Temporary tax relief for areas damaged by 2008 Midwestern severe storms, tornados, and flooding

(a)

In general

Subject to the modifications described in this section, the following provisions of or relating to the Internal Revenue Code of 1986 shall apply to any Midwestern disaster area in addition to the areas to which such provisions otherwise apply: (1)

Go Zone benefits

(A)Section 1400N (relating to tax benefits) other than subsections (b), (i), (j), (m), and (o) thereof. (B)Section 1400O (relating to education tax benefits). (C)Section 1400P (relating to housing tax benefits). (D)Section 1400Q (relating to special rules for use of retirement funds). (E)Section 1400R(a) (relating to employee retention credit for employers). (F)Section 1400S (relating to additional tax relief) other than subsection (d) thereof. (G)Section 1400T (relating to special rules for mortgage revenue bonds). (2)

Other benefits included in Katrina Emergency Tax Relief Act of 2005

Sections 302, 303, 304, 401, and 405 of the Katrina Emergency Tax Relief Act of 2005. (b)

Use of amended income tax returns To take into account receipt of certain casualty loss grants by disallowing previously taken casualty loss deductions

(1)

In general

Notwithstanding any other provision of the Internal Revenue Code of 1986, if a taxpayer claims a deduction for any taxable year with respect to a casualty loss to a principal residence (within the meaning of section 121 of such Code) resulting from the severe storms, tornados, or flooding giving rise to any Presidential declaration described in subsection (c)(1)(A) and in a subsequent taxable year receives a grant under any Federal or State program as reimbursement for such loss, such taxpayer may elect to file an amended income tax return for the taxable year in which such deduction was allowed (and for any taxable year to which such deduction is carried) and reduce (but not below zero) the amount of such deduction by the amount of such reimbursement. (2)

Time of filing amended return

Paragraph (1) shall apply with respect to any grant only if any amended income tax returns with respect to such grant are filed not later than the later of— (A)the due date for filing the tax return for the taxable year in which the taxpayer receives such grant, or (B)the date which is 1 year after the date of the enactment of this Act. (3)

Waiver of penalties and interest

Any underpayment of tax resulting from the reduction under paragraph (1) of the amount otherwise allowable as a deduction shall not be subject to any penalty or interest under such Code if such tax is paid not later than 1 year after the filing of the amended return to which such reduction relates. (c)

Midwestern disaster area

(1)

In general

For purposes of this section and for applying the substitutions described in subsections (e) and (f), the term Midwestern disaster area means an area— (A)with respect to which a major disaster has been declared by the President on or after May 20, 2008, and before August 1, 2008, under section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act by reason of severe storms, tornados, or flooding occurring in any of the States of Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, and Wisconsin, and (B)determined by the President to warrant individual or individual and public assistance from the Federal Government under such Act with respect to damages attributable to such severe storms, tornados, or flooding. (2)

Certain benefits available to areas eligible only for public assistance

For purposes of applying this section to benefits under the following provisions, paragraph (1) shall be applied without regard to subparagraph (B): (A)Sections 1400Q, 1400S(b), and 1400S(d) of the Internal Revenue Code of 1986. (B)Sections 302, 401, and 405 of the Katrina Emergency Tax Relief Act of 2005. (d)

References

(1)

Area

Any reference in such provisions to the Hurricane Katrina disaster area or the Gulf Opportunity Zone shall be treated as a reference to any Midwestern disaster area and any reference to the Hurricane Katrina disaster area or the Gulf Opportunity Zone within a State shall be treated as a reference to all Midwestern disaster areas within the State. (2)

Items attributable to disaster

Any reference in such provisions to any loss, damage, or other item attributable to Hurricane Katrina shall be treated as a reference to any loss, damage, or other item attributable to the severe storms, tornados, or flooding giving rise to any Presidential declaration described in subsection (c)(1)(A). (3)

Applicable disaster date

For purposes of applying the substitutions described in subsections (e) and (f), the term applicable disaster date means, with respect to any Midwestern disaster area, the date on which the severe storms, tornados, or flooding giving rise to the Presidential declaration described in subsection (c)(1)(A) occurred. (e)

Modifications to 1986 Code

The following provisions of the Internal Revenue Code of 1986 shall be applied with the following modifications: (1)

