House Report 118-348 - FEDERAL DISASTER TAX RELIEF ACT OF 2023

[House Report 118-348]
[From the U.S. Government Publishing Office]

118th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 118-348

======================================================================

FEDERAL DISASTER TAX RELIEF ACT OF 2023

_______

January 16, 2024.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed

_______

Mr. Smith of Missouri, from the Committee on Ways and Means, submitted
the following

R E P O R T

[To accompany H.R. 5863]

[Including cost estimate of the Congressional Budget Office]

The Committee on Ways and Means, to whom was referred the
bill (H.R. 5863) to provide tax relief with respect to certain
Federal disasters, having considered the same, reports
favorably thereon with an amendment and recommends that the
bill as amended do pass.

CONTENTS

Page
I. SUMMARY AND BACKGROUND...........................................3
A. Purpose and Summary................................. 3
B. Background and Need for Legislation................. 3
C. Legislative History................................. 3
D. Designated Hearing.................................. 3
II. EXPLANATION OF THE BILL..........................................4
A. Disaster Tax Provisions (secs. 2, 3, and 4 of the
bill and secs. 139 and 165 of the Code) 3.......... 4
III. VOTE OF THE COMMITTEE............................................7
IV. BUDGET EFFECTS OF THE BILL.......................................8
A. Committee Estimate of Budgetary Effects............. 8
B. Statement Regarding New Budget Authority and Tax
Expenditures Budget Authority...................... 10
C. Cost Estimate Prepared by the Congressional Budget
Office............................................. 10
V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE......13
A. Committee Oversight Findings and Recommendations.... 13
B. Statement of General Performance Goals and
Objectives......................................... 13
C. Information Relating to Unfunded Mandates........... 13
D. Congressional Earmarks, Limited Tax Benefits, and
Limited Tariff Benefits............................ 13
E. Tax Complexity Analysis............................. 13
F. Duplication of Federal Programs..................... 13
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED...........14
A. Changes in Existing Law Proposed by the Bill, as
Reported........................................... 14

The amendment is as follows:
Strike all after the enacting clause and insert the
following:

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Federal Disaster Tax Relief Act of
2023''.

SEC. 2. EXTENSION OF RULES FOR TREATMENT OF CERTAIN DISASTER-RELATED
PERSONAL CASUALTY LOSSES.

For purposes of applying section 304(b) of the Taxpayer Certainty and
Disaster Tax Relief Act of 2020, section 301 of such Act shall be
applied by substituting ``the Federal Disaster Tax Relief Act of 2023''
for ``this Act'' each place it appears.

SEC. 3. EXCLUSION FROM GROSS INCOME FOR COMPENSATION FOR LOSSES OR
DAMAGES RESULTING FROM CERTAIN WILDFIRES.

(a) In General.--For purposes of the Internal Revenue Code of 1986,
gross income shall not include any amount received by an individual as
a qualified wildfire relief payment.
(b) Qualified Wildfire Relief Payment.--For purposes of this
section--
(1) In general.--The term ``qualified wildfire relief
payment'' means any amount received by or on behalf of an
individual as compensation for losses, expenses, or damages
(including compensation for additional living expenses, lost
wages (other than compensation for lost wages paid by the
employer which would have otherwise paid such wages), personal
injury, death, or emotional distress) incurred as a result of a
qualified wildfire disaster, but only to the extent the losses,
expenses, or damages compensated by such payment are not
compensated for by insurance or otherwise.
(2) Qualified wildfire disaster.--The term ``qualified
wildfire disaster'' means any federally declared disaster (as
defined in section 165(i)(5)(A) of the Internal Revenue Code of
1986) declared, after December 31, 2014, as a result of any
forest or range fire.
(c) Denial of Double Benefit.--Notwithstanding any other provision of
the Internal Revenue Code of 1986--
(1) no deduction or credit shall be allowed (to the person
for whose benefit a qualified wildfire relief payment is made)
for, or by reason of, any expenditure to the extent of the
amount excluded under this section with respect to such
expenditure, and
(2) no increase in the basis or adjusted basis of any
property shall result from any amount excluded under this
subsection with respect to such property.
(d) Limitation on Application.--This section shall only apply to
qualified wildfire relief payments received by the individual during
taxable years beginning after December 31, 2019, and before January 1,
2026.

