II 111th CONGRESS 2d Session S. 3934 IN THE SENATE OF THE UNITED STATES September 29, 2010 Mr. Wicker (for himself and Mr. Vitter) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To provide tax relief for persons affected by the discharge of oil in connection with the explosion on, and sinking of, the mobile offshore drilling unit Deepwater Horizon.

1.

Short title

This Act may be cited as the Gulf Coast Oil Recovery Zone Tax Relief and Economic Recovery Act.

2.

Recovery zone; Gulf oil spill

For purposes of this Act— (1)

Recovery zone

The term Recovery Zone means the following counties and parishes affected by the Gulf oil spill: (A)The counties of Escambia, Santa Rosa, Okaloosa, Walton, Bay, Gulf, Franklin, and Wakulla in the State of Florida. (B)The counties of Hancock, Harrison, and Jackson in the State of Mississippi. (C)The counties of Mobile and Baldwin in the State of Alabama. (D)The parishes of Orleans, St. Tammany, St. Bernard, Plaquemines, Jefferson, Lafourche, Terrebonne, St. Mary, Iberia, Vermilion, and Cameron in the State of Louisiana. (2)

Gulf Oil Spill

The term Gulf oil spill means the discharge of oil by reason of the explosion on, and sinking of, the mobile offshore drilling unit Deepwater Horizon.

3.

Non-recognition of income from insurance proceeds which are reinvested in the recovery zone

(a)

In general

For purposes of the Internal Revenue Code of 1986, amounts received from any qualified Gulf oil spill payment shall be recognized only to the extent that the amount realized exceeds the qualified investments made by the taxpayer with respect to such qualified Gulf oil spill payment. (b)

Qualified Gulf oil spill payment

For purposes of this section, the term qualified Gulf oil spill payment means— (1)any proceeds or payments from insurance received in connection with the Gulf oil spill, or (2)any payment for damages attributable to the Gulf oil spill under section 1002 of the Oil Pollution Act of 1990 (33 U.S.C. 2702). (c)

Qualified investment

For purposes of this section— (1)

In general

The term qualified investment means, with respect to any qualified Gulf oil spill payment, the sum of the qualified recovery zone investments which are made by the taxpayer before the date which is 6 months after the later of— (A)the date of the qualified Gulf oil spill payment, or (B)the date of the enactment of this Act. (2)

Qualified recovery zone investment

The term qualified recovery zone investment means sum of— (A)amounts paid or incurred for tangible property (to which section 168 of the Internal Revenue Code of 1986 applies) acquired by purchase (within the meaning of section 179(d)(2) of such Code) for use in the active conduct of an recovery zone trade or business property, plus (B)amounts paid or incurred for start-up expenditures (as defined in section 195(c)) in connection with a qualified recovery zone trade or business. (3)

Qualified recovery zone trade or business

The term qualified recovery zone trade or business means— (A)any commercial or charter fishing business operating in the recovery zone, or (B)any hotel, lodging, recreation, entertainment, or restaurant business located in the recovery zone. (d)

Reduction in basis

For purposes of section 1016 of the Internal Revenue Code of 1986, the basis in any qualified investment shall be reduced (but not below zero) by an amount equal to the amount that bears the same ratio to such basis (determined without regard to this subsection) as the amount of qualified Gulf oil spill payments received by the taxpayer bears to the amount of qualified investments made the by taxpayer with respect to such qualified Gulf oil spill payments.

4.

5-year net operating loss carryback for certain oil spill-related losses

(a)

In general

For purposes of the Internal Revenue Code of 1986, in the case of a taxpayer which has a qualified oil spill loss (as defined in subsection (b)) for a taxable year, such qualified oil spill loss shall be a net operating loss carryback under section 172 of such Code to each of the 5 taxable years preceding the taxable year of such loss. (b)

Qualified oil spill losses

For purposes of this section— (1)

Definition

(A)

