118 S3043 IS: Natural Disaster Tax Relief Act of 2023
U.S. Senate
2023-10-16
text/xml
EN
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II
118th CONGRESS
1st Session
S. 3043
IN THE SENATE OF THE UNITED STATES
October 16, 2023
Ms. Hirono (for herself and Mr. Schatz) introduced the following bill; which was read twice and referred to the Committee on Finance
A BILL
To provide special rules for retirement accounts and personal casualty losses with respect to certain major disasters occurring in 2023.
1.

Short title
This Act may be cited as the “Natural Disaster Tax Relief Act of 2023”.
2.

Definitions
For purposes of this Act—
(1)

Qualified disaster area
The term qualified disaster area means any area with respect to which a major disaster was declared, during calendar year 2023, by the President under section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act if the incident period of the disaster with respect to which such declaration is made begins during calendar year 2023.
(2)

Qualified disaster
The term qualified disaster means, with respect to any qualified disaster area, the disaster by reason of which a major disaster was declared with respect to such area.
(3)

Incident period
The term incident period means, with respect to any qualified disaster, the period specified by the Federal Emergency Management Agency as the period during which such disaster occurred (except that for purposes of this Act such period shall not be treated as ending after January 31, 2024).
3.

Special disaster-related rules for use of retirement funds
(a)

Tax-Favored withdrawals from retirement plans
(1)

In general
Section 72(t) of the Internal Revenue Code of 1986 shall not apply to any qualified disaster distribution.
(2)

Aggregate dollar limitation
(A)

In general
For purposes of this subsection, the aggregate amount of distributions received by an individual which may be treated as qualified disaster distributions for any taxable year shall not exceed the excess (if any) of—
(i)
$100,000, over
(ii)
the aggregate amounts treated as qualified disaster distributions received by such individual for all prior taxable years.
(B)

Treatment of plan distributions
If a distribution to an individual would (without regard to subparagraph (A)) be a qualified disaster 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 disaster 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.
(C)

Controlled group
For purposes of subparagraph (B), the term controlled group means any group treated as a single employer under subsection (b), (c), (m), or (o) of section 414 of the Internal Revenue Code of 1986.
(D)

Special rule for individuals affected by more than one disaster
The limitation of subparagraph (A) shall be applied separately with respect to distributions made with respect to each qualified disaster.
(3)

Amount distributed may be repaid
(A)

In general
Any individual who receives a qualified disaster distribution may, at any time during the 3-year period beginning on the day after the date on which such distribution was received, make 1 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 the Internal Revenue Code of 1986, as the case may be.
(B)

Treatment of repayments of distributions from eligible retirement plans other than IRAs
For purposes of the Internal Revenue Code of 1986, if a contribution is made pursuant to subparagraph (A) with respect to a qualified disaster 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 disaster 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.
(C)

Treatment of repayments of distributions from IRAs
For purposes of the Internal Revenue Code of 1986, if a contribution is made pursuant to subparagraph (A) with respect to a qualified disaster 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 disaster 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.
(4)

Definitions
For purposes of this subsection—
(A)

Qualified disaster distribution
Except as provided in paragraph (2), the term qualified disaster distribution means any distribution from an eligible retirement plan made—
(i)
on or after the first day of the incident period of a qualified disaster and before July 1, 2024, and
(ii)
to an individual whose principal place of abode at any time during the incident period of such qualified disaster is located in the qualified disaster area with respect to such qualified disaster and who has sustained an economic loss by reason of such qualified disaster.
(B)

Eligible retirement plan
The term eligible retirement plan shall have the meaning given such term by section 402(c)(8)(B) of the Internal Revenue Code of 1986.
(5)

Income inclusion spread over 3-year period
(A)

In general
In the case of any qualified disaster distribution, unless the taxpayer elects not to have this paragraph 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.
(B)

Special rule
For purposes of subparagraph (A), rules similar to the rules of subparagraph (E) of section 408A(d)(3) of the Internal Revenue Code of 1986 shall apply.
(6)

Special rules
(A)

Exemption of distributions from trustee to trustee transfer and withholding rules
For purposes of sections 401(a)(31), 402(f), and 3405 of the Internal Revenue Code of 1986, qualified disaster distributions shall not be treated as eligible rollover distributions.
(B)

Qualified disaster distributions treated as meeting plan distribution requirements
For purposes of the Internal Revenue Code of 1986, a qualified disaster distribution shall be treated as meeting the requirements of sections 401(k)(2)(B)(i), 403(b)(7)(A)(i), 403(b)(11), and 457(d)(1)(A) of such Code and section 8433(h)(1) of title 5, United States Code, and, in the case of a money purchase pension plan, a qualified disaster distribution which is an in-service withdrawal shall be treated as meeting the distribution rules of section 401(a) of such Code.
(b)

Recontributions of withdrawals for home purchases
(1)

Recontributions
(A)

In general
Any individual who received a qualified distribution may, during the applicable period, make 1 or more contributions in an aggregate amount not to exceed the amount of such qualified distribution to an eligible retirement plan (as defined in section 402(c)(8)(B) of the Internal Revenue Code of 1986) 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), or 408(d)(3), of such Code, as the case may be.
(B)