SEC. 4. EAST PALESTINE DISASTER RELIEF PAYMENTS.

(a) Disaster Relief Payments to Victims of East Palestine Train
Derailment.--East Palestine train derailment payments shall be treated
as qualified disaster relief payments for purposes of section 139(b) of
the Internal Revenue Code of 1986.
(b) East Palestine Train Derailment Payments.--For purposes of this
section, the term ``East Palestine train derailment payment'' means any
amount received by or on behalf of an individual as compensation for
loss, damages, expenses, loss in real property value, closing costs
with respect to real property (including realtor commissions), or
inconvenience (including access to real property) resulting from the
East Palestine train derailment if such amount was provided by--
(1) a Federal, State, or local government agency,
(2) Norfolk Southern Railway, or
(3) any subsidiary, insurer, or agent of Norfolk Southern
Railway or any related person.
(c) Train Derailment.--For purposes of this section, the term ``East
Palestine train derailment'' means the derailment of a train in East
Palestine, Ohio, on February 3, 2023.
(d) Effective Date.--This section shall apply to amounts received on
or after February 3, 2023.

I. SUMMARY AND BACKGROUND

A. Purpose and Summary

The bill, H.R. 5863, the ``Federal Disaster Tax Relief Act
of 2023,'' as ordered reported by the Committee on Ways and
Means on November 2, 2023.
The Taxpayer Certainty and Disaster Tax Relief Act of 2020
provided tax relief to certain individuals in qualified
disaster areas. The relief included temporary suspension of
limitations on charitable contributions, eliminating the
requirement that casualty losses must exceed 10 percent of AGI
to qualify for deduction, and allowing taxpayers to claim the
casualty loss deduction without itemizing. Section 2 of the
bill extends the timeline of the Taxpayer Certainty and
Disaster Tax Relief Act of 2020 through 30 days after the date
of enactment of this Act, covering every ``qualified disaster
area'' since January 1, 2020.
In general, gross income is defined as income from whatever
source derived. Section 3 of the bill excludes from gross
income any amount received by or on behalf of an individual as
a qualified wildfire relief payment. Section 4 of the bill
excludes from gross income amounts received by or on behalf of
an individual as a result of the East Palestine train
derailment paid by a Federal, State, or local government
agency, Norfolk Southern Railway, or any subsidiary, insurer,
or agent of Norfolk Southern.

B. Background and Need for Legislation

A top priority of the Ways and Means Committee has been
listening to the concerns of American workers and families and
developing policy solutions to help. Many families have been
harmed by recent disasters, including hurricanes, drought,
wildfire, windstorms, winter storms, accidents, and flooding.
Families and communities are left to put back the pieces after
these devastating events. This legislation builds on three
bipartisan bills to help families recover and rebuild stronger
in the aftermath of a disaster.

C. Legislative History

Background

H.R. 5863 was introduced on October 2, 2023, and was
referred to the Committee on Ways and Means.

Committee Hearings

On September 14, 2023, the Committee held a hearing
entitled, ``Member Day.''

Committee Action

The Committee on Ways and Means marked up H.R. 5863, the
``Federal Disaster Tax Relief Act of 2023,'' on November 2,
2023, and ordered the bill, as amended, favorably reported
(with a quorum being present).

D. Designated Hearing

Pursuant to clause 3(c)(6) of rule XIII, the following
hearing was used to develop and consider H.R. 5863:
On September 14, 2023, the Committee held a hearing
entitled, ``Member Day.''