In general

Except as otherwise provided in this paragraph, the term qualified oil spill loss means the lesser of— (i)the excess of— (I)the amount of losses in a taxable year ending after April 20, 2010, and before October 1, 2011, incurred by any trade or business operating in the recovery zone and attributable to the Gulf oil spill, over (II)amounts received during such taxable year as payments for lost profits and earning capacity under section 1002(b)(2)(E) of the Oil Pollution Act of 1990 (33 U.S.C. 2702(b)(2)(E)), or (ii)the amount of the net operating loss (as defined in section 172(c) of the Internal Revenue Code of 1986) for such taxable year. (B)

Safe harbor for certain small businesses

In the case of any taxpayer the gross revenues of whom for any taxable year ending after April 20, 2010, and before October 1, 2011, do not exceed $5,000,000, such term means the amount of the net operating loss (as so defined) of such business for such taxable year. (C)

Coordination with qualified disaster losses

Such term shall not include any qualified disaster loss (as defined in section 172(j) of the Internal Revenue Code of 1986). (2)

Coordination with subsection (b)(2)

For purposes of applying section 172(b)(2) of such Code, a qualified oil spill loss for any taxable year shall be treated in a manner similar to the manner in which a specified liability loss (as defined in section 172(f) of such Code) is treated. (3)

Election

Any taxpayer entitled to a 5-year carryback under subsection (a) from any loss year may elect to have the carryback period with respect to such loss year determined without regard to subsection (a). 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)

Effective date

(1)

In general

Except as otherwise provided in this subsection, this section shall apply to net operating losses (as so defined) arising in taxable years ending after April 20, 2010. (2)

Transition rule

In the case of a net operating loss (as so defined) for a taxable year ending before the date of the enactment of this Act— (A)notwithstanding subsection (b)(1)(H)(iii)(II) or (b)(3) of section 172 of the Internal Revenue Code of 1986, any election made under such subsections with respect to such loss may be revoked before the applicable date, (B)any election made under subsection (a) with respect to such loss shall (notwithstanding such section) be treated as timely made if made before the applicable date, and (C)any application under section 6411(a) of such Code with respect to such loss shall be treated as timely filed if filed before the applicable date. For purposes of this paragraph, the term applicable date means the date which is 60 days after the date of the enactment of this Act.

5.

Tax-favored withdrawals from retirement plans for relief relating to the Gulf oil spill

(a)

In general

Section 72(t) of the Internal Revenue Code of 1986 shall not apply to any qualified Gulf Coast oil spill distribution. (b)

Aggregate dollar limitation

(1)

In general

For purposes of this section, the aggregate amount of distributions received by an individual which may be treated as qualified Gulf Coast oil spill distributions for any taxable year shall not exceed the excess (if any) of— (A)$100,000, over (B)the aggregate amounts treated as qualified Gulf Coast oil spill distributions received by such individual for all prior taxable years. (2)

Treatment of plan distributions

If a distribution to an individual would (without regard to paragraph (1)) be a qualified Gulf Coast oil spill 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 Gulf Coast oil spill 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. (3)

Controlled group

For purposes of paragraph (2), the term controlled group means any group treated as a single employer under subsection (b), (c), (m), or (o) of section 414 of such Code. (c)

Amount distributed may be repaid

(1)

In general

Any individual who receives a qualified Gulf Coast oil spill distribution may, at any time during the 3-year period beginning on the day after the date on which such distribution was received, make one 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 such Code, as the case may be. (2)

Treatment of repayments of distributions from eligible retirement plans other than iras

For purposes of such Code, if a contribution is made pursuant to paragraph (1) with respect to a qualified Gulf Coast oil spill 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 Gulf Coast oil spill 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. (3)

Treatment of repayments for distributions from iras

For purposes of such Code, if a contribution is made pursuant to paragraph (1) with respect to a qualified Gulf Coast oil spill 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 Gulf Coast oil spill 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. (d)

Definitions

For purposes of this section— (1)

Qualified Gulf Coast oil spill distribution

Except as provided in subsection (b), the term qualified Gulf Coast oil spill distribution means any distribution from an eligible retirement plan made on or after April 20, 2010, and before January 1, 2012, to an individual whose principal place of abode on April 20, 2010, is located in the recovery zone and who has sustained an economic loss by reason of the Gulf oil spill. (2)

Eligible retirement plan

The term eligible retirement plan shall have the meaning given such term by section 402(c)(8)(B) of such Code. (e)

