[Congressional Record Volume 151, Number 119 (Wednesday, September 21, 2005)]
[Senate]
[Pages S10320-S10325]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
KATRINA EMERGENCY TAX RELIEF ACT OF 2005
Mr. BENNETT. I ask unanimous consent that the Senate proceed to the
immediate consideration of H.R. 3768, which was received from the
House.
There being no objection, the Presiding officer laid before the
Senate the following message from the House of Representatives:
H.R. 3768
Resolved, That the House agree to the amendment of the
Senate to the bill (H.R. 3768) entitled ``An Act to provide
emergency tax relief for persons affected by Hurricane
Katrina'', with the following House amendment to Senate
amendment:
In lieu of the matter proposed to be inserted by the
amendment of the Senate, insert the following:
SECTION 1. SHORT TITLE, ETC.
(a) Short Title.--This Act may be cited as the ``Katrina
Emergency Tax Relief Act of 2005''.
(b) Table of Contents.--The table of contents for this Act
is as follows:
Sec. 1. Short title, etc.
Sec. 2. Hurricane Katrina disaster area.
TITLE I--SPECIAL RULES FOR USE OF RETIREMENT FUNDS FOR RELIEF RELATING
TO HURRICANE KATRINA
Sec. 101. Tax-favored withdrawals from retirement plans for
relief relating to Hurricane Katrina.
Sec. 102. Recontributions of withdrawals for home purchases
cancelled due to Hurricane Katrina.
Sec. 103. Loans from qualified plans for relief relating to
Hurricane Katrina.
Sec. 104. Provisions relating to plan amendments.
TITLE II--EMPLOYMENT RELIEF
Sec. 201. Work opportunity tax credit for Hurricane Katrina
employees.
Sec. 202. Employee retention credit for employers affected
by Hurricane Katrina.
TITLE III--CHARITABLE GIVING INCENTIVES
Sec. 301. Temporary suspension of limitations on charitable
contributions.
Sec. 302. Additional exemption for housing Hurricane
Katrina displaced individuals.
Sec. 303. Increase in standard mileage rate for charitable
use of vehicles.
Sec. 304. Mileage reimbursements to charitable volunteers
excluded from gross income.
Sec. 305. Charitable deduction for contributions of food
inventory.
Sec. 306. Charitable deduction for contributions of book
inventories to public schools.
TITLE IV--ADDITIONAL TAX RELIEF PROVISIONS
Sec. 401. Exclusions of certain cancellations of
indebtedness by reason of Hurricane Katrina.
Sec. 402. Suspension of certain limitations on personal
casualty losses.
Sec. 403. Required exercise of authority under section
7508A for tax relief relating to Hurricane Katrina.
Sec. 404. Special rules for mortgage revenue bonds.
Sec. 405. Extension of replacement period for
nonrecognition of gain for property located in
Hurricane Katrina disaster area.
Sec. 406. Special rule for determining earned income.
Sec. 407. Secretarial authority to make adjustments
regarding taxpayer and dependency status.
TITLE V--EMERGENCY REQUIREMENT
Sec. 501. Emergency requirement.
SEC. 2. HURRICANE KATRINA DISASTER AREA.
For purposes of this Act--
(1) Hurricane katrina disaster area.--The term ``Hurricane
Katrina disaster area'' means an area with respect to which a
major disaster has been declared by the President before
September 14, 2005, under section 401 of the Robert T.
Stafford Disaster Relief and Emergency Assistance Act by
reason of Hurricane Katrina.
(2) Core disaster area.--The term ``core disaster area''
means that portion of the Hurricane Katrina disaster area
determined by the President to warrant individual or
individual and public assistance from the Federal Government
under such Act.
TITLE I--SPECIAL RULES FOR USE OF RETIREMENT FUNDS FOR RELIEF RELATING
TO HURRICANE KATRINA
SEC. 101. TAX-FAVORED WITHDRAWALS FROM RETIREMENT PLANS FOR
RELIEF RELATING TO HURRICANE KATRINA.
(a) In General.--Section 72(t) of the Internal Revenue Code
of 1986 shall not apply to any qualified Hurricane Katrina
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 Hurricane Katrina
distributions for any taxable year shall not exceed the
excess (if any) of--
(A) $100,000, over
(B) the aggregate amounts treated as qualified Hurricane
Katrina 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 Hurricane Katrina 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 Hurricane Katrina 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
Hurricane Katrina 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 Hurricane Katrina 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
Hurricane Katrina 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 Hurricane
Katrina 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
Hurricane Katrina 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 hurricane katrina distribution.--Except as
provided in subsection (b), the term ``qualified Hurricane
Katrina distribution'' means any distribution from an
eligible retirement plan made on or after August 25, 2005,
and before January 1, 2007, to an individual whose principal
place of abode on August 28, 2005, is located in the
Hurricane Katrina disaster area and who has sustained an
economic loss by reason of Hurricane Katrina.
[[Page S10321]]
(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 Hurricane Katrina Distributions.--
(1) In general.--In the case of any qualified Hurricane
Katrina 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
Hurricane Katrina distributions shall not be treated as
eligible rollover distributions.