II. EXPLANATION OF THE BILL

A. Disaster Tax Provisions (Secs. 2, 3, and 4 of the Bill and Secs. 139
and 165 of the Code)

PRESENT LAW

Exclusion from income for qualified disaster relief payments

Present law provides an exclusion from income for qualified
disaster relief payments.\1\ Qualified disaster relief payments
include amounts paid to an individual: (1) to reimburse or pay
reasonable and necessary personal, family, living, or funeral
expenses incurred as a result of a qualified disaster; (2) to
reimburse or pay reasonable and necessary expenses incurred for
the repair or rehabilitation of a personal residence or
replacement of its contents to the extent that the need for
such repair, rehabilitation, or replacement is attributable to
a qualified disaster; (3) by a person engaged in the furnishing
or sale of transportation (i.e., common carriers) by reason of
death or personal injuries as a result of a qualified disaster;
or (4) by a Federal, State, or local government, or agency or
instrumentality thereof, in connection with a qualified
disaster in order to promote the general welfare.\2\ These
amounts do not include payments for any expenses compensated
for by insurance or otherwise.\3\
---------------------------------------------------------------------------
\1\Sec. 139.
\2\Sec. 139(b).
\3\Ibid.
---------------------------------------------------------------------------
Qualified disaster relief payments also are excludable for
purposes of self-employment taxes and employment taxes.\4\
---------------------------------------------------------------------------
\4\Sec. 139(d).
---------------------------------------------------------------------------
A qualified disaster is a disaster which results from a
terroristic or military action (as defined in section
692(c)(2)); a Federally declared disaster (as defined in
section 165(i)(5)(A)); a disaster which results from an
accident involving a common carrier or from any other event
which would be determined by the Secretary of the Treasury (the
``Secretary'') to be of a catastrophic nature; or, for purposes
of payments made by a Federal, State or local government, or an
agency or instrumentality of a government, a disaster
designated by an applicable Federal, State, or local authority
(as determined by the Secretary) to warrant assistance.\5\
---------------------------------------------------------------------------
\5\Sec. 139(c).
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The exclusion from income does not apply to any individual
identified by the Attorney General to have been a participant
or conspirator in any terrorist attack, or to a representative
of such individual.\6\ No deduction or credit is allowed for,
or by reason of, any expenditure to the extent of the amount
excluded from income with respect to such expenditure.\7\
---------------------------------------------------------------------------
\6\Sec. 139(e).
\7\Sec. 139(h).
---------------------------------------------------------------------------