Tax-exempt bond financing

Section 1400N(a)— (A)by substituting qualified Midwestern disaster area bond for qualified Gulf Opportunity Zone Bond each place it appears, except that in determining whether a bond is a qualified Midwestern disaster area bond— (i)paragraph (2)(A)(i) shall be applied by only treating costs as qualified project costs if— (I)in the case of a project involving a private business use (as defined in section 141(b)(6)), either the person using the property suffered a loss in a trade or business attributable to the severe storms, tornados, or flooding giving rise to any Presidential declaration described in subsection (c)(1)(A) or is a person designated for purposes of this section by the Governor of the State in which the project is located as a person carrying on a trade or business replacing a trade or business with respect to which another person suffered such a loss, and (II)in the case of a project relating to public utility property, the project involves repair or reconstruction of public utility property damaged by such severe storms, tornados, or flooding, and (ii)paragraph (2)(A)(ii) shall be applied by treating an issue as a qualified mortgage issue only if 95 percent or more of the net proceeds (as defined in section 150(a)(3)) of the issue are to be used to provide financing for mortgagors who suffered damages to their principal residences attributable to such severe storms, tornados, or flooding. (B)by substituting any State in which a Midwestern disaster area is located for the State of Alabama, Louisiana, or Mississippi in paragraph (2)(B), (C)by substituting designated for purposes of this section (on the basis of providing assistance to areas in the order in which such assistance is most needed) for designated for purposes of this section in paragraph (2)(C), (D)by substituting January 1, 2013 for January 1, 2011 in paragraph (2)(D), (E)in paragraph (3)(A)— (i)by substituting $1,000 for $2,500, and (ii)by substituting before the earliest applicable disaster date for Midwestern disaster areas within the State for before August 28, 2005, (F)by substituting qualified Midwestern disaster area repair or construction for qualified GO Zone repair or construction each place it appears, and (G)by substituting after the date of the enactment of the Housing and Economic Recovery Act of 2008 and before January 1, 2013 for after the date of the enactment of this paragraph and before January 1, 2011 in paragraph (7)(C). (2)

Low-income housing credit

Section 1400N(c)— (A)only with respect to calendar years 2009, 2010, and 2011, (B)by substituting Disaster Recovery Assistance housing amount for Gulf Opportunity housing amount, (C)in paragraph (1)(B)— (i)by substituting $4.00 for $18.00, and (ii)by substituting before the earliest applicable disaster date for Midwestern disaster areas within the State for before August 28, 2005 , and (D)determined without regard to paragraphs (2), (3), (4), (5), and (6) thereof. (3)

Special allowance for certain property acquired on or after the applicable disaster date

Section 1400N(d)— (A)by substituting qualified Disaster Recovery Assistance property for qualified Gulf Opportunity Zone property each place it appears, except that a taxpayer shall be allowed additional bonus depreciation and expensing under such subsection or section 1400N(e) with respect to such property only if— (i)the taxpayer suffered an economic loss attributable to the severe storms, tornados, or flooding giving rise to any Presidential declaration described in subsection (c)(1)(A), and (ii)such property— (I)rehabilitates property damaged, or replaces property destroyed or condemned, as a result of such severe storms, tornados, or flooding, except that, for purposes of this clause, property shall be treated as replacing property destroyed or condemned if, as part of an integrated plan, such property replaces property which is included in a continuous area which includes real property destroyed or condemned, and (II)is similar in nature to, and located in the same county as, the property being rehabilitated or replaced, (B)by substituting the applicable disaster date for August 28, 2005 each place it appears, (C)by substituting December 31, 2011 for December 31, 2007 in paragraph (2)(A)(v), (D)by substituting December 31, 2012 for December 31, 2008 in paragraph (2)(A)(v), (E)by substituting the day before the applicable disaster date for August 27, 2005 in paragraph (3)(A), (F)determined without regard to paragraph (6) thereof, and (G)by not including as qualified Disaster Recovery Assistance property any property to which section 168(k) applies. (4)

Increase in expensing under section 179

Section 1400N(e), by substituting qualified section 179 Disaster Recovery Assistance property for qualified section 179 Gulf Opportunity Zone property each place it appears. (5)

Expensing for certain demolition and clean-up costs

Section 1400N(f)— (A)by substituting qualified Disaster Recovery Assistance clean-up cost for qualified Gulf Opportunity Zone clean-up cost each place it appears, (B)by substituting beginning on the applicable disaster date and ending on December 31, 2010 for beginning on August 28, 2005, and ending on December 31, 2007 in paragraph (2), and (C)by treating costs as qualified Disaster Recovery Assistance clean-up costs only if the removal of debris or demolition of any structure was necessary due to damage attributable to the severe storms, tornados, or flooding giving rise to any Presidential declaration described in subsection (c)(1)(A). (6)