(2) Qualified hurricane katrina distributions treated as
meeting plan distribution requirements.--For purposes of such
Code, a qualified Hurricane Katrina 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.
SEC. 102. RECONTRIBUTIONS OF WITHDRAWALS FOR HOME PURCHASES
CANCELLED DUE TO HURRICANE KATRINA.
(a) Recontributions.--
(1) In general.--Any individual who received a qualified
distribution may, during the period beginning on August 25,
2005, and ending on February 28, 2006, make one 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.
(2) Treatment of repayments.--Rules similar to the rules of
paragraphs (2) and (3) of section 101(c) of this Act shall
apply for purposes of this section.
(b) Qualified Distribution Defined.--For purposes of this
section, the term ``qualified distribution'' means any
distribution--
(1) described in section 401(k)(2)(B)(i)(IV),
403(b)(7)(A)(ii) (but only to the extent such distribution
relates to financial hardship), 403(b)(11)(B), or 72(t)(2)(F)
of such Code,
(2) received after February 28, 2005, and before August 29,
2005, and
(3) which was to be used to purchase or construct a
principal residence in the Hurricane Katrina disaster area,
but which was not so purchased or constructed on account of
Hurricane Katrina.
SEC. 103. LOANS FROM QUALIFIED PLANS FOR RELIEF RELATING TO
HURRICANE KATRINA.
(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,
2007--
(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 August 25,
2005, 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 August 25,
2005, and ending on December 31, 2006, 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 August 28, 2005, is located in
the Hurricane Katrina disaster area and who has sustained an
economic loss by reason of Hurricane Katrina.
SEC. 104. PROVISIONS RELATING TO PLAN AMENDMENTS.
(a) In General.--If this section 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 subsection (b)(2)(A).
(b) Amendments to Which Section Applies.--
(1) In general.--This section shall apply to any amendment
to any plan or annuity contract which is made--
(A) pursuant to any amendment made by this title, or
pursuant to any regulation issued by the Secretary of the
Treasury or the Secretary of Labor under this title, and
(B) on or before the last day of the first plan year
beginning on or after January 1, 2007, or such later date as
the Secretary of the Treasury may prescribe.
In the case of a governmental plan (as defined in section
414(d) of the Internal Revenue Code of 1986), subparagraph
(B) shall be applied by substituting the date which is 2
years after the date otherwise applied under subparagraph
(B).
(2) Conditions.--This section shall not apply to any
amendment unless--
(A) during the period--
(i) beginning on the date the legislative or regulatory
amendment described in paragraph (1)(A) takes effect (or in
the case of a plan or contract amendment not required by such
legislative or regulatory amendment, the effective date
specified by the plan), and
(ii) ending on the date described in paragraph (1)(B) (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
(B) such plan or contract amendment applies retroactively
for such period.
TITLE II--EMPLOYMENT RELIEF
SEC. 201. WORK OPPORTUNITY TAX CREDIT FOR HURRICANE KATRINA
EMPLOYEES.
(a) In General.--For purposes of section 51 of the Internal
Revenue Code of 1986, a Hurricane Katrina employee shall be
treated as a member of a targeted group.
(b) Hurricane Katrina Employee.--For purposes of this
section, the term ``Hurricane Katrina employee'' means--
(1) any individual who on August 28, 2005, had a principal
place of abode in the core disaster area 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 core disaster area, and
(2) any individual who on such date had a principal place
of abode in the core disaster area, who is displaced from
such abode by reason of Hurricane Katrina, and who is hired
during the period beginning on such date and ending on
December 31, 2005.
(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
Hurricane Katrina 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 Hurricane
Katrina employee, unless such employee was an employee of the
employer on August 28, 2005.
SEC. 202. EMPLOYEE RETENTION CREDIT FOR EMPLOYERS AFFECTED BY
HURRICANE KATRINA.
(a) In General.--In the case of an eligible employer, there
shall be allowed as a credit against the tax imposed by
chapter 1 of the Internal Revenue Code of 1986 for the
taxable year an amount equal to 40 percent of the qualified
wages with respect to each eligible employee of such employer
for such taxable year. For purposes of the preceding
sentence, the amount of qualified wages which may be taken
into account with respect to any individual shall not exceed
$6,000.
(b) Definitions.--For purposes of this section--
(1) Eligible employer.--The term ``eligible employer''
means any employer--
(A) which conducted an active trade or business on August
28, 2005, in a core disaster area, and
(B) with respect to whom the trade or business described in
subparagraph (A) is inoperable on any day after August 28,
2005, and before January 1, 2006, as a result of damage
sustained by reason of Hurricane Katrina.
(2) Eligible employee.--The term ``eligible employee''
means with respect to an eligible employer an employee whose
principal place of employment on August 28, 2005, with such
eligible employer was in a core disaster area.
(3) Qualified wages.--The term ``qualified wages'' means
wages (as defined in section 51(c)(1) of such Code, but
without regard to section 3306(b)(2)(B) of such Code) paid or
incurred by an eligible employer with respect to an eligible
employee on any day after August 28, 2005, and before January
1, 2006, which occurs during the period--
(A) beginning on the date on which the trade or business
described in paragraph (1) first became inoperable at the
principal place of employment of the employee immediately
before Hurricane Katrina, and
(B) ending on the date on which such trade or business has
resumed significant operations at such principal place of
employment.