Personal casualty losses

In general
An individual taxpayer may claim an itemized deduction for
a personal casualty loss.\8\ If the loss is attributable to a
disaster declared by the President under section 401 of the
Robert T. Stafford Disaster Relief and Emergency Assistance
Act, (the ``Stafford Act'')\9\ then the loss is deductible only
to the extent of the sum of the individual's personal casualty
gains plus the amount by which aggregate net disaster-related
losses exceed 10 percent of the individual taxpayer's adjusted
gross income.\10\ In any taxable year beginning after December
31, 2017, and before January 1, 2026, all other personal
casualty losses are deductible only to the extent that the
losses do not exceed the individual's personal casualty gains.
---------------------------------------------------------------------------
\8\Sec. 165(h).
\9\Sec. 165(h)(5).
\10\Sec. 165(h)(2). Personal casualty gains are reduced for this
purpose by any gain used to offset any personal casualty loss which is
not attributable to a disaster.
---------------------------------------------------------------------------
For individual taxpayers, personal casualty losses are
losses of property not connected with a trade or business or a
transaction entered into for profit that arise from fire,
storm, shipwreck, or other casualty, or from theft.\11\
Personal casualty gains are recognized gains from any
involuntary conversion of property not connected with a trade
or business or a transaction entered into for profit that arise
from fire, storm, shipwreck, or other casualty, or from
theft.\12\ Personal casualty losses are deductible to the
extent they exceed $100 per casualty.\13\
---------------------------------------------------------------------------
\11\Sec. 165(c)(3)(B).
\12\Sec. 165(c)(3)(A).
\13\Sec. 165(h)(1).
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Additional relief for certain disasters
Congress has at times enacted more generous casualty loss
provisions in response to specific natural disasters.\14\
---------------------------------------------------------------------------
\14\See, e.g., sec. 204(b) of Pub. L. No. 116-94 (Hurricanes
Florence and Michael); sec. 20104(b) of Pub. L. No. 115-123 (certain
California wildfires); sec. 504(b) of Pub. L. No. 115-63 (Hurricanes
Harvey, Irma, and Maria); and former sec. 1400S(b) (Hurricanes Katrina,
Rita, and Wilma).
---------------------------------------------------------------------------
Most recently, Division EE of Public Law 116-260, the
Taxpayer Certainty and Disaster Tax Relief Act of 2020 (the
``Act''), provides special rules for ``qualified disaster-
related personal casualty losses,'' personal casualty losses
arising in a qualified disaster area on or after the first day
of the incident period of the applicable qualified disaster
which are attributable to that qualified disaster.\15\ These
losses are deductible without regard to whether aggregate net
losses exceed 10 percent of a taxpayer's adjusted gross income.
These losses are deductible to the extent they exceed $500 per
casualty. These losses are allowed as a deduction in addition
to the standard deduction and are allowed against alternative
minimum taxable income.
---------------------------------------------------------------------------
\15\Sec. 304(b) of Div. EE. of Pub. L. No. 116-260.
---------------------------------------------------------------------------
A ``qualified disaster area'' refers to an area with
respect to which a major disaster has been declared by the
President during the period beginning on January 1, 2020, and
ending on the date which is 60 days after the date of enactment
of the Act,\16\ under section 401 of the Stafford Act, if the
incident period of the disaster with respect to which the
declaration is made begins on or after December 28, 2019 and on
or before the date of enactment of the Act. A qualified
disaster area does not include any area with respect to which a
major disaster had been declared only by reason of COVID-19.
---------------------------------------------------------------------------
\16\The Act became law on December 27, 2020.
---------------------------------------------------------------------------
A ``qualified disaster'' is, with respect to the applicable
qualified disaster area, the disaster by reason of which a
major disaster was declared with respect to that area.
The ``incident period'' is, with respect to the applicable
qualified disaster, the period specified by the Federal
Emergency Management Agency as the period during which the
disaster occurred, except that the period is not treated as
ending after the date which is 30 days after the date of
enactment of the Act.

REASONS FOR CHANGE

The Committee wishes to provide tax relief for taxpayers
affected by certain disasters and events. The Committee
believes that the expansion of the personal casualty loss
deduction under section 165 under the Taxpayer Certainty and
Disaster Relief Act of 2020 provided necessary tax relief to
taxpayers who suffered losses in the wake of that year's major
disasters, and that such relief should be extended to provide
similar relief for major disasters in 2021, 2022, and 2023. The
Committee also believes that taxpayers affected by certain
wildfires and the East Palestine train derailment should not be
subject to Federal income tax on payments that compensate for
losses, expenses, or damages incurred as a result of those
events.

EXPLANATION OF PROVISIONS

Certain disaster-related personal casualty losses

For purposes of personal casualty losses arising in a
qualified disaster area, the provision broadens the Act's
definition of qualified disaster area to include any area with
respect to which a major disaster was declared by the President
during the period beginning on January 1, 2020, and ending on
the date which is 60 days after the date of enactment of the
provision, under section 401 of Stafford Act if the incident
period of the disaster begins on or after December 28, 2019,
and on or before the date of enactment of the provision. The
incident period will be treated as ending no later than the
date which is 30 days after the date of enactment of the
provision.
Thus, under the provision, certain disaster-related
personal casualty losses attributable to major disasters
beginning any time after the date of enactment of the Act and
through the date of enactment of the provision are provided the
same treatment as qualified disaster-related personal casualty
losses under the Act.