Income inclusion spread over 3-Year period for qualified Gulf Coast oil spill distributions

(1)

In general

In the case of any qualified Gulf Coast oil spill distribution, unless the taxpayer elects not to have this subsection 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. (2)

Special rule

For purposes of paragraph (1), rules similar to the rules of subparagraph (E) of section 408A(d)(3) of such Code shall apply. (f)

Special rules

(1)

Exemption of distributions from trustee to trustee transfer and withholding rules

For purposes of sections 401(a)(31), 402(f), and 3405 of such Code, qualified Gulf Coast oil spill distributions shall not be treated as eligible rollover distributions. (2)

Qualified Gulf Coast oil spill distributions treated as meeting plan distribution requirements

For purposes of such Code, a qualified Gulf Coast oil spill 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.

6.

Loans from qualified plans for relief relating to the Gulf oil spill

(a)

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 after the date of enactment of this Act and before January 1, 2012— (1)clause (i) of section 72(p)(2)(A) of such Code shall be applied by substituting $100,000 for $50,000, and (2)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. (b)

Delay of repayment

In the case of a qualified individual with an outstanding loan on or after April 20, 2010, from a qualified employer plan (as defined in section 72(p)(4) of such Code)— (1)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 April 20, 2010, and ending on December 31, 2011, such due date shall be delayed for 1 year, (2)any subsequent repayments with respect to any such loan shall be appropriately adjusted to reflect the delay in the due date under paragraph (1) and any interest accruing during such delay, and (3)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 paragraph (1) shall be disregarded. (c)

Qualified individual

For purposes of this section, the term qualified individual means an individual whose principal place of abode on April 20, 2005, is located in the recovery zone and who has sustained an economic loss by reason of the Gulf oil spill.

7.

Work opportunity tax credit for qualified recovery zone employees

(a)

In general

For purposes of section 51 of the Internal Revenue Code of 1986, a qualified recovery zone employee shall be treated as a member of a targeted group. (b)

Qualified recovery zone employee

For purposes of this section, the term Qualified recovery zone employee means any individual who on April 20, 2010, had a principal place of abode in the recovery zone and who is hired during the 2-year period beginning on such date for a position the principal place of employment of which is located in the recovery zone. (c)

Reasonable identification acceptable

In lieu of the certification requirement under subparagraph (A) of section 51(d)(12) of such Code, an individual may provide to the employer reasonable evidence that the individual is a qualified recovery zone employee, and subparagraph (B) of such section shall be applied as if such evidence were a certification described in such subparagraph. (d)

Special rules for determining credit

For purposes of applying subpart F of part IV of subchapter A of chapter 1 of such Code to wages paid or incurred to any Hurricane Katrina employee— (1)section 51(c)(4) of such Code shall not apply, and (2)section 51(i)(2) of such Code shall not apply with respect to the first hire of such employee as a qualified recovery zone employee, unless such employee was an employee of the employer on April 20, 2010.

8.

Special allowance for certain property acquired on or after April 20, 2010

(a)

Additional allowance

For purposes of the Internal Revenue Code of 1986, any qualified recovery zone property shall be treated as qualified property under section 168(k) of such Code. (b)

Qualified recovery zone property

For purposes of this section— (1)

In general

The term qualified recovery zone property means property— (A)which is described in section 168(k)(2)(A)(i) of the Internal Revenue Code of 1986, (B)substantially all of the use of which is in the recovery zone and is in the active conduct of a trade or business by the taxpayer in such Zone, (C)the original use of which in the recovery zone commences with the taxpayer on or after April 20, 2010, (D)which is acquired by the taxpayer by purchase (as defined in section 179(d)) on or after April 20, 2010, but only if no written binding contract for the acquisition was in effect before April 20, 2010, and (E)which is placed in service by the taxpayer on or before January 1, 2013. (2)

Exceptions

(A)

Alternative depreciation property

Such term shall not include any property described in section 168(k)(2)(D)(i) of the Internal Revenue Code of 1986. (B)

Tax-exempt bond-financed property

Such term shall not include any property any portion of which is financed with the proceeds of any obligation the interest on which is exempt from tax under section 103 of such Code. (C)