Such term shall include wages paid without regard to whether
the employee performs no services, performs services at a
different place of employment than such principal place of
employment, or performs services at such principal place of
employment before significant operations have resumed.
[[Page S10322]]
(c) Credit not Allowed for Large Businesses.--The term
``eligible employer'' shall not include any trade or business
for any taxable year if such trade or business employed an
average of more than 200 employees on business days during
the taxable year.
(d) Certain Rules to Apply.--For purposes of this section,
rules similar to the rules of sections 51(i)(1), 52, and
280C(a) of such Code shall apply.
(e) Employee not Taken Into Account More Than Once.--An
employee shall not be treated as an eligible employee for
purposes of this section for any period with respect to any
employer if such employer is allowed a credit under section
51 of such Code with respect to such employee for such
period.
(f) Credit to Be Part of General Business Credit.--The
credit allowed under this section shall be added to the
current year business credit under section 38(b) of such Code
and shall be treated as a credit allowed under subpart D of
part IV of subchapter A of chapter 1 of such Code.
TITLE III--CHARITABLE GIVING INCENTIVES
SEC. 301. TEMPORARY SUSPENSION OF LIMITATIONS ON CHARITABLE
CONTRIBUTIONS.
(a) In General.--Except as otherwise provided in subsection
(b), section 170(b) of the Internal Revenue Code of 1986
shall not apply to qualified contributions and such
contributions shall not be taken into account for purposes of
applying subsections (b) and (d) of section 170 of such Code
to other contributions.
(b) Treatment of Excess Contributions.--For purposes of
section 170 of such Code--
(1) Individuals.--In the case of an individual--
(A) Limitation.--Any qualified contribution shall be
allowed only to the extent that the aggregate of such
contributions does not exceed the excess of the taxpayer's
contribution base (as defined in subparagraph (F) of section
170(b)(1) of such Code) over the amount of all other
charitable contributions allowed under such section
170(b)(1).
(B) Carryover.--If the aggregate amount of qualified
contributions made in the contribution year (within the
meaning of section 170(d)(1) of such Code) exceeds the
limitation of subparagraph (A), such excess shall be added to
the excess described in the portion of subparagraph (A) of
such section which precedes clause (i) thereof for purposes
of applying such section.
(2) Corporations.--In the case of a corporation--
(A) Limitation.--Any qualified contribution shall be
allowed only to the extent that the aggregate of such
contributions does not exceed the excess of the taxpayer's
taxable income (as determined under paragraph (2) of section
170(b) of such Code) over the amount of all other charitable
contributions allowed under such paragraph.
(B) Carryover.--Rules similar to the rules of paragraph
(1)(B) shall apply for purposes of this paragraph.
(c) Exception to Overall Limitation on Itemized
Deductions.--So much of any deduction allowed under section
170 of such Code as does not exceed the qualified
contributions paid during the taxable year shall not be
treated as an itemized deduction for purposes of section 68
of such Code.
(d) Qualified Contributions.--
(1) In general.--For purposes of this section, the term
``qualified contribution'' means any charitable contribution
(as defined in section 170(c) of such Code)--
(A) paid during the period beginning on August 28, 2005,
and ending on December 31, 2005, in cash to an organization
described in section 170(b)(1)(A) of such Code (other than an
organization described in section 509(a)(3) of such Code),
(B) in the case of a contribution paid by a corporation,
such contribution is for relief efforts related to Hurricane
Katrina, and
(C) with respect to which the taxpayer has elected the
application of this section.
(2) Exception.--Such term shall not include a contribution
if the contribution is for establishment of a new, or
maintenance in an existing, segregated fund or account with
respect to which the donor (or any person appointed or
designated by such donor) has, or reasonably expects to have,
advisory privileges with respect to distributions or
investments by reason of the donor's status as a donor.
(3) Application of election to partnerships and s
corporations.--In the case of a partnership or S corporation,
the election under paragraph (1)(C) shall be made separately
by each partner or shareholder.
SEC. 302. ADDITIONAL EXEMPTION FOR HOUSING HURRICANE KATRINA
DISPLACED INDIVIDUALS.
(a) In General.--In the case of taxable years of a natural
person beginning in 2005 or 2006, for purposes of the
Internal Revenue Code of 1986, taxable income shall be
reduced by $500 for each Hurricane Katrina displaced
individual of the taxpayer for the taxable year.
(b) Limitations.--
(1) Dollar limitation.--The reduction under subsection (a)
shall not exceed $2,000, reduced by the amount of the
reduction under this section for all prior taxable years.
(2) Individuals taken into account only once.--An
individual shall not be taken into account under subsection
(a) if such individual was taken into account under such
subsection by the taxpayer for any prior taxable year.
(3) Identifying information required.--An individual shall
not be taken into account under subsection (a) for a taxable
year unless the taxpayer identification number of such
individual is included on the return of the taxpayer for such
taxable year.