Exclusion of certain wildfire relief payments

The provision provides an exclusion from gross income for
amounts received as qualified wildfire relief payments.
Qualified wildfire relief payments are amounts received by or
on behalf of an individual as compensation for losses,
expenses, or damages (including compensation for additional
living expenses, lost wages (other than compensation for lost
wages paid by the employer which would have otherwise paid such
wages), personal injury, death, or emotional distress) incurred
as a result of a qualified wildfire disaster. Qualified
wildfire relief payments do not include payments for any
expenses or losses compensated for by insurance or otherwise.
A qualified wildfire disaster is any Federally declared
disaster (as defined in section 165(i)(5)(A)) declared, after
December 31, 2014, as a result of any forest or range fire.
No deduction or credit is allowed with respect to any
expenditure to the extent of the amount excluded under the
provision with respect to the expenditure. The basis of any
property is not increased by amounts excluded from gross income
under the provision.

East Palestine disaster relief payments

The provision treats East Palestine train derailment
payments as qualified disaster relief payments for purposes of
section 139(b). As a consequence, the payments are excluded
from gross income and are subject to other present-law
provisions, such as the employment tax exclusions from wages
and net earnings from self-employment (section 139(d)) and the
prohibition on double benefits (section 139(h)), applicable to
qualified disaster relief payments.
The provision defines East Palestine train derailment
payment as any amount received by or on behalf of an individual
as compensation for loss, damages, expenses, loss in real
property value, closing costs with respect to real property
(including realtor commissions), or inconvenience (including
access to real property) resulting from the East Palestine
train derailment if the amount was provided by a Federal,
State, or local government agency, Norfolk Southern Railway, or
a subsidiary, insurer, or agent of Norfolk Southern Railway or
any related person. For this purpose, East Palestine train
derailment means the derailment of a train in East Palestine,
Ohio on February 3, 2023.

EFFECTIVE DATE

The provision relating to certain disaster-related personal
casualty losses is effective on date of enactment.
The provision relating to the exclusion of certain wildfire
relief payments applies to qualified wildfire relief payments
received during taxable years beginning after December 31,
2019, and before January 1, 2026.
The provision relating to the East Palestine train
derailment applies to amounts received on or after February 3,
2023.

III. VOTE OF THE COMMITTEE

Pursuant to clause 3(b) of rule XIII of the Rules of the
House of Representatives, the following statement is made
concerning the vote of the Committee on Ways and Means in its
consideration of H.R. 5863, the ``Federal Disaster Tax Relief
Act of 2023,'' on November 2, 2023.
H.R. 5863 was ordered favorably reported to the House of
Representatives as amended by a roll call vote of 38 yeas to 0
nays (with a quorum being present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
Representative Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Smith (MO)..................... X ...... ......... Mr. Neal............. X ...... .........
Mr. Buchanan....................... X ...... ......... Mr. Doggett.......... X ...... .........
Mr. Smith (NE)..................... X ...... ......... Mr. Thompson......... X ...... .........
Mr. Kelly.......................... X ...... ......... Mr. Larson........... X ...... .........
Mr. Schweikert..................... X ...... ......... Mr. Blumenauer....... X ...... .........
Mr. LaHood......................... X ...... ......... Mr. Pascrell......... ...... ...... .........
Dr. Wenstrup....................... X ...... ......... Mr. Davis............ X ...... .........
Mr. Arrington...................... X ...... ......... Ms. Sanchez.......... ...... ...... .........
Dr. Ferguson....................... X ...... ......... Mr. Higgins.......... ...... ...... .........
Mr. Estes.......................... X ...... ......... Ms. Sewell........... X ...... .........
Mr. Smucker........................ X ...... ......... Ms. DelBene.......... X ...... .........
Mr. Hern........................... X ...... ......... Ms. Chu.............. X ...... .........
Ms. Miller......................... X ...... ......... Ms. Moore............ X ...... .........
Dr. Murphy......................... X ...... ......... Mr. Kildee........... X ...... .........
Mr. Kustoff........................ X ...... ......... Mr. Beyer............ X ...... .........
Mr. Fitzpatrick.................... X ...... ......... Mr. Evans............ X ...... .........
Mr. Steube......................... X ...... ......... Mr. Schneider........ X ...... .........
Ms. Tenney......................... ...... ...... ......... Mr. Panetta.......... X ...... .........
Mrs. Fischbach..................... X ...... .........
Mr. Moore.......................... X ...... .........
Mrs. Steel......................... X ...... .........
Ms. Van Duyne...................... X ...... .........
Mr. Feenstra....................... X ...... .........
Ms. Malliotakis.................... X ...... .........
Mr. Carey.......................... ...... ...... .........
----------------------------------------------------------------------------------------------------------------

