described in section 408(d)(3) of such Code and as having been transferred to the eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution.
(4)
Definitions— For purposes of this subsection—
(A)
Qualified disaster distribution— Except as provided in paragraph (2), the term qualified disaster distribution means any distribution from an eligible retirement plan made—
(i)
on or after the first day of the incident period of a qualified disaster and before the date which is 180 days after the date of the enactment of this Act, and
(ii)
to an individual whose principal place of abode at any time during the incident period of such qualified disaster is located in the qualified disaster area with respect to such qualified disaster and who has sustained an economic loss by reason of such qualified disaster.
(B)
Eligible retirement plan— The term eligible retirement plan shall have the meaning given such term by section 402(c)(8)(B) of the Internal Revenue Code of 1986.
(5)
Income inclusion spread over 3-year period—
(A)
In general— In the case of any qualified disaster 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.
(B)
Special rule— For purposes of subparagraph (A), rules similar to the rules of subparagraph (E) of section 408A(d)(3) of the Internal Revenue Code of 1986 shall apply.
(6)
Special rules—
(A)
Exemption of distributions from trustee to trustee transfer and withholding rules— For purposes of sections 401(a)(31), 402(f), and 3405 of the Internal Revenue Code of 1986, qualified disaster distributions shall not be treated as eligible rollover distributions.
(B)
Qualified disaster distributions treated as meeting plan distribution requirements— For purposes the Internal Revenue Code of 1986, a qualified disaster 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) of such Code.
(b)
Recontributions of withdrawals for home purchases—
(1)
Recontributions—
(A)
In general— Any individual who received a qualified distribution may, during the applicable period, make 1 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 the Internal Revenue Code of 1986) 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), of such Code, as the case may be.
(B)
Treatment of repayments— Rules similar to the rules of subparagraphs (B) and (C) of subsection (a)(3) shall apply for purposes of this subsection.
(2)
Qualified distribution— For purposes of this subsection, the term qualified distribution means any distribution—
(A)
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), of the Internal Revenue Code of 1986,
(B)
which was to be used to purchase or construct a principal residence in a qualified disaster area, but which was not so used on account of the qualified disaster with respect to such area, and
(C)
which was received during the period beginning on the date which is 180 days before the first day of the incident period of such qualified disaster and ending on the date which is 30 days after the last day of such incident period.
(3)
Applicable period— For purposes of this subsection, the term applicable period means, in the case of a principal residence in a qualified disaster area with respect to any qualified disaster, the period beginning on the first day of the incident period of such qualified disaster and ending on the date which is 180 days after the date of the enactment of this Act.
(c)
Loans from qualified plans—
(1)
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) of the Internal Revenue Code of 1986) to a qualified individual made during the 180-day period beginning on the date of the enactment of this Act—
(A)
clause (i) of section 72(p)(2)(A) of such Code shall be applied by substituting “$100,000” for “$50,000”, and
(B)
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”.
(2)
Delay of repayment— In the case of a qualified individual (with respect to any qualified disaster) with an outstanding loan (on or after the first day of the incident period of such qualified disaster) from a qualified employer plan (as defined in section 72(p)(4) of the Internal Revenue Code of 1986)—
(A)
if the due date pursuant to subparagraph (B) or (C) of section 72(p)(2) of such Code for any repayment with respect to such loan occurs during the period beginning on the first day of the incident period of such qualified disaster and ending on the date which is 180 days after the last day of such incident period, such due date shall be delayed for 1 year (or, if later, until the date which is 180 days after the date of the enactment of this Act),
(B)
any subsequent repayments with respect to any such loan shall be appropriately adjusted to reflect the delay in the due date under subparagraph (A) and any interest accruing during such delay, and
(C)
in determining the 5-year period and the term of a loan under subparagraph (B) or (C) of section 72(p)(2) of such Code, the period described in subparagraph (A) of this paragraph shall be disregarded.
(3)
Qualified individual— For purposes of this subsection, the term “qualified individual” means any individual—
(A)
whose principal place of abode at any time during the incident period of any qualified disaster is located in the qualified disaster area with respect to such qualified disaster, and
(B)
who has sustained an economic loss by reason of such qualified disaster.
(d)
Provisions relating to plan amendments—
(1)
In general— If this subsection applies to any amendment to any plan or annuity contract, such plan or contract shall be treated as being operated in accordance with the terms of the plan during the period described in paragraph (2)(B)(i).
(2)
Amendments to which subsection applies—
(A)
In general— This subsection shall apply to any amendment to any plan or annuity contract which is made—
(i)
pursuant to any provision of this section, or pursuant to any regulation issued by the Secretary or the Secretary of Labor under any provision of this section, and
(ii)
on or before the last day of the first plan year beginning on or after January 1, 2020, or such later date as the Secretary may prescribe.
(B)
Conditions— This subsection shall not apply to any amendment unless—
(i)
during the period—
(I)
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
(II)
ending on the date described in subparagraph (A)(ii) (or, if earlier, the date the plan or contract amendment is adopted),
(ii)
such plan or contract amendment applies retroactively for such period.

