[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).
---------------------------------------------------------------------------
    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).
---------------------------------------------------------------------------
            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
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                 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
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    By fiscal year, millions of dollars--
                                                   -----------------------------------------------------------------------------------------------------
                                                     2024    2025    2026    2027    2028    2029    2030    2031    2032    2033   2024-2028  2024-2033
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               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
--------------------------------------------------------------------------------------------------------------------------------------------------------

    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.