II 

Calendar No. 212 

109TH CONGRESS 

1ST SESSION S. 1696 

To provide tax relief for the victims of Hurricane Katrina, to provide 

incentives for charitable giving, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 13, 2005 

Mr. GRASSLEY (for himself, Mr. BAUCUS, Mr. LOTT, Ms. LANDRIEU, Mr. 

VITTER, Mr. COCHRAN, Mr. SHELBY, and Mr. CRAIG) introduced the following bill; which was referred to the Committee on Finance 

SEPTEMBER 15, 2005 

Committee discharged; amended and ordered to be placed on the calendar 

A BILL 

To provide tax relief for the victims of Hurricane Katrina, 

to provide incentives for charitable giving, and for other 

purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; 

4 TABLE OF CONTENTS. 

5 (a) SHORT TITLE.—This Act may be cited as the 

6 ‘‘Hurricane Katrina Tax Relief Act of 2005’’. 
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1 (b) AMENDMENT OF 1986 CODE.—Except as other2 wise expressly provided, whenever in this Act an amend3 ment or repeal is expressed in terms of an amendment 

4 to, or repeal of, a section or other provision, the reference 

5 shall be considered to be made to a section or other provi6 sion of the Internal Revenue Code of 1986. 

7 (c) TABLE OF CONTENTS.—The table of contents for 

8 this Act is as follows: 

Sec. 1. Short title; amendment of 1986 Code; table of contents. 

Sec. 2. Hurricane Katrina disaster area. 

TITLE I—PENALTY FREE USE OF RETIREMENT FUNDS BY 

NATURAL DISASTER VICTIMS 

Sec. 101. Penalty free withdrawals from retirement plans for victims of federally declared natural disasters. 

Sec. 102. Income averaging for disaster-relief distributions related to Hurricane 

Katrina. 

Sec. 103. Recontributions of withdrawals for home purchases cancelled due to 

Hurricane Katrina. 

Sec. 104. Loans from qualified plans to victims of Hurricane Katrina. 

Sec. 105. Provisions relating to plan amendments. 

TITLE II—EMPLOYMENT RELIEF 

Sec. 201. Work opportunity tax credit for Hurricane Katrina employee survivors. 

Sec. 202. Employee retention credit for employers affected by Hurricane 

Katrina. 

TITLE III—CHARITABLE GIVING INCENTIVES 

Sec. 301. Temporary increase in limitation on individual and corporate charitable cash contributions. 

Sec. 302. Tax-free distributions from individual retirement accounts for charitable purposes. 

Sec. 303. Charitable deduction for contributions of food inventories. 

Sec. 304. Charitable deduction for contributions of book inventories. 

Sec. 305. Additional personal exemption amount for Hurricane Katrina houseguest. 

Sec. 306. Increase in standard mileage rate for charitable use of passenger 

automobile. 

TITLE IV—ADDITIONAL TAX RELIEF PROVISIONS 

Sec. 401. Exclusions of certain cancellations of indebtedness for victims of Hurricane Katrina. 

Sec. 402. Modification to casualty loss rules for victims of Hurricane Katrina. 
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Sec. 403. Required exercise of authority under section 7508A for tax relief for 

victims of Hurricane Katrina. 

Sec. 404. Special mortgage financing rules for residences located in Hurricane 

Katrina disaster area. 

Sec. 405. Extension of replacement period for nonrecognition of gain for property located in Hurricane Katrina disaster area. 

Sec. 406. Special rule for determining earned income. 

Sec. 407. Secretarial authority to make adjustments regarding taxpayer and dependency status. 

TITLE V—ADDITIONAL PROVISIONS 

Sec. 501. Disclosure to State officials of proposed actions related to exempt organizations. 

Sec. 502. Dedication and use of certain fees. 

1 SEC. 2. HURRICANE KATRINA DISASTER AREA. 

2 For purposes of this Act, the term ‘‘Hurricane 

3 Katrina disaster area’’ means an area— 

4 (1) with respect to which a major disaster has 

5 been declared by the President before September 14, 

6 2005, under section 401 of the Robert T. Stafford 

7 Disaster Relief and Emergency Assistance Act in 

8 connection with Hurricane Katrina, and 

9 (2) which is determined by the President before 

10 such date to warrant individual assistance, or indi11 vidual and public assistance, from the Federal Gov12 ernment under such Act. 
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1 TITLE I—PENALTY FREE USE OF 

2 RETIREMENT FUNDS BY NAT3 URAL DISASTER VICTIMS 

4 SEC. 101. PENALTY FREE WITHDRAWALS FROM RETIRE5 MENT PLANS FOR VICTIMS OF FEDERALLY 

6 DECLARED NATURAL DISASTERS. 

7 (a) IN GENERAL.—Paragraph (2) of section 72(t) 

8 (relating to 10-percent additional tax on early distribu9 tions from qualified retirement plans) is amended by add10 ing at the end the following new subparagraph: 

11 ‘‘(G) DISTRIBUTIONS FROM RETIREMENT

12 PLANS TO VICTIMS OF FEDERALLY DECLARED

13 NATURAL DISASTERS.— 

14 ‘‘(i) DISTRIBUTION ALLOWED.—Any 

15 qualified disaster-relief distribution. 