Sec. 203 Employee retention credit for employers affected by qualified disasters

(a)
In general— For purposes of section 38 of the Internal Revenue Code of 1986, in the case of an eligible employer, the 2018 qualified disaster employee retention credit shall be treated as a credit listed at the end of subsection (b) of such section. For purposes of this section, the 2018 qualified disaster 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. The amount of qualified wages with respect to any employee which may be taken into account under this section by the employer for any taxable year shall not exceed $6,000 (reduced by the amount of qualified wages with respect to such employee which may be so taken into account for any prior taxable year).
(b)
Definitions— For purposes of this section—
(1)
Eligible employer— The term eligible employer means any employer—
(A)
which conducted an active trade or business in a qualified disaster zone at any time during the incident period of the qualified disaster with respect to such qualified disaster zone, and
(B)
with respect to whom the trade or business described in subparagraph (A) is inoperable at any time on or after the first day of the incident period of such qualified disaster, and before January 1, 2019, as a result of damage sustained by reason of such qualified disaster.
(2)
Eligible employee— The term eligible employee means with respect to an eligible employer an employee whose principal place of employment with such eligible employer (determined immediately before the qualified disaster referred to in paragraph (1)) was in the qualified disaster zone referred to in such paragraph.
(3)
Qualified wages— The term qualified wages means wages (as defined in section 51(c)(1) of the Internal Revenue Code of 1986, but without regard to section 3306(b)(2)(B) of such Code) paid or incurred by an eligible employer with respect to an eligible employee at any time on or after the date on which the trade or business described in paragraph (1) first became inoperable at the principal place of employment of the employee (determined immediately before the qualified disaster referred to in such paragraph) and before the earlier of—
(A)
the date on which such trade or business has resumed significant operations at such principal place of employment, or
(B)
the date which is 150 days after the last day of the incident period of the qualified disaster referred to in paragraph (1).
(c)
Certain rules to apply— For purposes of this section, rules similar to the rules of sections 51(i)(1), 52, and 280C(a), of the Internal Revenue Code of 1986, shall apply.
(d)
Employee not taken into account more than once— An employee shall not be treated as an eligible employee for purposes of this section for any period with respect to any employer if such employer is allowed a credit under section 51 of the Internal Revenue Code of 1986 with respect to such employee for such period.