(c) Hurricane Katrina Displaced Individual.--For purposes
of this section, the term ``Hurricane Katrina displaced
individual'' means, with respect to any taxpayer for any
taxable year, any natural person if--
(1) such person's principal place of abode on August 28,
2005, was in the Hurricane Katrina disaster area,
(2)(A) in the case of such an abode located in the core
disaster area, such person is displaced from such abode, or
(B) in the case of such an abode located outside of the
core disaster area, such person is displaced from such abode,
and
(i) such abode was damaged by Hurricane Katrina, or
(ii) such person was evacuated from such abode by reason of
Hurricane Katrina, and
(3) such person is provided housing free of charge by the
taxpayer in the principal residence of the taxpayer for a
period of 60 consecutive days which ends in such taxable
year.
Such term shall not include the spouse or any dependent of
the taxpayer.
(d) Compensation for Housing.--No deduction shall be
allowed under this section if the taxpayer receives any rent
or other amount (from any source) in connection with the
providing of such housing.
SEC. 303. INCREASE IN STANDARD MILEAGE RATE FOR CHARITABLE
USE OF VEHICLES.
Notwithstanding section 170(i) of the Internal Revenue Code
of 1986, for purposes of computing the deduction under
section 170 of such Code for use of a vehicle described in
subsection (f)(12)(E)(i) of such section for provision of
relief related to Hurricane Katrina during the period
beginning on August 25, 2005, and ending on December 31,
2006, the standard mileage rate shall be 70 percent of the
standard mileage rate in effect under section 162(a) of such
Code at the time of such use. Any increase under this section
shall be rounded to the next highest cent.
SEC. 304. MILEAGE REIMBURSEMENTS TO CHARITABLE VOLUNTEERS
EXCLUDED FROM GROSS INCOME.
(a) In General.--For purposes of the Internal Revenue Code
of 1986, gross income of an individual for taxable years
ending on or after August 25, 2005, does not include amounts
received, from an organization described in section 170(c) of
such Code, as reimbursement of operating expenses with
respect to use of a passenger automobile for the benefit of
such organization in connection with providing relief
relating to Hurricane Katrina during the period beginning on
August 25, 2005, and ending on December 31, 2006. The
preceding sentence shall apply only to the extent that the
expenses which are reimbursed would be deductible under
chapter 1 of such Code if section 274(d) of such Code were
applied--
(1) by using the standard business mileage rate in effect
under section 162(a) at the time of such use, and
(2) as if the individual were an employee of an
organization not described in section 170(c) of such Code.
(b) Application to Volunteer Services Only.--Subsection (a)
shall not apply with respect to any expenses relating to the
performance of services for compensation.
(c) No Double Benefit.--No deduction or credit shall be
allowed under any other provision of such Code with respect
to the expenses excludable from gross income under subsection
(a).
SEC. 305. CHARITABLE DEDUCTION FOR CONTRIBUTIONS OF FOOD
INVENTORY.
(a) In General.--Paragraph (3) of section 170(e) of the
Internal Revenue Code of 1986 (relating to special rule for
certain contributions of inventory and other property) is
amended by redesignating subparagraph (C) as subparagraph (D)
and by inserting after subparagraph (B) the following new
subparagraph:
``(C) Special rule for contributions of food inventory.--
``(i) General rule.--In the case of a charitable
contribution of food from any trade or business of the
taxpayer, this paragraph shall be applied--
``(I) without regard to whether the contribution is made by
a C corporation, and
``(II) only to food that is apparently wholesome food.
``(ii) Limitation.--In the case of a taxpayer other than a
C corporation, the aggregate amount of such contributions for
any taxable year which may be taken into account under this
section shall not exceed 10 percent of the taxpayer's
aggregate net income for such taxable year from all trades or
businesses from which such contributions were made for such
year, computed without regard to this section.
``(iii) Apparently wholesome food.--For purposes of this
subparagraph, the term `apparently wholesome food' has the
meaning given to such term by section 22(b)(2) of the Bill
Emerson Good Samaritan Food Donation Act (42 U.S.C.
1791(b)(2)), as in effect on the date of the enactment of
this subparagraph.
``(iv) Termination.--This subparagraph shall not apply to
contributions made after December 31, 2005.''.
(b) Effective Date.--The amendment made by this section
shall apply to contributions made on or after August 28,
2005, in taxable years ending after such date.
[[Page S10323]]
SEC. 306. CHARITABLE DEDUCTION FOR CONTRIBUTIONS OF BOOK
INVENTORIES TO PUBLIC SCHOOLS.
(a) In General.--Paragraph (3) of section 170(e) of the
Internal Revenue Code of 1986 (relating to certain
contributions of ordinary income and capital gain property),
as amended by section 305, is amended by redesignating
subparagraph (D) as subparagraph (E) and by inserting after
subparagraph (C) the following new subparagraph:
``(D) Special rule for contributions of book inventory to
public schools.--
``(i) Contributions of book inventory.--In determining
whether a qualified book contribution is a qualified
contribution, subparagraph (A) shall be applied without
regard to whether the donee is an organization described in
the matter preceding clause (i) of subparagraph (A).
``(ii) Qualified book contribution.--For purposes of this
paragraph, the term `qualified book contribution' means a
charitable contribution of books to a public school which is
an educational organization described in subsection
(b)(1)(A)(ii) and which provides elementary education or
secondary education (kindergarten through grade 12).