IV. BUDGET EFFECTS OF THE BILL

A. Committee Estimate of Budgetary Effects

In compliance with clause 3(d) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the effects on the budget of the bill, H.R. 5863, as
reported.
The bill is estimated to decrease Federal fiscal year
budget receipts by $4.9 billion for the period 2023 through
2033.

ESTIMATED REVENUE EFFECTS OF THE CHAIRMAN'S AMENDMENT IN THE NATURE OF A SUBSTITUTE OF H.R. 5863, THE ``FEDERAL DISASTER TAX RELIEF ACT OF 2023'' SCHEDULED FOR MARKUP BY THE COMMITTEE ON WAYS
AND MEANS ON NOVEMBER 2, 2023--FISCAL YEARS 2024-2033
[Millions of dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Provision Effective 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2024-28 2024-33
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1. Extension of rules for treatment of certain DOE............................... -2,883 -876 -415 -201 -33 -1 -1 -1 -1 -1 -4,408 -4,414
disaster-related personal casualty losses.
2. Exclusion from gross income for compensation [1]............................... -384 -85 -43 ....... ...... ...... ...... ...... ...... ........ -512 -512
for losses or damages resulting from certain
wildfires.
3. East Palestine disaster relief payments...... arooa 2/3/23...................... -1 [2] [2] ....... ...... ...... ...... ...... ...... ........ -1 -1
Net total................................... .................................. -3,268 -961 -458 -201 -33 -1 -1 -1 -1 -1 -4,921 -4,927
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Joint Committee on Taxation.
NOTE: Details may not add to totals due to rounding. The date of enactment is assumed to be December 1, 2023.
Legend for ``Effective'' column:
arooa = amounts received on or after
DOE = date of enactment
[1] Applies to qualified wildfire relief payments received during taxable years beginning after December 31, 2019, and before January 1, 2026.
[2] Loss of less than $500,000.

B. Statement Regarding New Budget Authority and Tax Expenditures Budget
Authority

In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee states that the
bill involves no new or increased budget authority. The
Committee further states that sections 2, 3, and 4 of the bill
include new tax expenditures with respect to sections 139 and
165 of the Code, as described above.

C. Cost Estimate Prepared by the Congressional Budget Office

In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, requiring a cost estimate
prepared by the CBO, the following statement by CBO is
provided.

The bill would:
Allow losses from federally declared
disasters that occur from January 1, 2020, through the
date of enactment to be deducted from income taxes
without itemizing and without a reduction based on
adjusted gross income
Exclude compensation for losses from some
wildfire disasters and the East Palestine, Ohio, train
derailment from gross income
Estimated budgetary effects would mainly stem from:
A reduction in revenues from an increase in
income tax deductions
A reduction in revenues from taxpayers'
excluding certain compensation from gross income
Areas of significant uncertainty include:
How many people would take tax deductions,
and in what amounts, for losses related to federally
declared disasters
The Congressional Budget Act of 1974, as amended,
stipulates that revenue estimates provided by the staff of the
Joint Committee on Taxation (JCT) will be the official
estimates for all tax legislation considered by Congress. As
such, CBO incorporates those estimates into its cost estimates
of the effects of legislation. All of the estimates for the
revenue provisions of H.R. 5863 were provided by JCT.
Bill summary: H.R. 5863 would amend the Internal Revenue
Code to provide tax relief to people affected by certain
federally declared disasters. The bill would allow affected
taxpayers to deduct losses arising from federally declared
disasters without itemizing deductions on their tax returns and
would exclude from gross income some compensation received for
losses from wildfires or the February 2023 train derailment in
East Palestine, Ohio.
Estimated Federal cost: The estimated budgetary effect of
H.R. 5863 is shown in Table 1. The costs of the legislation
fall within budget function 800 (general government).