16 ‘‘(ii) AMOUNT DISTRIBUTED MAY BE

17 REPAID.— 

18 ‘‘(I) IN GENERAL.—Any indi19 vidual who receives a qualified dis20 aster-relief distribution may, at any 

21 time during the 3-year period begin22 ning on the day after the date on 

23 which such distribution was made, 

24 make one or more contributions in an 

25 aggregate amount not to exceed the 
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1 amount of such distribution to an eli2 gible retirement plan (as defined in 

3 section 402(c)(8)(B)) of which such 

4 individual is a beneficiary and to 

5 which a rollover contribution of such 

6 distribution could be made under sec7 tion 402(c), 403(a)(4), 403(b)(8), 

8 408(d)(3), or 457(e)(16), as the case 

9 may be. 

10 ‘‘(II) TREATMENT OF REPAY11 MENTS FOR DISTRIBUTIONS FROM EL12 IGIBLE RETIREMENT PLANS OTHER

13 THAN IRAS.—For purposes of this 

14 title, if a contribution is made pursu15 ant to subclause (I) with respect to a 

16 qualified disaster-relief distribution 

17 from an eligible retirement plan (as so 

18 defined) other than an individual re19 tirement plan, then the taxpayer shall, 

20 to the extent of the amount of the 

21 contribution, be treated as having re22 ceived the qualified disaster-relief dis23 tribution in an eligible rollover dis24 tribution (as defined in section 

25 402(c)(4)) and as having transferred 
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1 the amount to the eligible retirement 

2 plan in a direct trustee to trustee 

3 transfer within 60 days of the dis4 tribution. 

5 ‘‘(III) TREATMENT OF REPAY6 MENTS FOR DISTRIBUTIONS FROM

7 IRAS.—For purposes of this title, if a 

8 contribution is made pursuant to sub9 clause (I) with respect to a qualified 

10 disaster-relief distribution from an in11 dividual retirement plan, then, to the 

12 extent of the amount of the contribu13 tion, the qualified disaster-relief dis14 tribution shall be treated as a dis15 tribution described in section 

16 408(d)(3) and as having been trans17 ferred to the eligible retirement plan 

18 in a direct trustee to trustee transfer 

19 within 60 days of the distribution. 

20 ‘‘(IV) APPLICATION TO GOVERN21 MENTAL SECTION 457 PLANS.—In de22 termining whether any distribution is 

23 a qualified disaster-relief distribution 

24 for purposes of this clause, an eligible 

25 deferred compensation plan (as de-
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1 fined in section 457(b)) maintained by 

2 an employer described in section 

3 457(e)(1)(A) shall be treated as a 

4 qualified retirement plan. 

5 ‘‘(iii) QUALIFIED DISASTER-RELIEF

6 DISTRIBUTION.—Except as provided in 

7 clause (iv), for purposes of this subpara8 graph, the term ‘qualified disaster-relief 

9 distribution’ means any distribution— 

10 ‘‘(I) to an individual who has 

11 sustained a loss as a result of a major 

12 disaster declared under section 401 of 

13 the Robert T. Stafford Disaster Relief 

14 and Emergency Assistance Act and 

15 who has a principal place of abode im16 mediately before the declaration in a 

17 qualified disaster area, and 

18 ‘‘(II) which is made during the 1- 

19 year period beginning on the date 

20 such declaration is made. 

21 ‘‘(iv) DOLLAR LIMITATION.— 

22 ‘‘(I) IN GENERAL.—The term 

23 ‘qualified disaster-relief distribution’ 

24 shall not include any distributions 

25 with respect to any major disaster de-
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1 scribed in clause (iii)(I) to the extent 

2 the aggregate amount of such dis3 tributions exceeds $100,000. 

4 ‘‘(II) TREATMENT OF PLAN DIS5 TRIBUTIONS.—If a distribution to an 

6 individual with respect to any such 

7 major disaster would (without regard 

8 to subclause (I)) be a qualified dis9 aster-relief distribution, a plan shall 

10 not be treated as violating any re11 quirement of this title merely because 

12 it treats such distribution as a quali13 fied disaster-relief distribution, unless 

14 the aggregate amount of such dis15 tributions from all plans maintained 

16 by the employer (and any member of 

17 controlled group which includes the 

18 employer) to such individual with re19 spect to such major disaster exceeds 

20 $100,000. 