``(iii) Certification by donee.--Subparagraph (A) shall not
apply to any contribution unless (in addition to the
certifications required by subparagraph (A) (as modified by
this subparagraph)), the donee certifies in writing that--
``(I) the books are suitable, in terms of currency,
content, and quantity, for use in the donee's educational
programs, and
``(II) the donee will use the books in its educational
programs.
``(iv) Termination.--This subparagraph shall not apply to
contributions made after December 31, 2005.''.
(b) Effective Date.--The amendments made by this section
shall apply to contributions made on or after August 28,
2005, in taxable years ending after such date.
TITLE IV--ADDITIONAL TAX RELIEF PROVISIONS
SEC. 401. EXCLUSIONS OF CERTAIN CANCELLATIONS OF INDEBTEDNESS
BY REASON OF HURRICANE KATRINA.
(a) In General.--For purposes of the Internal Revenue Code
of 1986, gross income shall not include any amount which (but
for this section) would be includible in gross income by
reason of the discharge (in whole or in part) of indebtedness
of a natural person described in subsection (b) by an
applicable entity (as defined in section 6050P(c)(1) of such
Code).
(b) Persons Described.--A natural person is described in
this subsection if the principal place of abode of such
person on August 25, 2005, was located--
(1) in the core disaster area, or
(2) in the Hurricane Katrina disaster area (but outside the
core disaster area) and such person suffered economic loss by
reason of Hurricane Katrina.
(c) Exceptions.--
(1) Business indebtedness.--Subsection (a) shall not apply
to any indebtedness incurred in connection with a trade or
business.
(2) Real property outside core disaster area.--Subsection
(a) shall not apply to any discharge of indebtedness to the
extent that real property constituting security for such
indebtedness is located outside of the Hurricane Katrina
disaster area.
(d) Denial of Double Benefit.--For purposes of the Internal
Revenue Code of 1986, the amount excluded from gross income
under subsection (a) shall be treated in the same manner as
an amount excluded under section 108(a) of such Code.
(e) Effective Date.--This section shall apply to discharges
made on or after August 25, 2005, and before January 1, 2007.
SEC. 402. SUSPENSION OF CERTAIN LIMITATIONS ON PERSONAL
CASUALTY LOSSES.
Paragraphs (1) and (2)(A) of section 165(h) of the Internal
Revenue Code of 1986 shall not apply to losses described in
section 165(c)(3) of such Code which arise in the Hurricane
Katrina disaster area on or after August 25, 2005, and which
are attributable to Hurricane Katrina. In the case of any
other losses, section 165(h)(2)(A) of such Code shall be
applied without regard to the losses referred to in the
preceding sentence.
SEC. 403. REQUIRED EXERCISE OF AUTHORITY UNDER SECTION 7508A
FOR TAX RELIEF RELATING TO HURRICANE KATRINA.
(a) Authority Includes Suspension of Payment of Employment
and Excise Taxes.--Subparagraphs (A) and (B) of section
7508(a)(1) of the Internal Revenue Code of 1986 are amended
to read as follows:
``(A) Filing any return of income, estate, gift,
employment, or excise tax;
``(B) Payment of any income, estate, gift, employment, or
excise tax or any installment thereof or of any other
liability to the United States in respect thereof;''.
(b) Application With Respect to Hurricane Katrina.--In the
case of any taxpayer determined by the Secretary of the
Treasury to be affected by the Presidentially declared
disaster relating to Hurricane Katrina, any relief provided
by the Secretary of the Treasury under section 7508A of the
Internal Revenue Code of 1986 shall be for a period ending
not earlier than February 28, 2006, and shall be treated as
applying to the filing of returns relating to, and the
payment of, employment and excise taxes.
(c) Effective Date.--The amendment made by subsection (a)
shall apply for any period for performing an act which has
not expired before August 25, 2005.
SEC. 404. SPECIAL RULES FOR MORTGAGE REVENUE BONDS.
(a) In General.--In the case of financing provided with
respect to a qualified Hurricane Katrina recovery residence,
subsection (d) of section 143 of the Internal Revenue Code of
1986 shall be applied as if such residence were a targeted
area residence.
(b) Qualified Hurricane Katrina Recovery Residence.--For
purposes of this section, the term ``qualified Hurricane
Katrina recovery residence'' means--
(1) any residence in the core disaster area, and
(2) any other residence if--
(A) such other residence is located in the same State as
the principal residence referred to in subparagraph (B), and
(B) the mortgagor with respect to such other residence
owned a principal residence on August 28, 2005, which--
(i) was located in the Hurricane Katrina disaster area, and
(ii) was rendered uninhabitable by reason of Hurricane
Katrina.
(c) Special Rule for Home Improvement Loans.--In the case
of any loan with respect to a residence in the Hurricane
Katrina disaster area, section 143(k)(4) of such Code shall
be applied by substituting $150,000 for the dollar amount
contained therein to the extent such loan is for the repair
of damage by reason of Hurricane Katrina.
(d) Application.--Subsection (a) shall not apply to
financing provided after December 31, 2007.