Qualified revitalization buildings

Such term shall not include any qualified revitalization building with respect to which the taxpayer has elected the application of paragraph (1) or (2) of section 1400I(a) of such Code. (D)

Election out

If a taxpayer makes an election under this subparagraph with respect to any class of property for any taxable year, this section shall not apply to all property in such class placed in service during such taxable year. (E)

Bonus depreciation property under section 168(k)

Such term shall not include any property to which section 168(k) applies. (c)

Special rules

For purposes of this section, rules similar to the rules of subparagraph (E) of section 168(k)(2) of the Internal Revenue Code of 1986 shall apply to qualified recovery zone property, except that such subparagraph shall be applied— (1)by substituting April 20, 2010 for December 31, 2007 each place it appears therein, (2)by substituting January 1, 2013 for January 1, 2011 in clause (i) thereof, and (3)by substituting qualified recovery zone property for qualified property in clause (iv) thereof.

9.

Extension of 15-year recovery period for certain property placed in service in the recovery zone

For purposes of section 168 of the Internal Revenue Code of 1986, the term 15-year property shall include qualified leasehold improvement property (as defined by section 168(e)(6) of such Code), qualified restaurant property (as defined by section 168(e)(7) of such Code), and qualified retail improvement property (as defined by section 168(e)(8) of such Code, determined without regard to subclause (E) thereof) which is placed in service in the recovery zone after April 20, 2010, and before January 1, 2013.

10.

Tax-Exempt Bond Financing

(a)

In general

For purposes of the Internal Revenue Code of 1986— (1)any qualified recovery zone bond described in subsection (b)(1)(A) shall be treated as an exempt facility bond under section 142 of such Code, and (2)any qualified recovery zone bond described in subsection (b)(1)(B) shall be treated as a qualified mortgage bond under section 143(a) of such Code. (b)

Qualified recovery zone bond

For purposes of this section, the term qualified recovery zone bond means any bond issued as part of an issue if— (1)(A)95 percent or more of the net proceeds (as defined in section 150(a)(3) of the Internal Revenue Code of 1986) of such issue are to be used for qualified project costs, or (B)such issue meets the requirements of a qualified mortgage issue (as defined in section 143(a)(2) of such Code), except as otherwise provided in this subsection, (2)such bond is issued by the State of Florida, Alabama, Louisiana, or Mississippi, or any political subdivision thereof, (3)such bond is designated for purposes of this section by— (A)in the case of a bond which is required under State law to be approved by the bond commission of such State, such bond commission, and (B)in the case of any other bond, the Governor of such State, (4)such bond is issued after the date of the enactment of this Act and before January 1, 2016, and (5)no portion of the proceeds of such issue is to be used to provide any property described in section 144(c)(6)(B) of the Internal Revenue Code of 1986. (c)

Limitations on bonds

The maximum aggregate face amount of bonds which may be designated under this section with respect to any State shall not exceed the product of $2,500 multiplied by the portion of the State population which is in the recovery zone (as determined on the basis of the most recent census estimate of resident population released by the Bureau of Census before April 20, 2010). (d)

Qualified project costs

For purposes of this section, the term qualified project costs means— (1)the cost of any qualified residential rental project (as defined in section 142(d) of the Internal Revenue Code of 1986) located in the recovery zone, and (2)the cost of acquisition, construction, reconstruction, and renovation of— (A)nonresidential real property (including fixed improvements associated with such property) located in the recovery zone, and (B)public utility property (as defined in section 168(i)(10) of such Code) located in the recovery zone. (e)