Extension of expensing for environmental remediation costs

Section 1400N(g)— (A)by substituting the applicable disaster date for August 28, 2005 each place it appears, (B)by substituting January 1, 2011 for January 1, 2008 in paragraph (1), (C)by substituting December 31, 2010 for December 31, 2007 in paragraph (1), and (D)by treating a site as a qualified contaminated site only if the release (or threat of release) or disposal of a hazardous substance at the site was attributable to the severe storms, tornados, or flooding giving rise to any Presidential declaration described in subsection (c)(1)(A). (7)

Increase in rehabilitation credit

Section 1400N(h)— (A)by substituting the applicable disaster date for August 28, 2005, (B)by substituting January 1, 2011 for January 1, 2008 in paragraph (1), and (C)by only applying such subsection to qualified rehabilitation expenditures with respect to any building or structure which was damaged or destroyed as a result of the severe storms, tornados, or flooding giving rise to any Presidential declaration described in subsection (c)(1)(A). (8)

Treatment of net operating losses attributable to disaster losses

Section 1400N(k)— (A)by substituting qualified Disaster Recovery Assistance loss for qualified Gulf Opportunity Zone loss each place it appears, (B)by substituting after the day before the applicable disaster date, and before January 1, 2011 for after August 27, 2005, and before January 1, 2008 each place it appears, (C)by substituting the applicable disaster date for August 28, 2005 in paragraph (2)(B)(ii)(I), (D)by substituting qualified Disaster Recovery Assistance property for qualified Gulf Opportunity Zone property in paragraph (2)(B)(iv), and (E)by substituting qualified Disaster Recovery Assistance casualty loss for qualified Gulf Opportunity Zone casualty loss each place it appears. (9)

Credit to holders of tax credit bonds

Section 1400N(l)— (A)by substituting Midwestern tax credit bond for Gulf tax credit bond each place it appears, (B)by substituting any State in which a Midwestern disaster area is located for the State of Alabama, Louisiana, or Mississippi in paragraph (4)(A)(i), (C)by substituting after December 31, 2008 and before January 1, 2010 for after December 31, 2005, and before January 1, 2007, (D)by substituting shall not exceed $100,000,000 for any State with an aggregate population located in all Midwestern disaster areas within the State of at least 2,000,000, $50,000,000 for any State with an aggregate population located in all Midwestern disaster areas within the State of at least 1,000,000 but less than 2,000,000, and zero for any other State. The population of a State within any area shall be determined on the basis of the most recent census estimate of resident population released by the Bureau of Census before the earliest applicable disaster date for Midwestern disaster areas within the State. for shall not exceed and all that follows in paragraph (4)(C), and (E)by substituting the earliest applicable disaster date for Midwestern disaster areas within the State for August 28, 2005 in paragraph (5)(A). (10)

Education tax benefits

Section 1400O, by substituting 2008 or 2009 for 2005 or 2006. (11)

Housing tax benefits

Section 1400P, by substituting the applicable disaster date for August 28, 2005 in subsection (c)(1). (12)

Special rules for use of retirement funds

Section 1400Q— (A)by substituting qualified Disaster Recovery Assistance distribution for qualified hurricane distribution each place it appears, (B)by substituting on or after the applicable disaster date and before January 1, 2010 for on or after August 25, 2005, and before January 1, 2007 in subsection (a)(4)(A)(i), (C)by substituting the applicable disaster date for August 28, 2005 in subsections (a)(4)(A)(i) and (c)(3)(B), (D)by disregarding clauses (ii) and (iii) of subsection (a)(4)(A) thereof, (E)by substituting qualified storm damage distribution for qualified Katrina distribution each place it appears, (F)by substituting after the date which is 6 months before the applicable disaster date and before the date which is the day after the applicable disaster date for after February 28, 2005, and before August 29, 2005 in subsection (b)(2)(B)(ii), (G)by substituting the Midwestern disaster area, but not so purchased or constructed on account of severe storms, tornados, or flooding giving rise to the designation of the area as a disaster area for the Hurricane Katrina disaster area, but not so purchased or constructed on account of Hurricane Katrina in subsection (b)(2)(B)(iii), (H)by substituting beginning on the applicable disaster date and ending on the date which is 5 months after the date of the enactment of the Housing and Economic Recovery Act of 2008 for beginning on August 25, 2005, and ending on February 28, 2006 in subsection (b)(3)(A), (I)by substituting qualified storm damage individual for qualified Hurricane Katrina individual each place it appears, (J)by substituting December 31, 2009 for December 31, 2006 in subsection (c)(2)(A), (K)by substituting beginning on the date of the enactment of the Housing and Economic Recovery Act of 2008 and ending on December 31, 2009 for beginning on September 24, 2005, and ending on December 31, 2006 in subsection (c)(4)(A)(i), (L)by substituting the applicable disaster date for August 25, 2005 in subsection (c)(4)(A)(ii), and (M)by substituting January 1, 2010 for January 1, 2007 in subsection (d)(2)(A)(ii). (13)