SEC. 405. EXTENSION OF REPLACEMENT PERIOD FOR NONRECOGNITION
OF GAIN FOR PROPERTY LOCATED IN HURRICANE
KATRINA DISASTER AREA.
Clause (i) of section 1033(a)(2)(B) of the Internal Revenue
Code of 1986 shall be applied by substituting ``5 years'' for
``2 years'' with respect to property in the Hurricane Katrina
disaster area which is compulsorily or involuntarily
converted on or after August 25, 2005, by reason of Hurricane
Katrina, but only if substantially all of the use of the
replacement property is in such area.
SEC. 406. SPECIAL RULE FOR DETERMINING EARNED INCOME.
(a) In General.--In the case of a qualified individual, if
the earned income of the taxpayer for the taxable year which
includes August 25, 2005, is less than the earned income of
the taxpayer for the preceding taxable year, the credits
allowed under sections 24(d) and 32 of the Internal Revenue
Code of 1986 may, at the election of the taxpayer, be
determined by substituting--
(1) such earned income for the preceding taxable year, for
(2) such earned income for the taxable year which includes
August 25, 2005.
(b) Qualified Individual.--For purposes of this section,
the term ``qualified individual'' means any individual whose
principal place of abode on August 25, 2005, was located--
(1) in the core disaster area, or
(2) in the Hurricane Katrina disaster area (but outside the
core disaster area) and such individual was displaced from
such principal place of abode by reason of Hurricane Katrina.
(c) Earned Income.--For purposes of this section, the term
``earned income'' has the meaning given such term under
section 32(c) of such Code.
(d) Special Rules.--
(1) Application to joint returns.--For purpose of
subsection (a), in the case of a joint return for a taxable
year which includes August 25, 2005--
(A) such subsection shall apply if either spouse is a
qualified individual, and
(B) 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.
(2) Uniform application of election.--Any election made
under subsection (a) shall apply with respect to both section
24(d) and section 32 of such Code.
(3) Errors treated as mathematical error.--For purposes of
section 6213 of such Code, an incorrect use on a return of
earned income pursuant to subsection (a) shall be treated as
a mathematical or clerical error.
(4) No effect on determination of gross income, etc.--
Except as otherwise provided in this section, the Internal
Revenue Code of 1986 shall be applied without regard to any
substitution under subsection (a).
SEC. 407. SECRETARIAL AUTHORITY TO MAKE ADJUSTMENTS REGARDING
TAXPAYER AND DEPENDENCY STATUS.
With respect to taxable years beginning in 2005 or 2006,
the Secretary of the Treasury or the Secretary's delegate may
make such adjustments in the application of the internal
revenue laws as may be necessary to ensure that taxpayers do
not lose any deduction or credit or experience a change of
filing status by reason of temporary relocations by reason of
Hurricane Katrina. Any adjustments made under the preceding
sentence shall ensure that an individual is not taken into
account by more than one taxpayer with respect to the same
tax benefit.
TITLE V--EMERGENCY REQUIREMENT
SEC. 501. EMERGENCY REQUIREMENT.
Any provision of this Act causing an effect on receipts,
budget authority, or outlays is designated as an emergency
requirement pursuant to section 402 of H. Con. Res. 95 (109th
Congress).
Mr. GRASSLEY. Mr. President, so far, the Finance Committee has put
forth two Hurricane Katrina relief bills. One is the emergency tax
relief bill passed today.
[[Page S10324]]
The second is the health and welfare bill introduced last Thursday.
And we're working on a third bill to help rebuild and rejuvenate the
Gulf region.
Today I met with Mississippi Governor Haley Barbour to hear about the
needs of people in the Katrina area, both now and in the future.
In addition to Senator Baucus, I've been working with my colleagues
from Mississippi, Louisiana, and Alabama, including the cosponsors of
this tax bill--Senators Lott, Landrieu, Vitter, Cochran and Shelby.
For the next package, we're taking ideas from these senators.
I've talked with Senator Vitter, Senator Lott and Senator Landrieu
about tax incentives and expect to talk with the rest of the group in
the coming days.
We've had the biggest natural disaster in history. People are
hurting, and we're getting them help.
We know that tax incentives helped to revitalize New York after 9/11.
They can do the same for New Orleans, Gulfport and the other hurricane-
hit areas.
The immediate relief package will help get short-term aid to
hurricane victims by encouraging food donations and the employment of
displaced individuals, for example.
For those who've suffered casualty losses, we've liberalized the tax
rules to permit affected taxpayers to deduct losses from damaged
property.
We also want to help protect Katrina victims from undeserved IRS
harassment.
It's good that the House and Senate quickly worked out minor
differences in our respective versions of the bill.
We need to get these tax incentives on the books and help Katrina
victims make a fresh start.
The President is working to restore a high quality of life to the
people of the gulf region, and today we're contributing a solid piece
of legislation to his effort.
After this package is completed, our focus will be on longer-term tax
incentives to help rebuild homes and businesses.
We're looking at depreciation changes, tax-exempt bond authority,
tax-exempt bond refunding, and enterprise-zone initiatives.
In the coming days and weeks, the Finance Committee will be examining
these ideas with an eye toward the most effective and efficient use of
the taxpayer's dollar.