21 ‘‘(v) QUALIFIED DISASTER AREA.— 

22 For purposes of this subparagraph, the 

23 term ‘qualified disaster area’ means an 

24 area— 
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1 ‘‘(I) with respect to which a 

2 major disaster has been declared by 

3 the President under section 401 of the 

4 Robert T. Stafford Disaster Relief 

5 and Emergency Assistance Act, and 

6 ‘‘(II) which is determined by the 

7 President to warrant individual assist8 ance, or individual and public assist9 ance, from the Federal Government 

10 under such Act.’’. 

11 (b) EXEMPTION OF DISTRIBUTIONS FROM TRUSTEE

12 TO TRUSTEE TRANSFER AND WITHHOLDING RULES.— 

13 Paragraph (4) of section 402(c) (relating to eligible roll14 over distribution) is amended by striking ‘‘and’’ at the end 

15 of subparagraph (B), by striking the period at the end 

16 of subparagraph (C) and inserting ‘‘, and’’, and by insert17 ing at the end the following new subparagraph: 

18 ‘‘(D) any qualified disaster-relief distribu19 tion (within the meaning of section 

20 72(t)(2)(G)).’’. 

21 (c) CONFORMING AMENDMENTS.— 

22 (1) Section 401(k)(2)(B)(i) is amended by 

23 striking ‘‘or’’ at the end of subclause (III), by strik24 ing ‘‘and’’ at the end of subclause (IV) and inserting 
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1 ‘‘or’’, and by inserting after subclause (IV) the fol2 lowing new subclause: 

3 ‘‘(V) the date on which a period 

4 referred to in section 

5 72(t)(2)(G)(iii)(II) begins (but only to 

6 the extent provided in section 

7 72(t)(2)(G)), and’’. 

8 (2) Section 403(b)(7)(A)(ii) is amended by in9 serting ‘‘sustains a loss as a result of a major dis10 aster declared under section 401 of the Robert T. 

11 Stafford Disaster Relief and Emergency Assistance 

12 Act (but only to the extent provided in section 

13 72(t)(2)(G)),’’ before ‘‘or’’. 

14 (3) Section 403(b)(11) is amended by striking 

15 ‘‘or’’ at the end of subparagraph (A), by striking the 

16 period at the end of subparagraph (B) and inserting 

17 ‘‘, or’’, and by inserting after subparagraph (B) the 

18 following new subparagraph: 

19 ‘‘(C) for distributions to which section 

20 72(t)(2)(G) applies.’’. 

21 (4) Section 457(d)(1)(A) is amended by strik22 ing ‘‘or’’ at the end of clause (ii), by adding ‘‘or’’ 

23 at the end of clause (iii), and by adding at the end 

24 the following new clause: 
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1 ‘‘(iv) in the case of an eligible de2 ferred compensation plan established and 

3 maintained by an employer described in 

4 subsection (e)(1)(A), when the participant 

5 sustains a loss as a result of a major dis6 aster declared under section 401 of the 

7 Robert T. Stafford Disaster Relief and 

8 Emergency Assistance Act (but only to the 

9 extent provided in section 72(t)(2)(G)),’’. 

10 (d) EFFECTIVE DATE.—The amendments made by 

11 this section shall apply to distributions received after Au12 gust 28, 2005. 

13 SEC. 102. INCOME AVERAGING FOR DISASTER-RELIEF DIS14 TRIBUTIONS RELATED TO HURRICANE 

15 KATRINA. 

16 (a) IN GENERAL.—In the case of any qualified dis17 aster-relief distribution (within the meaning of section 

18 72(t)(2)(G) of the Internal Revenue Code of 1986) from 

19 a qualified retirement plan (as defined in section 4974(c) 

20 of such Code) to a qualified individual, unless the taxpayer 

21 elects not to have this section apply for any taxable year, 

22 any amount required to be included in gross income for 

23 such taxable year shall be so included ratably over the 3- 

24 taxable year period beginning with such taxable year. 

25 (b) SPECIAL RULES.— 
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1 (1) APPLICATION TO GOVERNMENTAL SECTION

2 457 PLANS.—In determining whether any distribu3 tion is a qualified disaster-relief distribution (as so 

4 defined) for purposes of this section, an eligible de5 ferred compensation plan (as defined in section 

6 457(b) of such Code) maintained by an employer de7 scribed in section 457(e)(1)(A) of such Code shall be 

8 treated as a qualified retirement plan (as so de9 fined). 

10 (2) CERTAIN RULES TO APPLY.—Rules similar 

11 to the rules of subparagraph (E) of section 

12 408A(d)(3) of such Code shall apply for purposes of 

13 this section. 

14 (c) QUALIFIED INDIVIDUAL.—For purposes of this 

15 section, the term ‘‘qualified individual’’ means an indi16 vidual who has sustained a loss as a result of the major 

17 disaster declared under section 401 of the Robert T. Staf18 ford Disaster Relief and Emergency Assistance Act (42 

19 U.S.C. 5170) in connection with Hurricane Katrina and 

20 who has a principal place of abode immediately before the 

21 declaration in a Hurricane Katrina disaster area. 

