Flood Emergency Tax Relief Act of 2016 (FLETRA)

Summary: Flood Emergency Tax Relief Act of 2016 (FLETRA)  This bill amends the Internal Revenue Code to permit individuals impacted by flooding in the Mississippi Delta to make penalty-free withdrawals from retirement accounts.  The bill waives the 10% additional tax on early distributions from retirement plans for up to $100,000 in distributions made on or after August 11, 2016, and before January 1, 2018. The distributions must be made to an individual: (1) whose principal place of abode on August 11, 2016, is located in the Mississippi River Delta disaster area, and (2) who has sustained an economic loss by reason of the severe storms and flooding giving rise to the Presidential declaration of a major disaster area in Louisiana on or after August 11, 2016, and before September 1, 2016.  A taxpayer who has received such a distribution may: (1) repay the distribution by making additional contributions to a retirement account within three years, and (2) include the distribution in gross income by dividing the amount over a three-year period.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Flood Emergency Tax Relief Act of 
2016 (FLETRA)''.

SEC. 2. SPECIAL RULES FOR USE OF RETIREMENT FUNDS WITH RESPECT TO 
              MISSISSIPPI DELTA AREAS DAMAGED BY 2016 FLOODING.

    (a) Tax-Favored Withdrawals From Retirement Plans.--
            (1) In general.--Section 72(t) of the Internal Revenue Code 
        of 1986 shall not apply to any qualified Mississippi River 
        Delta flooding distribution.
            (2) Aggregate dollar limitation.--
                    (A) In general.--For purposes of this subsection, 
                the aggregate amount of distributions received by an 
                individual which may be treated as qualified 
                Mississippi River Delta flooding distributions for any 
                taxable year shall not exceed the excess (if any) of--
                            (i) $100,000, over
                            (ii) the aggregate amounts treated as 
                        qualified Mississippi River Delta flooding 
                        distributions received by such individual for 
                        all prior taxable years.
                    (B) Treatment of plan distributions.--If a 
                distribution to an individual would (without regard to 
                subparagraph (A)) be a qualified Mississippi River 
                Delta flooding distribution, a plan shall not be 
                treated as violating any requirement of this title 
                merely because the plan treats such distribution as a 
                qualified Mississippi River Delta flooding 
                distribution, unless the aggregate amount of such 
                distributions from all plans maintained by the employer 
                (and any member of any controlled group which includes 
                the employer) to such individual exceeds $100,000.
                    (C) Controlled group.--For purposes of subparagraph 
                (B), the term ``controlled group'' means any group 
                treated as a single employer under subsection (b), (c), 
                (m), or (o) of section 414 of the Internal Revenue Code 
                of 1986.
            (3) Amount distributed may be repaid.--
                    (A) In general.--Any individual who receives a 
                qualified Mississippi River Delta flooding 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 the Internal Revenue Code 
                of 1986, as the case may be.
                    (B) Treatment of repayments of distributions from 
                eligible retirement plans other than iras.--For 
                purposes of this title, if a contribution is made 
                pursuant to subparagraph (A) with respect to a 
                qualified Mississippi River Delta flooding 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 Mississippi 
                River Delta flooding distribution in an eligible 
                rollover distribution (as defined in section 402(c)(4) 
                of the Internal Revenue Code of 1986) and as having 
                transferred the amount to the eligible retirement plan 
                in a direct trustee to trustee transfer within 60 days 
                of the distribution.
                    (C) Treatment of repayments for distributions from 
                iras.--For purposes of this title, if a contribution is 
                made pursuant to subparagraph (A) with respect to a 
                qualified Mississippi River Delta flooding distribution 
                from an individual retirement plan (as defined by 
                section 7701(a)(37) of the Internal Revenue Code of 
                1986), then, to the extent of the amount of the 
                contribution, the qualified Mississippi River Delta 
                flooding distribution shall be treated as a 
                distribution described in section 408(d)(3) of such 
                Code and as having been transferred to the eligible 
                retirement plan in a direct trustee to trustee transfer 
                within 60 days of the distribution.
            (4) Definitions.--For purposes of this subsection--
                    (A) Qualified mississippi river delta flooding 
                distribution.--Except as provided in paragraph (2), the 