The more thoughtful we are, and the more expeditiously we act, the
sooner the people of the gulf region can return home, earn a living,
and rebuild their communities.
Mr. BAUCUS. Mr. President, traveling down to the gulf coast region
last week, I saw firsthand the havoc that Hurricane Katrina had
wreaked. As colleagues who have been down there know, in many places,
it is stunning. It is like a war zone. It is worse than the pictures.
At one stop, we went into what was left of a library. Muck and ruin
covered books and other library materials. One shiny object caught my
eye and I picked up. It was a DVD of the film, ``The Perfect Storm.''
The victims of Katrina have many immediate needs. The legislation
that we pass today will address four of them.
One, they need cash. And they need it fast. Two, they need jobs.
Three, they need housing. And four, charities need help from Congress
so they can help the victims of the hurricane.
I am pleased that Congress could come together and act quickly on
this emergency tax relief to address those needs.
First, victims of Katrina need immediate access to cash. The working
poor should not lose government benefits that they currently receive.
These benefits are an important supplement to low-income working
families. A prolonged change in their living situation could affect
their eligibility for these benefits, such as the earned income credit
and the child tax credit. This bill will allow displaced individuals to
use their 2004 income to calculate benefits on their 2005 tax return.
It will further ensure that these working families do not lose
deductions, credits or filing status because the family is displaced
from their home.
We also allow victims of Katrina access to retirement accounts for
immediate cash assistance. Under current law, there is a 10 percent
penalty for early distributions of money in these accounts. We waive
that penalty and allow displaced persons to recontribute to the
retirement account over a 3-year period.
Victims also need tax relief if a commercial lender forgives their
debt. When a commercial lender discharges debt--such as a cancellation
of a mortgage--this amount is included as income for tax purposes. This
legislation ensures that individuals affected by the hurricane are not
taxed on this personal debt relief.
Second, victims of Katrina want to get back in the workforce. We
provide businesses with the tools that they need to hire displaced
workers. The Work Opportunity Tax Credit allows employers to claim a
credit against wages paid to new workers that face barriers to
employment. It applies to veterans, low-income families, and other
targeted groups. We expand the Work Opportunity Tax Credit to cover all
survivors of Hurricane Katrina who lived in the disaster zone no matter
where they seek a job.
We also allow employers located in the disaster zone to take a $2,400
tax credit on wages paid to employees during the period the business
was shut down. These employees have tapped into their savings to help
out their employees.
Third, we address the housing needs of people dislocated by the
hurricane. Many folks across the country have opened up their hearts
and opened up their homes. These generous individuals now face
increased living expenses--higher water, electric, and grocery bills.
This is a considerable burden. We help defray these costs.
We create a special tax deduction for individuals who provide rent-
free housing to dislocated persons for at least 60 days. The deduction
is $500 for each dislocated person up to a maximum of $2,000.
Finally, the victims need the generosity of individuals and
businesses across this country. There has been a surge in giving to
charitable organizations. We should encourage this activity. Our bill
provides incentives for corporations to increase gifts of cash, food,
books, and other items sorely needed in the affected areas and
communities.
We didn't get everything we wanted in this bill. I regret that my
House colleagues did not accept our provision supporting ``pay
protection'' for military reservists and guards and I will continue to
work with my colleagues, Senators Landrieu and Kerry, to get this
enacted. As passed by the Senate, employers in the disaster zone who
continued to pay employees that were activated by the reserves or the
National Guard would also be entitled to the employee retention credit.
Over a third of the Guard members in Mississippi and Louisiana are
currently serving in Iraq, and in Alabama, all major Guard units who
have been activated for the disaster have already served in Iraq or are
there currently. Around 500 of the 3,700 Louisiana National Guard
members serving in Iraq lost their homes or their families were
displaced due to Hurricane Katrina. If their loyal employers, who
despite being hit by Hurricane Katrina, were continuing to help out
these military families, why shouldn't Congress at a minimum extend
this $2,400 employee retention credit? I am disappointed, but resolved
to keep fighting on this matter.
In the coming weeks, I plan to work with my colleagues to draft a
long-term tax relief package. We will draft legislation that will help
rebuild homes and businesses, pump money into local economies, and help
distressed working families.
I thank all Senators for allowing this emergency legislation to move
forward today. Today, we have taken real steps, concrete steps, that
will make a difference in the lives of people who can use the help.
This is what we came here to government service to do. And I am glad
that we have been able to do it.
Mr. KERRY. Mr. President, today, we are passing legislation which
will provide immediate tax relief to those directly affected by this
incredible disaster. This tax relief will help put cash in the hands of
victims and encourage charitable giving. This legislation is needed,
but I am deeply disappointed that this legislation is missing an
extremely important component--relief for military reservists.
[[Page S10325]]
We have rightfully focused on rescuing, reuniting and rebuilding, but
we must also make sure to take care of our strained military families.
The first and best definition of patriotism is keeping faith with those
who wear our uniform. That means giving our troops the resources they
need to keep safe while they are keeping us safe. And it means
supporting our troops at home as well as abroad.