22 SEC. 103. RECONTRIBUTIONS OF WITHDRAWALS FOR HOME 

23 PURCHASES CANCELLED DUE TO HURRI24 CANE KATRINA. 

25 (a) RECONTRIBUTIONS.— 
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1 (1) IN GENERAL.—Any individual who received 

2 a qualified distribution may, at any time during the 

3 6-month period beginning on the day after the dis4 aster declaration date, make one or more contribu5 tions in an aggregate amount not to exceed the 

6 amount of such qualified distribution to an eligible 

7 retirement plan (as defined in section 402(c)(8)(B) 

8 of the Internal Revenue Code of 1986) of which such 

9 individual is a beneficiary and to which a rollover 

10 contribution of such distribution could be made 

11 under section 402(c), 403(a)(4), 403(b)(8), or 

12 408(d)(3) of such Code, as the case may be. 

13 (2) TREATMENT OF REPAYMENTS.— 

14 (A) TREATMENT OF REPAYMENTS FOR

15 DISTRIBUTIONS FROM ELIGIBLE RETIREMENT

16 PLANS OTHER THAN IRAS.—For purposes of 

17 the Internal Revenue Code of 1986, if a con18 tribution is made pursuant to paragraph (1) 

19 with respect to a qualified distribution from an 

20 eligible retirement plan (as so defined) other 

21 than an individual retirement plan (as defined 

22 in section 7701(a)(37) of such Code), then the 

23 taxpayer shall, to the extent of the amount of 

24 the contribution, be treated as having received 

25 the qualified distribution in an eligible rollover 
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1 distribution (as defined in section 402(c)(4) of 

2 such Code) and as having transferred the 

3 amount to the eligible retirement plan in a di4 rect trustee to trustee transfer within 60 days 

5 of the distribution. 

6 (B) TREATMENT OF REPAYMENTS FOR

7 DISTRIBUTIONS FROM IRAS.—For purposes of 

8 the Internal Revenue Code of 1986, if a con9 tribution is made pursuant to paragraph (1) 

10 with respect to a qualified distribution from an 

11 individual retirement plan (as so defined), then, 

12 to the extent of the amount of the contribution, 

13 the qualified distribution shall be treated as a 

14 distribution described in section 408(d)(3) of 

15 such Code and as having been transferred to 

16 the eligible retirement plan (as so defined) in a 

17 direct trustee to trustee transfer within 60 days 

18 of the distribution. 

19 (b) DEFINITIONS.—For purposes of this section— 

20 (1) QUALIFIED DISTRIBUTION.—The term 

21 ‘‘qualified distribution’’ means any distribution— 

22 (A) described in section 

23 401(k)(2)(B)(i)(IV), 403(b)(7)(A)(ii) (but only 

24 to the extent such distribution relates to finan-
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1 cial hardship), 403(b)(11)(B), or 72(t)(2)(F) of 

2 the Internal Revenue Code of 1986, 

3 (B) received after February 28, 2005, and 

4 before August 29, 2005, and 

5 (C) which was to be used to purchase or 

6 construct a principal residence in a Hurricane 

7 Katrina disaster area, but which was not so 

8 purchased or constructed. 

9 (2) DISASTER DECLARATION DATE.—The term 

10 ‘‘disaster declaration date’’ means the date on which 

11 the President designated the area as a Hurricane 

12 Katrina disaster area. 

13 SEC. 104. LOANS FROM QUALIFIED PLANS TO VICTIMS OF 

14 HURRICANE KATRINA. 

15 (a) INCREASE IN LIMIT ON LOANS NOT TREATED AS

16 DISTRIBUTIONS.—In the case of any loan from a qualified 

17 employer plan (as defined under section 72(p)(4) of the 

18 Internal Revenue Code of 1986) to a qualified individual 

19 (as defined in section 102(c)) made after the date of en20 actment of this Act and before the date which is 1 year 

21 after the disaster declaration date (as defined in section 

22 103(b)(2))— 

23 (1) clause (i) of section 72(p)(2)(A) of such 

24 Code shall be applied by substituting ‘‘$100,000’’ 

25 for ‘‘$50,000’’, and 
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1 (2) clause (ii) of such section shall be applied 

2 by substituting ‘‘the present value of the nonforfeit3 able accrued benefit of the employee under the plan’’ 

4 for ‘‘one-half of the present value of the nonforfeit5 able accrued benefit of the employee under the 

6 plan’’. 