                term ``qualified Mississippi River Delta flooding 
                distribution'' means any distribution from an eligible 
                retirement plan made on or after August 11, 2016, and 
                before January 1, 2018, to an individual whose 
                principal place of abode on August 11, 2016, is located 
                in the Mississippi River Delta disaster area and who 
                has sustained an economic loss by reason of the severe 
                storms and flooding giving rise to the Presidential 
                declaration described in subsection (c).
                    (B) Eligible retirement plan.--The term ``eligible 
                retirement plan'' shall have the meaning given such 
                term by section 402(c)(8)(B) of the Internal Revenue 
                Code of 1986.
            (5) Income inclusion spread over 3-year period.--
                    (A) In general.--In the case of any qualified 
                Mississippi River Delta flooding distribution, unless 
                the taxpayer elects not to have this paragraph apply 
                for any taxable year, any amount required to be 
                included in gross income for such taxable year shall be 
                so included ratably over the 3-taxable-year period 
                beginning with such taxable year.
                    (B) Special rule.--For purposes of subparagraph 
                (A), rules similar to the rules of subparagraph (E) of 
                section 408A(d)(3) of the Internal Revenue Code of 1986 
                shall apply.
            (6) Special rules.--
                    (A) Exemption of distributions from trustee to 
                trustee transfer and withholding rules.--For purposes 
                of sections 401(a)(31), 402(f), and 3405 of the 
                Internal Revenue Code of 1986, qualified Mississippi 
                River Delta flooding distributions shall not be treated 
                as eligible rollover distributions.
                    (B) Qualified mississippi river delta flooding 
                distributions treated as meeting plan distribution 
                requirements.--For purposes of this title, a qualified 
                Mississippi River Delta flooding 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 the Internal Revenue Code of 1986.
    (b) Provisions Relating to Plan Amendments.--
            (1) In general.--If this subsection applies to any 
        amendment to any plan or annuity contract, such plan or 
        contract shall be treated as being operated in accordance with 
        the terms of the plan during the period described in paragraph 
        (2)(B)(i).
            (2) Amendments to which subsection applies.--
                    (A) In general.--This subsection shall apply to any 
                amendment to any plan or annuity contract which is 
                made--
                            (i) pursuant to any provision of this 
                        section, or pursuant to any regulation issued 
                        by the Secretary or the Secretary of Labor 
                        under any provision of this section; and
                            (ii) on or before the last day of the first 
                        plan year beginning on or after January 1, 
                        2018, or such later date as the Secretary may 
                        prescribe.
                In the case of a governmental plan (as defined in 
                section 414(d) of the Internal Revenue Code of 1986), 
                clause (ii) shall be applied by substituting the date 
                which is 2 years after the date otherwise applied under 
                clause (ii).
                    (B) Conditions.--This subsection shall not apply to 
                any amendment unless--
                            (i) during the period--
                                    (I) beginning on the date that this 
                                section or the regulation described in 
                                subparagraph (A)(i) takes effect (or in 
                                the case of a plan or contract 
                                amendment not required by this section 
                                or such regulation, the effective date 
                                specified by the plan); and
                                    (II) ending on the date described 
                                in subparagraph (A)(ii) (or, if 
                                earlier, the date the plan or contract 
                                amendment is adopted),
                        the plan or contract is operated as if such 
                        plan or contract amendment were in effect; and
                            (ii) such plan or contract amendment 
                        applies retroactively for such period.
    (c) Mississippi River Delta Flood Disaster Area.--For purposes of 
this section, the term ``Mississippi River Delta flood disaster area'' 
means the area with respect to which a major disaster has been declared 
by the President under section 401 of the Robert T. Stafford Disaster 
Relief and Emergency Assistance Act by reason of severe storms or 
flooding occurring in the State of Louisiana on or after August 11, 
2016, and before September 1, 2016.