[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6640 Introduced in House (IH)]







110th CONGRESS
  2d Session
                                H. R. 6640

  To amend the Internal Revenue Code of 1986 to provide relief in the 
                 case of federally declared disasters.


_______________________________________________________________________


                    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.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

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

SEC. 2. LOSSES ATTRIBUTABLE TO FEDERALLY DECLARED DISASTERS.

    (a) Waiver of Adjusted Gross Income Limitation.--
            (1) 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:
            ``(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, 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.''.
            (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) 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)''.
                    (C) 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)''.
                    (D)(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:
    ``(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--''.
                    (ii) 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''.
                    (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).''.
                    (iv) Section 139(c)(2) of such Code 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) 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))''.
                    (vi) Subclause (III) of section 172(b)(1)(F)(ii) of 
                such Code is amended by striking ``Presidentially 
                declared disasters'' and inserting ``federally declared 
                disasters''.
                    (vii) 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))''.
    (b) Increase in Standard Deduction by Disaster Casualty Loss.--
            (1) 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:
                    ``(D) the disaster loss deduction.''.
            (2) Disaster loss deduction.--Subsection (c) of section 63 
        of such Code 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)).''.
            (3) 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).''.
    (c) 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''.
    (d) Effective Dates.--
            (1) Except as provided by paragraph (2), the amendments 
        made by this section shall apply to taxable years beginning 
        after December 31, 2007.
            (2) The amendment made by subsection (c) shall apply to 
        taxable years beginning after December 31, 2008.

SEC. 3. EXPENSING OF QUALIFIED DISASTER EXPENSES.

    (a) 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:

``SEC. 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).
    ``(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.''.
    (b) 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:

``Sec. 198A. Expensing of Qualified Disaster Expenses.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred after December 31, 2007.

SEC. 4. NET OPERATING LOSSES ATTRIBUTABLE TO FEDERALLY DECLARED 
              DISASTERS.

    (a) 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:
                    ``(J) 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.''.
    (b) 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:
    ``(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)), 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.''.
    (c) 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:
            ``(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.''.
    (d) Conforming Amendments.--
            (1) 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.
            (2) 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)).''.
    (e) Effective Date.--The amendments made by this section shall 
apply to losses arising in taxable years beginning after December 31, 
2007.

SEC. 5. WAIVER OF CERTAIN MORTGAGE REVENUE BOND REQUIREMENTS FOLLOWING 
              FEDERALLY DECLARED DISASTERS.

    (a) In General.--Paragraph (11) of section 143(k) of the Internal 
Revenue Code of 1986 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) Principle 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).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to disasters occurring after December 31, 2007.
                                 <all>