7 (b) DELAY OF REPAYMENT.—In the case of a quali8 fied individual (as defined in section 102(c)) with an out9 standing loan on or after August 26, 2005, from a quali10 fied employer plan (as defined in section 72(p)(4) of the 

11 Internal Revenue Code of 1986)— 

12 (1) if the due date pursuant to subparagraph 

13 (B) or (C) of section 72(p)(2) of such Code for any 

14 repayment with respect to such loan occurs during 

15 the period beginning after August 29, 2005, and 

16 ending before August 30, 2006, such due date shall 

17 be delayed for 1 year, 

18 (2) any subsequent repayments with respect to 

19 any such loan shall be appropriately adjusted to re20 flect the delay in the due date under paragraph (1) 

21 and any interest accruing during such delay, and 

22 (3) in determining the 5-year period and the 

23 term of a loan under subparagraph (B) or (C) of 

24 section 72(p)(2) of such Code, such period shall be 

25 disregarded. 
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1 SEC. 105. PROVISIONS RELATING TO PLAN AMENDMENTS. 

2 (a) IN GENERAL.—If this section applies to any plan 

3 or contract amendment such plan or contract shall be 

4 treated as being operated in accordance with the terms 

5 of the plan during the period described in subsection 

6 (b)(2)(A). 

7 (b) AMENDMENTS TO WHICH SECTION APPLIES.— 

8 (1) IN GENERAL.—This section shall apply to 

9 any amendment to any plan or annuity contract 

10 which is made— 

11 (A) pursuant to any amendment made by 

12 this title, or pursuant to any regulation issued 

13 by the Secretary of the Treasury or the Sec14 retary of Labor under this title, and 

15 (B) on or before the last day of the first 

16 plan year beginning on or after January 1, 

17 2007, or such later date as the Secretary of the 

18 Treasury may prescribe. 

19 In the case of a governmental plan (as defined in 

20 section 414(d) of the Internal Revenue Code of 

21 1986), subparagraph (B) shall be applied by sub22 stituting the date which is 2 years after the date 

23 otherwise applied under subparagraph (B). 

24 (2) CONDITIONS.—This section shall not apply 

25 to any amendment unless— 

26 (A) during the period— 
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1 (i) beginning on the date the legisla2 tive or regulatory amendment described in 

3 paragraph (1)(A) takes effect (or in the 

4 case of a plan or contract amendment not 

5 required by such legislative or regulatory 

6 amendment, the effective date specified by 

7 the plan), and 

8 (ii) ending on the date described in 

9 paragraph (1)(B) (or, if earlier, the date 

10 the plan or contract amendment is adopt11 ed), 

12 the plan or contract is operated as if such plan 

13 or contract amendment were in effect; and 

14 (B) such plan or contract amendment ap15 plies retroactively for such period. 

16 TITLE II—EMPLOYMENT RELIEF 

17 SEC. 201. WORK OPPORTUNITY TAX CREDIT FOR HURRI18 CANE KATRINA EMPLOYEE SURVIVORS. 

19 (a) IN GENERAL.—For purposes of section 51 of the 

20 Internal Revenue Code of 1986, a Hurricane Katrina em21 ployee survivor shall be treated as a member of a targeted 

22 group. 

23 (b) HURRICANE KATRINA EMPLOYEE SURVIVOR.— 

24 For purposes of this section, the term ‘‘Hurricane Katrina 
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1 employee survivor’’ means any individual who is certified 

2 as an individual who— 

3 (1) on August 28, 2005, had a principal place 

4 of abode in a Hurricane Katrina disaster area, and 

5 (2) became unemployed as a result of Hurri6 cane Katrina. 

7 (c) SPECIAL RULES FOR DETERMINING CREDIT.— 

8 For purposes of applying subpart F of part IV of sub9 chapter A of chapter 1 of such Code to wages paid or in10 curred to any Hurricane Katrina employee survivor— 

11 (1) section 51(c)(4) of such Code shall not 

12 apply, 

13 (2) notwithstanding section 51(d)(12) of such 

14 Code, the certification under subsection (b) shall be 

15 made in such manner and at such time as deter16 mined by the Secretary of the Treasury, except that 

17 the certification shall be made by a person other 

18 than such employee survivor or the employer (within 

19 the meaning of section 51 of such Code), and 

20 (3) section 51(i)(2) of such Code shall not 

21 apply with respect to the first hire of such employee 

22 survivor, unless such employee survivor was an em23 ployee of the employer on August 28, 2005. 

24 (d) APPLICATION OF SECTION.—This section shall 

25 apply to wages (within the meaning of section 51(c) of 
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1 such Code) paid or incurred to any individual who begins 

2 work— 

3 (1) for an employer during the 1-year period 

4 beginning on August 29, 2005, or 

5 (2) in the case of an individual who is being 

6 hired for a position the principal place of employ7 ment of which is located in a Hurricane Katrina dis8 aster area, for any employer during the 3-year pe9 riod beginning on such date. 

