Section 1 Short title
This Act may be cited as the “Tax Relief for Fraud Victims Act”.
Tax Relief for Fraud Victims Act
A BILL
To amend the Internal Revenue Code of 1986 to repeal the limitation on deductions for personal casualty losses and to provide for increased taxpayer relief with respect to theft losses involving fraud, deceit, or misrepresentation.
Sec. 2 Repeal of limitation on deductions for personal casualty losses; increased taxpayer relief with respect to certain theft losses
Repeal of limitation on deductions for personal casualty losses— Section 165(h) of the Internal Revenue Code of 1986 is amended by striking paragraph (5).
Certain theft losses sustained during taxable year of choice; extension of period of limitation for credit or refund claims for certain theft losses—
Certain theft losses sustained during taxable year of choice— Section 165(e) of such Code is amended to read as follows:
“(e) Theft losses—For purposes of subsection (a)—
“(1) In general—Except as provided in paragraph (2), any loss arising from theft shall be treated as sustained during the taxable year in which the taxpayer discovers such loss.
“(2) Theft losses involving fraud, deceit, or misrepresentation—In the case of any loss arising from theft involving fraud, deceit, or misrepresentation (as defined by the Secretary), the taxpayer may elect to treat such loss as sustained during the taxable year in which such loss occurs.”
Extension of period of limitation for credit or refund claims for certain theft losses— Section 165(h)(4) of such Code is amended by adding at the end the following new subparagraph:
“(F) Period of limitation for credit or refund claims for theft losses involving fraud, deceit, or misrepresentation—In the case of a claim for credit or refund with respect to a deduction allowed under subsection (a) for any loss arising from theft involving fraud, deceit, or misrepresentation—
“(i) the period of limitation prescribed by section 6511(a) for the filing of such claim shall be treated as not expiring earlier than the date that is 1 year after the date on which the taxpayer discovers such loss, and
“(ii) section 6511(b)(2) shall not apply with respect to the filing of such claim.”
Distributions relating to theft losses involving fraud, deceit, or misrepresentation— Section 72(t)(2) of such Code is amended by adding at the end the following new subparagraph:
“(O) Distributions relating to theft losses involving fraud, deceit, or misrepresentation
“(i) In general—Any distribution to the extent it relates to any loss arising from theft involving fraud, deceit, or misrepresentation for which a deduction is allowed under section 165(a).
“(ii) Amount distributed may be repaid—Rules similar to the rules of subparagraph (H)(v) shall apply with respect to an individual who receives a distribution to which clause (i) applies, except that subparagraph (H)(v)(I) shall be applied by substituting “1-year period beginning on the day after the date on which the taxpayer discovers the loss described in subparagraph (O)(i)” for “3-year period beginning on the day after the date on which such distribution was received”.
“(iii) Period of limitation for credit or refund claims—In the case of a claim for credit or refund of the tax imposed by paragraph (1) with respect to a distribution described in clause (i)—
“(I) the period of limitation prescribed by section 6511(a) for the filing of such claim shall be treated as not expiring earlier than the date that is 1 year after the date on which the taxpayer discovers the loss described in clause (i), and
“(II) section 6511(b)(2) shall not apply with respect to the filing of such claim.”
Cross reference— Section 6511(i) of such Code is amended by adding at the end the following new paragraph:
“(8) For a period of limitations for credit or refund in the case of theft losses involving fraud, deceit, or misrepresentation, see sections 72(t)(2)(O)(iii) and 165(h)(4)(F).”
Effective dates—
In general— Except as provided in this subsection, the amendments made by this subsection shall apply to losses sustained in taxable years beginning after December 31, 2025.
Distributions relating to theft losses involving fraud, deceit, or misrepresentation— The amendment made by subsection (c) shall apply to distributions made after December 31, 2025.
Pyrrhotite-related personal casualty losses—
In general— In the case of any pyrrhotite-related personal casualty loss, paragraph (1) shall be applied by substituting “December 31, 2020” for “December 31, 2025”.
Pyrrhotite-related personal casualty loss— For purposes of this paragraph, the term pyrrhotite-related personal casualty loss means any personal casualty loss (as defined in section 165(h)(3)(B) of the Internal Revenue Code of 1986) arising in connection with damage to a principal residence (within the meaning of section 121 of such Code) by reason of deterioration of a concrete foundation adversely impacted by pyrrhotite.
Extension of period of limitation for credit or refund claims for pyrrhotite-related personal casualty losses— In the case of a claim for credit or refund with respect to a deduction allowed under section 165(a) of the Internal Revenue Code of 1986 by reason of subparagraph (A) for any pyrrhotite-related personal casualty loss—
the period of limitation prescribed by section 6511(a) of such Code for the filing of such claim shall be treated as not expiring earlier than the date that is 1 year after the date of the enactment of this section, and
section 6511(b)(2) of such Code shall not apply with respect to the filing of such claim.