Employee retention credit for employers affected by severe storms, tornados, and flooding

Section 1400R(a)— (A)by substituting the applicable disaster date for August 28, 2005 each place it appears, (B)by substituting January 1, 2009 for January 1, 2006 both places it appears, and (C)only with respect to eligible employers who employed an average of not more than 200 employees on business days during the taxable year before the applicable disaster date. (14)

Temporary suspension of limitations on charitable contributions

Section 1400S(a), by substituting the following paragraph for paragraph (4) thereof:

(4)

Qualified contributions

(A)

In general

For purposes of this subsection, the term qualified contribution means any charitable contribution (as defined in section 170(c)) if— (i)such contribution— (I)is paid during the period beginning on the earliest applicable disaster date for all States and ending on December 31, 2008, in cash to an organization described in section 170(b)(1)(A), and (II)is made for relief efforts in 1 or more Midwestern disaster areas, (ii)the taxpayer obtains from such organization contemporaneous written acknowledgment (within the meaning of section 170(f)(8)) that such contribution was used (or is to be used) for relief efforts in 1 or more Midwestern disaster areas, 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), or (ii)for establishment of a new, or maintenance of an existing, donor advised fund (as defined in section 4966(d)(2)). (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.

(15)

Suspension of certain limitations on personal casualty losses

Section 1400S(b)(1), by substituting the applicable disaster date for August 25, 2005. (16)

Special rule for determining earned income

Section 1400S(d)— (A)by treating an individual as a qualified individual if such individual's principal place of abode on the applicable disaster date was located in a Midwestern disaster area, (B)by treating the applicable disaster date with respect to any such individual as the applicable date for purposes of such subsection, and (C)by treating an area as described in paragraph (2)(B)(ii) thereof if the area is a Midwestern disaster area only by reason of subsection (b)(2) of this section (relating to areas eligible only for public assistance). (17)

Adjustments regarding taxpayer and dependency status

Section 1400S(e), by substituting 2008 or 2009 for 2005 or 2006. (f)

Modifications to Katrina Emergency Tax Relief Act of 2005

The following provisions of the Katrina Emergency Tax Relief Act of 2005 shall be applied with the following modifications: (1)

Additional exemption for housing displaced individual

Section 302— (A)by substituting 2008 or 2009 for 2005 or 2006 in subsection (a) thereof, (B)by substituting Midwestern displaced individual for Hurricane Katrina displaced individual each place it appears, and (C)by treating an area as a core disaster area for purposes of applying subsection (c) thereof if the area is a Midwestern disaster area without regard to subsection (b)(2) of this section (relating to areas eligible only for public assistance). (2)

Increase in standard mileage rate

Section 303, by substituting beginning on the applicable disaster date and ending on December 31, 2008 for beginning on August 25, 2005, and ending on December 31, 2006. (3)

Mileage reimbursements for charitable volunteers

Section 304— (A)by substituting beginning on the applicable disaster date and ending on December 31, 2008 for beginning on August 25, 2005, and ending on December 31, 2006 in subsection (a), and (B)by substituting the applicable disaster date for August 25, 2005 in subsection (a). (4)

Exclusion of certain cancellation of indebtedness income

Section 401— (A)by treating an individual whose principal place of abode on the applicable disaster date was in a Midwestern disaster area (determined without regard to subsection (b)(2) of this section) as an individual described in subsection (b)(1) thereof, and by treating an individual whose principal place of abode on the applicable disaster date was in a Midwestern disaster area solely by reason of subsection (b)(2) of this section as an individual described in subsection (b)(2) thereof, (B)by substituting the applicable disaster date for August 28, 2005 both places it appears, and (C)by substituting January 1, 2010 for January 1, 2007 in subsection (e). (5)

Extension of replacement period for nonrecognition of gain

Section 405, by substituting on or after the applicable disaster date for on or after August 25, 2005.