Determination of earned income for purposes of the earned income credit and the child tax credit for individuals in the Hurricane Harvey and Hurricane Irma disaster areas

(a)

Earned income credit

Section 32 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:

(n)

Special rule relating to Hurricane Harvey and Hurricane Irma

For purposes of this section and section 24(d)— (1)

In general

In the case of a qualified individual, if the earned income of the taxpayer for the taxable year which includes the applicable date is less than the earned income of the taxpayer for the preceding taxable year, the credit allowed under subsection (a) for the taxable year which includes the applicable date 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 taxable year which includes the applicable date. (2)

Qualified individual

For purposes of this subsection, the term qualified individual means any individual— (A)whose principal place of abode on the applicable date was located in the Hurricane Harvey disaster area or the Hurricane Irma disaster area and such individual was displaced from such principal place of abode by reason of the Hurricane Harvey federally declared disaster or the Hurricane Irma federally declared disaster, respectively, or (B)who performed substantially all employment services in the disaster area and was so employed on the applicable date. (3)

Other definitions

For purposes of this subsection— (A)

Applicable date

The term applicable date means— (i)August 25, 2017, with respect to Hurricane Harvey, and (ii)September 5, 2017, with respect to Hurricane Irma. (B)

Hurricane Harvey federally declared disaster

(i)

In general

The term Hurricane Harvey federally declared disaster means the disaster occurring by reason of Hurricane Harvey and determined by the President to warrant individual or individual and public assistance from the Federal Government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act. (ii)

Hurricane Harvey disaster area

The term Hurricane Harvey disaster area means the area so determined to warrant such assistance. (C)

Hurricane Irma federally declared disaster

(i)

In general

The term Hurricane Irma federally declared disaster means the disaster occurring by reason of Hurricane Irma and determined by the President to warrant individual or individual and public assistance from the Federal Government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act. (ii)

Hurricane Irma disaster area

The term Hurricane Irma disaster area means the area so determined to warrant such assistance. (4)

Special rules

(A)

Application to joint returns

For purposes of paragraph (1), in the case of a joint return for a taxable year which includes the applicable date— (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 this section and section 24(d). (C)

Errors treated as mathematical error

For purposes of section 6213, 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, this title shall be applied without regard to any substitution under paragraph (1).

(b)

Child tax credit

Subsection (d) of section 24 of such Code is amended by adding at the end the following new paragraph:

(6)

Special rule relating to Hurricane Harvey and Hurricane Irma

See section 32(n) for determination of earned income with respect to the Hurricane Harvey and Hurricane Irma federally declared disasters.

(c)

Treatment of possessions

(1)

Payments to possessions

(A)

Mirror code possession

The Secretary of the Treasury shall pay to each possession of the United States with a mirror code tax system amounts equal to the loss to that possession by reason of the amendments made by this section. Such amounts shall be determined by the Secretary of the Treasury based on information provided by the government of the respective possession. (B)

Other possessions

The Secretary of the Treasury shall pay to each possession of the United States which does not have a mirror code tax system amounts estimated by the Secretary of the Treasury as being equal to the aggregate benefits that would have been provided to residents of such possession by reason of the amendments made by this section if a mirror code tax system had been in effect in such possession. The preceding sentence shall not apply with respect to any possession of the United States unless such possession has a plan, which has been approved by the Secretary of the Treasury, under which such possession will promptly distribute such payments to the residents of such possession. (2)

Coordination with credit allowed against United States income taxes

In the case of any person— (A)to whom a credit is allowed against taxes imposed by a possession of the United States by reason of the amendments made by this section for any taxable year, or (B)who is eligible for a payment under a plan described in paragraph (1)(B) with respect to any taxable year,

any credit allowed under section 24 or 32 of the Internal Revenue Code of 1986 to such person for such taxable year shall be determined without regard to the amendments made by this section.

(3)

Definitions and special rules

(A)

Possession of the United States

For purposes of this subsection, the term possession of the United States includes the Commonwealth of Puerto Rico and the Commonwealth of the Northern Mariana Islands. (B)

Mirror code tax system

For purposes of this subsection, the term mirror code tax system means, with respect to any possession of the United States, the income tax system of such possession if the income tax liability of the residents of such possession under such system is determined by reference to the income tax laws of the United States as if such possession were the United States. (C)

Treatment of payments

For purposes of section 1324(b)(2) of title 31, United States Code, the payments under this subsection shall be treated in the same manner as a refund due from a credit allowed under section 24(d) or 32 of the Internal Revenue Code of 1986. (d)

Effective date

The amendments made by this section shall apply to taxable years ending after August 25, 2017.