Special rules

In applying the Internal Revenue Code of 1986 to any qualified recovery zone bond, the following modifications shall apply: (1)Section 142(d)(1) of such Code (defining qualified residential rental project) shall be applied— (A)by substituting 60 percent for 50 percent in subparagraph (A) thereof, and (B)by substituting 70 percent for 60 percent in subparagraph (B) thereof. (2)Section 143 of such Code (relating to mortgage revenue bonds: qualified mortgage bond and qualified veterans’ mortgage bond) shall be applied— (A)only with respect to owner-occupied residences in the recovery zone, (B)by treating any such residence in the recovery zone as a targeted area residence, (C)by applying subsection (f)(3) thereof without regard to subparagraph (A) thereof, and (D)by substituting $150,000 for $15,000 in subsection (k)(4) thereof. (3)Except as provided in section 143 of such Code, repayments of principal on financing provided by the issue of which such bond is a part may not be used to provide financing. (4)Section 146 of such Code (relating to volume cap) shall not apply. (5)Section 147(d)(2) of such Code (relating to acquisition of existing property not permitted) shall be applied by substituting 50 percent for 15 percent each place it appears. (6)Section 148(f)(4)(C) of such Code (relating to exception from rebate for certain proceeds to be used to finance construction expenditures) shall apply to the available construction proceeds of bonds which are part of an issue described in subsection (b)(1)(A). (7)Section 57(a)(5) of such Code (relating to tax-exempt interest) shall not apply. (f)

Separate issue treatment of portions of an issue

This section shall not apply to the portion of an issue which (if issued as a separate issue) would be treated as a qualified bond (within the meaning of section 141 of the Internal Revenue Code of 1986) or as a bond that is not a private activity bond (within the meaning of such section 141 and determined without regard to subsection (a)), if the issuer elects to so treat such portion.

11.

Advance Refundings of Certain Tax-Exempt Bonds

(a)

In general

With respect to a bond described in subsection (c), one additional advance refunding after the date of the enactment of this Act and before January 1, 2016, shall be allowed under the applicable rules of section 149(d) of the Internal Revenue Code of 1986 if— (1)the Governor of the State designates the advance refunding bond for purposes of this subsection, and (2)the requirements of subsection (e) are met. (b)

Certain private activity bonds

With respect to a bond described in subsection (c) which is an exempt facility bond described in paragraph (1) or (2) of section 142(a) of the Internal Revenue Code of 1986, one advance refunding after the date of the enactment of this Act and before January 1, 2016, shall be allowed under the applicable rules of section 149(d) of such Code (notwithstanding paragraph (2) thereof) if the requirements of paragraphs (1) and (2) of subsection (a) are met. (c)

Bonds described

A bond is described in this subsection if such bond was outstanding on April 20, 2010, and is issued by the State of Florida, Alabama, Louisiana, or Mississippi, or a political subdivision thereof. (d)

Aggregate limit

The maximum aggregate face amount of bonds which may be designated under this section by the Governor of a State shall not exceed— (1)$4,500,000,000 in the case of the State of Florida, (2)$4,500,000,000 in the case of the State of Louisiana, (3)$4,500,000,000 in the case of the State of Mississippi, and (4)$4,500,000,000 in the case of the State of Alabama. (e)

Additional requirements

The requirements of this subsection are met with respect to any advance refunding of a bond described in subsection (c) if— (1)no advance refundings of such bond would be allowed under the Internal Revenue Code of 1986 on or after April 20, 2010, (2)the advance refunding bond is the only other outstanding bond with respect to the refunded bond, and (3)the requirements of section 148 of such Code are met with respect to all bonds issued under this subsection. (f)

Use of proceeds requirement

This section shall not apply to any advance refunding of a bond which is issued as part of an issue if any portion of the proceeds of such issue (or any prior issue) was (or is to be) used to provide any property described in section 144(c)(6)(B) of the Internal Revenue Code of 1986.

12.

De Minimus safe harbor exception for certain tax-exempt interest expense of financial institutions

(a)

In general

For purposes of section 265(b)(2)(A) of the Internal Revenue Code of 1986, there shall not be taken into account any qualified recovery zone bond (as defined in section 10(b)) or any advanced refunding bond issued pursuant to section 11. (b)

Limitation

The amount of obligations not taken into account under subsection (a) shall not exceed the excess of— (1)2 percent of the amount determined under paragraph (2)(B) of section 265(b) such Code, over (2)any amount taken into account under paragraph (7) of such section. (c)

Treatment as financial institution preference item

The portion of any obligation not taken into account under paragraph (2)(A) of section 265(b) of the Internal Revenue Code of 1986 by reason of subsection (a) shall be treated for purposes of section 291 of such Code as having been acquired on August 7, 1986.