TABLE 1.--ESTIMATED BUDGETARY EFFECTS of H.R. 5863
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By fiscal year, millions of dollars--
-----------------------------------------------------------------------------------------------------------
2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2024-2028 2024-2033
--------------------------------------------------------------------------------------------------------------------------------------------------------
Decreases in Revenues

Estimated Revenues.......................... -3,268 -961 -458 -201 -33 -1 -1 -1 -1 -1 -4,921 -4,927
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sources: Congressional Budget Office; Staff of the Joint Committee on Taxation.
CBO estimates that implementing H.R. 5863 would increase the Internal Revenue Service's administrative costs by less than $500,000 over the 2024-2033
period; any spending would be subject to appropriation.

Basis of estimate: The Congressional Budget Act of 1974, as
amended, stipulates that revenue estimates provided by the
staff of the Joint Committee on Taxation (JCT) are the official
estimates for all tax legislation considered by the Congress.
CBO therefore incorporates such estimates into its cost
estimates of the effects of legislation. JCT provided the
revenue estimates presented here for H.R. 5863.\1\
---------------------------------------------------------------------------
\1\See Joint Committee on Taxation, Estimated Revenue Effects of
the Chairman's Amendment in the Nature of a Substitute of H.R. 5863,
the ``Federal Disaster Tax Relief Act of 2023,'' JCX-50-23 (November 1,
2023), www.jct.gov/publications/2023/jcx-50-23. For more about the
provisions, see Joint Committee on Taxation, Description of H.R. 5863,
the ``Federal Disaster Tax Relief Act of 2023,'' JCX-45-23 (October 4,
2023), www.jct.gov/publications/2023/jcx-45-23.
---------------------------------------------------------------------------
For this estimate, CBO and JCT assume that the bill will be
enacted in fiscal year 2024.
Revenues: H.R. 5863 would provide tax relief to some
individual taxpayers affected by federally declared disasters.
Section 2 would allow casualty loss deductions for disasters
occurring from January 1, 2020, through the date of enactment
of the bill to be taken on tax returns without itemizing
deductions and without the typical reduction of $100 per
casualty loss and 10 percent of adjusted gross income. Instead,
the deduction would be reduced by $500 per casualty loss. This
is an extension of the special rules for casualty losses in the
Taxpayer Certainty and Disaster Tax Relief Act of 2020. Section
3 would exclude from gross income compensation for expenses or
losses resulting from certain wildfires, thus excluding that
compensation from taxable income. This would apply to qualified
wildfire relief payments received between December 31, 2019,
and January 1, 2026. Section 4 would exclude from gross income
any disaster relief payments received after February 3, 2023,
by people affected by the February 2023 train derailment in
East Palestine, Ohio.
JCT estimates that enacting the bill would decrease
revenues by $4.9 billion over the 2024-2033 period.
Spending subject to appropriation: CBO estimates that
implementing H.R. 5863 would increase the Internal Revenue
Service's administrative costs by less than $500,000 over the
2024-2028 period; any spending would be subject to the
availability of appropriated funds.
Uncertainty: JCT's estimates of the budgetary effects of
H.R. 5863 are subject to uncertainty because they are made on
the basis of underlying projections and other factors that
could change significantly. In particular, the estimates rely
in part on CBO's economic projections for the next decade under
current law and on expectations of the way taxpayers might
respond to changes in tax law. In this case, the uncertainty
also involves how many people would take deductions, and in
what amounts, for losses related to federally declared
disasters and how many would exclude disaster-related
compensation from their taxable income. The amount of disaster-
related compensation that will be paid through January 1, 2026,
also depends on the number of federally declared disasters
resulting from wildfires during that time.
Pay-As-You-Go considerations: The Statutory Pay-As-You-Go
Act of 2010 establishes budget-reporting and enforcement
procedures for legislation affecting direct spending or
revenues. The net changes in revenues that are subject to those
pay-as-you-go procedures are shown in Table 2.