Sec. 204 Other disaster-related tax relief provisions

(a)
Temporary increase in limitation on qualified contributions—
(1)
Suspension of current limitation— Except as otherwise provided in paragraph (2), qualified contributions shall be disregarded in applying subsections (b) and (d) of section 170 of the Internal Revenue Code of 1986.
(2)
Application of increased limitation— For purposes of section 170 of the Internal Revenue Code of 1986—
(A)
Individuals— In the case of an individual—
(i)
Limitation— Any qualified contribution shall be allowed as a deduction 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 (H) of section 170(b)(1) of such Code) over the amount of all other charitable contributions allowed under section 170(b)(1) of such Code.
(ii)
Carryover— If the aggregate amount of qualified contributions made in the contribution year (within the meaning of section 170(d)(1) of such Code) exceeds the limitation of clause (i), such excess shall be added to the excess described in section 170(b)(1)(G)(ii).
(B)
Corporations— In the case of a corporation—
(i)
Limitation— Any qualified contribution shall be allowed as a deduction 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) of such Code) over the amount of all other charitable contributions allowed under such paragraph.
(ii)
Carryover— If the aggregate amount of qualified contributions made in the contribution year (within the meaning of section 170(d)(2) of such Code) exceeds the limitation of clause (i), such excess shall be appropriately taken into account under section 170(d)(2) subject to the limitations thereof.
(3)
Qualified contributions—
(A)
In general— For purposes of this subsection, the term qualified contribution means any charitable contribution (as defined in section 170(c) of the Internal Revenue Code of 1986) if—
(i)
such contribution—
(I)
is paid during 2018 in cash to an organization described in section 170(b)(1)(A) of such Code, and
(II)
is made for relief efforts in one or more qualified disaster areas,
(ii)
the taxpayer obtains from such organization contemporaneous written acknowledgment (within the meaning of section 170(f)(8) of such Code) that such contribution was used (or is to be used) for relief efforts described in clause (i)(II), and
(iii)
the taxpayer has elected the application of this subsection with respect to such contribution.
(B)
Exception— Such term shall not include a contribution by a donor if the contribution is—
(i)
to an organization described in section 509(a)(3) of the Internal Revenue Code of 1986, or
(ii)
for the establishment of a new, or maintenance of an existing, donor advised fund (as defined in section 4966(d)(2) of such Code).
(C)
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.
(b)
Special rules for qualified disaster-related personal casualty losses—
(1)
In general— If an individual has a net disaster loss for any taxable year—
(A)
the amount determined under section 165(h)(2)(A)(ii) of the Internal Revenue Code of 1986 shall be equal to the sum of—
(i)
such net disaster loss, and
(ii)
so much of the excess referred to in the matter preceding clause (i) of section 165(h)(2)(A) of such Code (reduced by the amount in clause (i) of this subparagraph) as exceeds 10 percent of the adjusted gross income of the individual,
(B)
section 165(h)(1) of such Code shall be applied by substituting “$500” for “$500 ($100 for taxable years beginning after December 31, 2009)”,
(C)
the standard deduction determined under section 63(c) of such Code shall be increased by the net disaster loss, and
(D)
section 56(b)(1)(E) of such Code shall not apply to so much of the standard deduction as is attributable to the increase under subparagraph (C) of this paragraph.
(2)
Net disaster loss— For purposes of this subsection, the term net disaster loss means the excess of qualified disaster-related personal casualty losses over personal casualty gains (as defined in section 165(h)(3)(A) of the Internal Revenue Code of 1986).
(3)
Qualified disaster-related personal casualty losses— For purposes of this subsection, the term qualified disaster-related personal casualty losses means losses described in section 165(c)(3) of the Internal Revenue Code of 1986 which arise in a qualified disaster area on or after the first day of the incident period of the qualified disaster to which such area relates, and which are attributable to such qualified disaster.
(c)
Special rule for determining earned income—
(1)
In general— In the case of a qualified individual, if the earned income of the taxpayer for the applicable taxable year is less than the earned income of the taxpayer for the preceding taxable year, the credits allowed under sections 24(d) and 32 of the Internal Revenue Code of 1986 may, at the election of the taxpayer, be determined by substituting—
(A)
such earned income for the preceding taxable year, for
(B)
such earned income for the applicable taxable year.
(2)
Qualified individual— For purposes of this subsection, the term qualified individual means any individual whose principal place of abode at any time during the incident period of any qualified disaster was located—
(A)
in the qualified disaster zone with respect to such qualified disaster, or
(B)
in the qualified disaster area with respect to such qualified disaster (but outside the qualified disaster zone with respect to such qualified disaster) and such individual was displaced from such principal place of abode by reason of such qualified disaster.
(3)
Applicable taxable year— The term applicable taxable year means, with respect to any qualified individual, any taxable year which includes any portion of the incident period of the qualified disaster to which the qualified disaster area referred to in paragraph (2) relates.
(4)
Earned income— For purposes of this subsection, the term earned income has the meaning given such term under section 32(c) of the Internal Revenue Code of 1986.
(5)
Special rules—
(A)
Application to joint returns— For purposes of paragraph (1), in the case of a joint return for an applicable taxable year—
(i)
such paragraph shall apply if either spouse is a qualified individual, and
(ii)
the earned income of the taxpayer for the preceding taxable year shall be the sum of the earned income of each spouse for such preceding taxable year.
(B)
Uniform application of election— Any election made under paragraph (1) shall apply with respect to both sections 24(d) and 32 of the Internal Revenue Code of 1986.
(C)
Errors treated as mathematical error— For purposes of section 6213 of the Internal Revenue Code of 1986, an incorrect use on a return of earned income pursuant to paragraph (1) shall be treated as a mathematical or clerical error.
(D)
No effect on determination of gross income, etc— Except as otherwise provided in this subsection, the Internal Revenue Code of 1986 shall be applied without regard to any substitution under paragraph (1).

Sec. 205 Treatment of certain possessions

(a)
Payments to Guam and the Commonwealth of the Northern Mariana Islands— In the case of Guam and the Commonwealth of the Northern Mariana Islands, the Secretary of the Treasury shall pay to each such possession amounts equal to the loss in revenues (if any) to that possession by reason of the application of the provisions of this title. Such amounts shall be determined by the Secretary of the Treasury based on information provided by the government of the respective possession.
(b)
Payments to American Samoa— The Secretary of the Treasury shall pay to American Samoa amounts estimated by the Secretary of the Treasury as being equal to the aggregate benefits (if any) that would have been provided to residents of American Samoa by reason of the provisions of this title if American Samoa had in effect a tax system under which the income tax liability of residents of American Samoa were determined by reference to the income tax laws of the United States. The preceding sentence shall not apply unless American Samoa has a plan, which has been approved by the Secretary of the Treasury, under which it will promptly distribute such payments to its residents.
(c)
Treatment of payments— For purposes of section 1324 of title 31, United States Code, the payments under this section shall be treated in the same manner as a refund due from a credit provision referred to in subsection (b)(2) of such section.