10 SEC. 202. EMPLOYEE RETENTION CREDIT FOR EMPLOYERS 

11 AFFECTED BY HURRICANE KATRINA. 

12 (a) IN GENERAL.—In the case of an eligible em13 ployer, there shall be allowed as a credit against the tax 

14 imposed by chapter 1 of the Internal Revenue Code of 

15 1986 for the taxable year an amount equal to 40 percent 

16 of the qualified wages with respect to each eligible em17 ployee of such employer for such taxable year. For pur18 poses of the preceding sentence, the amount of qualified 

19 wages which may be taken into account with respect to 

20 any individual shall not exceed $6,000. 

21 (b) DEFINITIONS.—For purposes of this section— 

22 (1) ELIGIBLE EMPLOYER.—The term ‘‘eligible 

23 employer’’ means any employer— 
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1 (A) which conducted an active trade or 

2 business on August 28, 2005, in a Hurricane 

3 Katrina disaster area, and 

4 (B) with respect to whom the trade or 

5 business described in subparagraph (A) is inop6 erable on any day after August 28, 2005, and 

7 before January 1, 2006, as a result of damage 

8 sustained in connection with Hurricane 

9 Katrina. 

10 (2) ELIGIBLE EMPLOYEE.—The term ‘‘eligible 

11 employee’’ means with respect to an eligible em12 ployer— 

13 (A) an employee whose principal place of 

14 employment on August 28, 2005, with such eli15 gible employer was in a Hurricane Katrina dis16 aster area, or 

17 (B) a Ready Reserve-National Guard em18 ployee of such eligible employer who is per19 forming qualified active duty and whose prin20 cipal place of employment immediately before 

21 the date on which such employee began per22 forming such qualified active duty was in a 

23 Hurricane Katrina disaster area. 

24 (3) QUALIFIED WAGES.—The term ‘‘qualified 

25 wages’’ means wages (as defined in section 51(c)(1) 
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1 of the Internal Revenue Code of 1986, but without 

2 regard to section 3306(b)(2)(B) of such Code) paid 

3 or incurred by an eligible employer with respect to 

4 an eligible employee on any day after August 28, 

5 2005, and before January 1, 2006, which occurs 

6 during the period— 

7 (A) beginning on the date on which the 

8 trade or business described in paragraph (1) 

9 first became inoperable at the principal place of 

10 employment of the employee immediately before 

11 Hurricane Katrina, and 

12 (B) ending on the date on which such 

13 trade or business has resumed significant oper14 ations at such principal place of employment. 

15 Such term shall include wages paid without regard 

16 to whether the employee performs no services, per17 forms services at a different place of employment 

18 than such principal place of employment, or per19 forms services at such principal place of employment 

20 before significant operations have resumed. 

21 (4) READY RESERVE-NATIONAL GUARD EM22 PLOYEE.—The term ‘‘Ready Reserve-National 

23 Guard employee’’ means an employee who is a mem24 ber of the Ready Reserve of a reserve component of 

25 an Armed Force of the United States as described 
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1 in section 10142 and 10101 of title 10, United 

2 States Code and who is performing qualified active 

3 duty. 

4 (5) QUALIFIED ACTIVE DUTY.—The term 

5 ‘‘qualified active duty’’ means— 

6 (A) active duty, other than the training 

7 duty specified in section 10147 of title 10, 

8 United States Code (relating to training re9 quirements for Ready Reserve), or section 

10 502(a) of title 32, United States Code (relating 

11 to required drills and field exercises for the Na12 tional Guard), in connection with which an em13 ployee is entitled to reemployment rights and 

14 other benefits or to a leave of absence from em15 ployment under chapter 43 of title 38, United 

16 States Code, and 

17 (B) hospitalization incident to such duty. 

18 (c) CERTAIN RULES TO APPLY.—For purposes of 

19 this section, rules similar to the rules of sections 51(i)(1), 

20 52, and 280C(a) of the Internal Revenue Code of 1986 

21 shall apply. 

22 (d) CREDIT TO BE PART OF GENERAL BUSINESS

23 CREDIT.—The credit allowed under this section shall be 

24 added to the current year business credit under section 

25 38(b) of the Internal Revenue Code of 1986 and shall be 
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1 treated as a credit allowed under subpart D of part IV 

2 of subchapter A of chapter 1 of such Code. 