TABLE 2.--CBO'S ESTIMATE OF THE STATUTORY PAY-AS-YOU-GO EFFECTS OF H.R. 5863, THE FEDERAL DISASTER TAX RELIEF ACT OF 2023, AS ORDERED REPORTED BY THE
HOUSE COMMITTEE ON WAYS AND MEANS ON NOVEMBER 2, 2023
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By fiscal year, millions of dollars--
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2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2024-2028 2024-2033
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Net Increase in the Deficit

Pay-As-You-Go Effect.............................. 3,268 961 458 201 33 1 1 1 1 1 4,921 4,927
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Increase in long-term net direct spending and deficits: JCT
estimates that enacting H.R. 5863 would not increase net direct
spending or on-budget deficits in any of the four consecutive
10-year periods beginning in 2034.
Mandates: JCT has determined that H.R. 5863 would not
impose intergovernmental or private-sector mandates as defined
in the Unfunded Mandates Reform Act.
Estimate prepared by: Revenues: Kathleen Burke, Staff of
the Joint Committee on Taxation; Federal Costs: Matthew
Pickford; Mandates: Andrew Laughlin, Staff of the Joint
Committee on Taxation.
Estimate reviewed by: Robert Reese, Chief, Natural and
Physical Resources Cost Estimates Unit; Joshua Shakin, Chief,
Revenue Estimating Unit; Kathleen FitzGerald, Chief, Public and
Private Mandates Unit; H. Samuel Papenfuss, Deputy Director of
Budget Analysis; John McClelland, Director of Tax Analysis.
Estimate approved by: Phillip L. Swagel, Director,
Congressional Budget Office.

V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE

A. Committee Oversight Findings and Recommendations

With respect to clause 3(c)(1) of rule XIII of the Rules of
the House of Representatives, the Committee made findings and
recommendations that are reflected in this report.

B. Statement of General Performance Goals and Objectives

With respect to clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
bill does not authorize funding, so no statement of general
performance goals and objectives is required.

C. Information Relating to Unfunded Mandates

This information is provided in accordance with section 423
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
The Committee has determined that the bill does not contain
Federal mandates on the private sector. The Committee has
determined that the bill does not impose a Federal
intergovernmental mandate on State, local, or tribal
governments.

D. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff
Benefits

With respect to clause 9 of rule XXI of the Rules of the
House of Representatives, the Committee has carefully reviewed
the provisions of the bill, and states that the provisions of
the bill do not contain any congressional earmarks, limited tax
benefits, or limited tariff benefits within the meaning of the
rule.

E. Tax Complexity Analysis

Pursuant to clause 3(h)(1) of rule XIII of the Rules of the
House of Representatives, the staff of the Joint Committee on
Taxation has determined that a complexity analysis is not
required under section 4022(b) of the IRS Reform Act because
the bill contains no provisions that amend the Internal Revenue
Code of 1986 and that have ``widespread applicability'' to
individuals or small businesses, within the meaning of the
rule.

F. Duplication of Federal Programs

In compliance with clause 3(c)(5) of rule XIII of the Rules
of the House of Representatives, the Committee states that no
provision of the bill establishes or reauthorizes: (1) a
program of the Federal Government known to be duplicative of
another Federal program; (2) a program included in any report
from the Government Accountability Office to Congress pursuant
to section 21 of Public Law 111-139; or (3) a program related
to a program identified in the most recent Catalog of Federal
Domestic Assistance, published pursuant to the Federal Program
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No.
98-169).

VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

A. Changes in Existing Law Proposed by the Bill, as Reported

With respect to the requirement of clause 3(e) of rule XIII
of the Rules of the House of Representatives H.R. 5863 makes no
amendatory changes to existing law.