The Senate passed Hurricane Katrina tax relief legislation which
looked out for our military reservists. More than 40 percent of
military reservists and National Guard members suffer a pay cut when
they are called to defend our nation, including those serving in the
gulf coast today. These citizens serve nobly. They are much more than
weekend warriors. Currently, there are over 140,000 reservists called
up for active duty in the war against terrorism and over ten thousand
of these reservists and guardsman are from Louisiana, Alabama, and
Mississippi. Over 50,000 National Guard members have been called up to
assist with Hurricane Katrina.
Many of these reservists are being hit with a double-whammy. After
recent service in Iraq or Afghanistan, they are coming home to an area
that has been devastated. The all-volunteer army depends on these
reservists. They have been serving our country with distinction and
pride for many years, and should not be penalized financially for their
honorable service.
The Senate passed bill included an employee retention credit which
provides a 40 percent tax credit for wages paid up to $6,000 after
August 28, 2005 and before December 31, 2005. This credit would help
employers in the gulf coast who pay employees that are not able to work
because the business was either damaged or destroyed and pay reservists
and guardsmen that worked for them right up to the time before they
were deployed.
Giving employers' incentives to pay reservist employees is the right
thing to do. We have read about the Louisiana reservists who have come
home from Iraq and found that they have lost everything. According to
the Washington Post, nearly 550 of the Louisiana brigade's troops lost
homes or loved ones or were otherwise affected by Katrina. The brigade
is coming to the end of its rotation in Baghdad. This is exactly why we
must provide a tax incentive that helps employers pay wages to these
reservists. Businesses on the gulf coast want to do the right thing for
their employees. But in the wake of this disaster, most just cannot
afford it.
During negotiations between the House and the Senate on a final
Hurricane Katrina tax package, the employee retention credit was scaled
back. Wages paid to reservists are no longer eligible for the credit.
This is the wrong message to be sending to our reservists who put their
lives on the line defending our country.
Due to Operations Iraqi Freedom and Enduring Freedom in Afghanistan,
the military has placed greater training and participation demands on
reservists, taking them away from their families and jobs. We should be
doing all we can to help these reservists, and this includes providing
tax incentives to their employers who provide extended pay coverage.
Providing tax incentives to help employers in the gulf coast impacted
by Hurricane Katrina was a step in the right direction in helping
reservists. For the last couple of years, Senator Landrieu and I have
worked on legislation to provide assistance to businesses that employ
reservists who have been called up to active duty. That legislation
would provide tax credits to employers who pay reservists wages that
are above their military pay and to help with the costs of hiring
replacement workers. This provision passed the Senate twice last year,
unfortunately, it was not enacted into law.
This past Monday, I chaired a field hearing of the Committee on Small
Business and Entrepreneurship entitled ``Military Reservists and Small
Business: Supporting our Military Families and their Patriotic Small
Business Employers.'' The hearing focused on the financial difficulties
reservists who work for small businesses and their families face when
they are called up to active duty.
Lieutenant Colonel Sam Poulten told his compelling story. He was a
partner in a real estate firm and he received a three-day notice that
he was being called-up to serve as a medical Army reservist in Iraq.
Lieutenant Colonel Poulten spent 13 months away from his business,
which saw a loss in sales due to his absence. His wife had to resort to
using credit cards to pay for basic necessities. Lieutenant Colonel
Poulten is one of the many examples of a reservist whose family and
business faced financial struggles due to long mobilization.
Captain Marshall Hanson, USNR (Ret), Legislative Director of the
Reserve Officers Association, discussed the consequences of
mobilization and demobilization on military families and employers. He
stated:
Families and employers play a large role in a citizen-
warrior's decision on whether or not to enlist and to remain
in the military. Employer pressure is cited as one of the top
reasons why reservists quit military service.
We left military reservists who were personally impacted by Katrina
out of this tax bill and this is wrong. After Monday's field hearing, I
am convinced more than ever that we need to provide tax credits to
small employers who pay reservists above their military wages and to
help with the cost of a temporary replacement employee.
I thank Chairman Grassley and Ranking Member Baucus for working with
me to include wages paid to eligible reservists and guardsman as part
of the employee retention tax credit. Unfortunately, we were not able
to have this provision included in the final package.
I will continue to work on providing tax incentives for small
business employers who have military reservists as employees. We must
pass these tax incentives. If we do not make it easier for small
businesses to employ military reservists, we will see a substantial
decline in our reserve forces. According to published reports, the Army
National Guard has missed its recruiting targets every month this year
and appears certain to miss its third straight annual recruiting goal.
Our military depends on these civilian-warriors. We need to recognize
that the needs of our reserve forces are different than the needs of
the career military. Our reservists did not sign-up for active duty,
and they have been faced with long-term call ups and multiple call ups.
I do not understand why we cannot pass legislation which provides tax
incentive to help employer's of civilian-warriors when we continue to
pass tax cuts that just benefit the wealthy.
We need to do all that we can to help our reservists and the
businesses that employ them to ensure that our great tradition of
citizen soldiers does not fade or end because of the effect service can
have on work and family in this time of crisis.
Mr. BENNETT. I ask unanimous consent the Senate concur in the House
amendment to the Senate amendment and that the motion to reconsider be
laid upon the table.
The PRESIDING OFFICER. Without objection, it is so ordered.
____________________