3 TITLE III—CHARITABLE GIVING 

4 INCENTIVES 

5 SEC. 301. TEMPORARY INCREASE IN LIMITATION ON INDI6 VIDUAL AND CORPORATE CHARITABLE CASH 

7 CONTRIBUTIONS. 

8 (a) IN GENERAL.—In the case of qualified contribu9 tions made during the period beginning on August 29, 

10 2005, and ending on December 31, 2005, in the case of 

11 any taxable year which includes any portion of such pe12 riod— 

13 (1) subsection (b)(1)(A) of section 170 of the 

14 Internal Revenue Code of 1986 shall be applied sep15 arately— 

16 (A) first without regard to such contribu17 tions, and 

18 (B) next with regard to such contributions 

19 by substituting ‘‘60 percent of the taxpayer’s 

20 contribution base less the other contributions 

21 allowable under this paragraph for the taxable 

22 year’’ for ‘‘50 percent of the taxpayer’s con23 tribution base for the taxable year’’, and 

24 (2) subsection (b)(2) of section 170 of such 

25 Code shall be applied separately— 
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1 (A) first without regard to such contribu2 tions, and 

3 (B) next with regard to such contributions 

4 by substituting ‘‘15 percent of the taxpayer’s 

5 taxable income less the other charitable con6 tributions allowable for the taxable year’’ for 

7 ‘‘10 percent of the taxpayer’s taxable income’’. 

8 (b) QUALIFIED CONTRIBUTIONS.—For purposes of 

9 this section, the term ‘‘qualified contributions’’ means any 

10 charitable contributions (as defined in section 170(c) of 

11 such Code) made in cash to an organization described in 

12 section 170(b)(1)(A) of such Code. 

13 (c) APPLICATION OF CARRYOVER RULES.—For pur14 poses of section 170 of such Code— 

15 (1) qualified contributions shall not be taken 

16 into account under section 170(d)(1)(A)(i) of such 

17 Code in determining the amount of the deduction al18 lowable under such section with respect to such con19 tributions, and 

20 (2) to the extent qualified contributions in21 crease the amount allowable under section 170 of 

22 such Code by reason of subsection (a), such con23 tributions shall not be taken into account under sec24 tion 170(d) of such Code. 
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1 (d) FISCAL YEAR TAXPAYERS.—In the case of a tax2 payer whose taxable year ends after August 28, 2005, and 

3 before December 31, 2005, subsection (a) shall apply to 

4 only the one taxable year that the taxpayer elects. 

5 SEC. 302. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RE6 TIREMENT ACCOUNTS FOR CHARITABLE 

7 PURPOSES. 

8 (a) IN GENERAL.—Subsection (d) of section 408 (re9 lating to individual retirement accounts) is amended by 

10 adding at the end the following new paragraph: 

11 ‘‘(8) DISTRIBUTIONS FOR CHARITABLE PUR12 POSES.— 

13 ‘‘(A) IN GENERAL.—No amount shall be 

14 includible in gross income by reason of a quali15 fied charitable distribution. 

16 ‘‘(B) QUALIFIED CHARITABLE DISTRIBU17 TION.—For purposes of this paragraph, the 

18 term ‘qualified charitable distribution’ means 

19 any distribution made after August 28, 2005, 

20 and before January 1, 2006, from an individual 

21 retirement account— 

22 ‘‘(i) which is made directly by the 

23 trustee— 

24 ‘‘(I) to an organization described 

25 in section 170(c), or 
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1 ‘‘(II) to a split-interest entity, 

2 and 

3 ‘‘(ii) which is made on or after— 

4 ‘‘(I) in the case of any distribu5 tion described in clause (i)(I), the 

6 date that the individual for whose 

7 benefit the account is maintained has 

attained age 701 8 ⁄2, and 

9 ‘‘(II) in the case of any distribu10 tion described in clause (i)(II), the 

11 date that such individual has attained 

age 591 12 ⁄2. 

13 A distribution shall be treated as a qualified 

14 charitable distribution only to the extent that 

15 the distribution would be includible in gross in16 come without regard to subparagraph (A) and, 

17 in the case of a distribution to a split-interest 

18 entity, only if no person holds an income inter19 est in the amounts in the split-interest entity 

20 attributable to such distribution other than one 

21 or more of the following: the individual for 

22 whose benefit such account is maintained, the 

23 spouse of such individual, or any organization 

24 described in section 170(c). 
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1 ‘‘(C) CONTRIBUTIONS MUST BE OTHER2 WISE DEDUCTIBLE.—For purposes of this para3 graph— 

4 ‘‘(i) DIRECT CONTRIBUTIONS.—A dis5 tribution to an organization described in 

6 section 170(c) shall be treated as a quali7 fied charitable distribution only if a deduc8 tion for the entire distribution would be al9 lowable under section 170 (determined 

10 without regard to subsection (b) thereof 

11 and this paragraph). 

12 ‘‘(ii) SPLIT-INTEREST GIFTS.—A dis13 tribution to a split-interest entity shall be 

14 treated as a qualified charitable distribu15 tion only if a deduction for the entire value 

16 of the interest in the distribution for the 

17 use of an organization described in section 

18 170(c) would be allowable under section 

19 170 (determined without regard to sub20 section (b) thereof and this paragraph). 