Treatment of repayments
Rules similar to the rules of subparagraphs (B) and (C) of subsection (a)(3) shall apply for purposes of this subsection.
(2)

Qualified distribution
For purposes of this subsection, the term qualified distribution means any distribution—
(A)
described in section 401(k)(2)(B)(i)(IV), 403(b)(7)(A)(i)(V), 403(b)(11)(B), or 72(t)(2)(F), of the Internal Revenue Code of 1986,
(B)
which was to be used to purchase or construct a principal residence in a qualified disaster area, but which was not so used on account of the qualified disaster with respect to such area, and
(C)
which was received during the period beginning on the date which is 180 days before the first day of the incident period of such qualified disaster and ending on the date which is 30 days after the last day of such incident period.
(3)

Applicable period
For purposes of this subsection, the term applicable period means, in the case of a principal residence in a qualified disaster area with respect to any qualified disaster, the period beginning on the first day of the incident period of such qualified disaster and ending on June 30, 2024.
(c)

Loans from qualified plans
(1)

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 during the period beginning on the date of the enactment of this Act and ending on June 30, 2024—
(A)
clause (i) of section 72(p)(2)(A) of such Code shall be applied by substituting “$100,000” for “$50,000”, and
(B)
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”.
(2)

Delay of repayment
In the case of a qualified individual (with respect to any qualified disaster) with an outstanding loan (on or after the first day of the incident period of such qualified disaster) from a qualified employer plan (as defined in section 72(p)(4) of the Internal Revenue Code of 1986)—
(A)
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 the first day of the incident period of such qualified disaster and ending on the date which is 180 days after the last day of such incident period, such due date shall be delayed for 1 year (or, if later, until June 30, 2024),
(B)
any subsequent repayments with respect to any such loan shall be appropriately adjusted to reflect the delay in the due date under subparagraph (A) and any interest accruing during such delay, and
(C)
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 subparagraph (A) of this paragraph shall be disregarded.
(3)

Qualified individual
For purposes of this subsection, the term qualified individual means any individual—
(A)
whose principal place of abode at any time during the incident period of any qualified disaster is located in the qualified disaster area with respect to such qualified disaster, and
(B)
who has sustained an economic loss by reason of such qualified disaster.
(d)

Provisions relating to plan amendments
(1)

In general
If this subsection applies to any amendment to any plan or annuity contract, such plan or contract shall be treated as being operated in accordance with the terms of the plan during the period described in paragraph (2)(B)(i).
(2)

Amendments to which subsection applies
(A)

In general
This subsection shall apply to any amendment to any plan or annuity contract which is made—
(i)
pursuant to any provision of this section, or pursuant to any regulation issued by the Secretary or the Secretary of Labor under any provision of this section, and
(ii)
on or before the last day of the first plan year beginning on or after January 1, 2024, or such later date as the Secretary may prescribe.
In the case of a governmental plan (as defined in section 414(d) of the Internal Revenue Code of 1986), clause (ii) shall be applied by substituting the date which is 2 years after the date otherwise applied under clause (ii).
(B)

Conditions
This subsection shall not apply to any amendment unless—
(i)
during the period—
(I)
beginning on the date that this section or the regulation described in subparagraph (A)(i) takes effect (or in the case of a plan or contract amendment not required by this section or such regulation, the effective date specified by the plan), and
(II)
ending on the date described in subparagraph (A)(ii) (or, if earlier, the date the plan or contract amendment is adopted),
the plan or contract is operated as if such plan or contract amendment were in effect, and
(ii)
such plan or contract amendment applies retroactively for such period.
4.

Special rules for qualified disaster-related personal casualty losses
(a)

In general
If an individual has a net disaster loss for any taxable year—
(1)
the amount determined under section 165(h)(2)(A)(ii) of the Internal Revenue Code of 1986 shall be equal to the sum of—
(A)
such net disaster loss, and
(B)
so much of the excess referred to in the matter preceding clause (i) of section 165(h)(2)(A) of such Code (reduced by the amount in clause (i) of this subparagraph) as exceeds 10 percent of the adjusted gross income of the individual,
(2)
in the case of qualified disaster-related personal casualty losses, section 165(h)(1) of such Code shall be applied to by substituting “$500” for “$500 ($100 for taxable years beginning after December 31, 2009)”,
(3)
the standard deduction determined under section 63(c) of such Code shall be increased by the net disaster loss, and
(4)
section 56(b)(1)(E) of such Code shall not apply to so much of the standard deduction as is attributable to the increase under subparagraph (C) of this paragraph.
(b)

Net disaster loss
For purposes of this subsection, the term net disaster loss means the excess of qualified disaster-related personal casualty losses over personal casualty gains (as defined in section 165(h)(3)(A) of the Internal Revenue Code of 1986).
(c)

Qualified disaster-Related personal casualty losses
For purposes of this subsection, the term qualified disaster-related personal casualty losses means losses described in section 165(c)(3) of the Internal Revenue Code of 1986 which arise in a qualified disaster area on or after the first day of the incident period of the qualified disaster to which such area relates, and which are attributable to such qualified disaster.