21 ‘‘(D) APPLICATION OF SECTION 72.—Not22 withstanding section 72, in determining the ex23 tent to which a distribution is a qualified chari24 table distribution, the entire amount of the dis25 tribution shall be treated as includible in gross 
29 

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1 income without regard to subparagraph (A) to 

2 the extent that such amount does not exceed 

3 the aggregate amount which would have been so 

4 includible if all amounts were distributed from 

5 all individual retirement accounts treated as 1 

6 contract under paragraph (2)(A) for purposes 

7 of determining the inclusion on such distribu8 tion under section 72. Proper adjustments shall 

9 be made in applying section 72 to other dis10 tributions in such taxable year and subsequent 

11 taxable years. 

12 ‘‘(E) SPECIAL RULES FOR SPLIT-INTEREST

13 ENTITIES.— 

14 ‘‘(i) CHARITABLE REMAINDER

15 TRUSTS.—Notwithstanding section 664(b), 

16 distributions made from a trust described 

17 in subparagraph (G)(i) shall be treated as 

18 ordinary income in the hands of the bene19 ficiary to whom is paid the annuity de20 scribed in section 664(d)(1)(A) or the pay21 ment described in section 664(d)(2)(A). 

22 ‘‘(ii) POOLED INCOME FUNDS.—No 

23 amount shall be includible in the gross in24 come of a pooled income fund (as defined 

25 in subparagraph (G)(ii)) by reason of a 
30 

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1 qualified charitable distribution to such 

2 fund, and all distributions from the fund 

3 which are attributable to qualified chari4 table distributions shall be treated as ordi5 nary income to the beneficiary. 

6 ‘‘(iii) CHARITABLE GIFT ANNU7 ITIES.—Qualified charitable distributions 

8 made for a charitable gift annuity shall not 

9 be treated as an investment in the con10 tract. 

11 ‘‘(F) DENIAL OF DEDUCTION.—Qualified 

12 charitable distributions shall not be taken into 

13 account in determining the deduction under sec14 tion 170. 

15 ‘‘(G) SPLIT-INTEREST ENTITY DEFINED.— 

16 For purposes of this paragraph, the term ‘split17 interest entity’ means— 

18 ‘‘(i) a charitable remainder annuity 

19 trust or a charitable remainder unitrust 

20 (as such terms are defined in section 

21 664(d)) which must be funded exclusively 

22 by qualified charitable distributions, 

23 ‘‘(ii) a pooled income fund (as defined 

24 in section 642(c)(5)), but only if the fund 

25 accounts separately for amounts attrib-
31 

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1 utable to qualified charitable distributions, 

2 and 

3 ‘‘(iii) a charitable gift annuity (as de4 fined in section 501(m)(5)).’’. 

5 (b) MODIFICATIONS RELATING TO INFORMATION RE6 TURNS BY CERTAIN TRUSTS.— 

7 (1) RETURNS.—Section 6034 (relating to re8 turns by trusts described in section 4947(a)(2) or 

9 claiming charitable deductions under section 642(c)) 

10 is amended to read as follows: 

11 ‘‘SEC. 6034. RETURNS BY TRUSTS DESCRIBED IN SECTION 

12 4947(a)(2) OR CLAIMING CHARITABLE DEDUC13 TIONS UNDER SECTION 642(c). 

14 ‘‘(a) TRUSTS DESCRIBED IN SECTION 4947(a)(2).— 

15 Every trust described in section 4947(a)(2) shall furnish 

16 such information with respect to the taxable year as the 

17 Secretary may by forms or regulations require. 

18 ‘‘(b) TRUSTS CLAIMING A CHARITABLE DEDUCTION

19 UNDER SECTION 642(c).— 

20 ‘‘(1) IN GENERAL.—Every trust not required to 

21 file a return under subsection (a) but claiming a de22 duction under section 642(c) for the taxable year 

23 shall furnish such information with respect to such 

24 taxable year as the Secretary may by forms or regu25 lations prescribe, including— 
32 

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1 ‘‘(A) the amount of the deduction taken 

2 under section 642(c) within such year, 

3 ‘‘(B) the amount paid out within such year 

4 which represents amounts for which deductions 

5 under section 642(c) have been taken in prior 

6 years, 

7 ‘‘(C) the amount for which such deductions 

8 have been taken in prior years but which has 

9 not been paid out at the beginning of such year, 

10 ‘‘(D) the amount paid out of principal in 

11 the current and prior years for the purposes de12 scribed in section 642(c), 

13 ‘‘(E) the total income of the trust within 

14 such year and the expenses attributable thereto, 

15 and 

16 ‘‘(F) a balance sheet showing the assets, li17 abilities, and net worth of the trust as of the 

18 beginning of such year. 

19 ‘‘(2) EXCEPTIONS.—Paragraph (1) shall not 

20 apply to a trust for any taxable year if— 

21 ‘‘(A) all the net income for such year, de22 termined under the applicable principles of the 

23 law of trusts, is required to be distributed cur24 rently to the beneficiaries, or 
33 

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1 ‘‘(B) the trust is described in section 

2 4947(a)(1).’’. 

3 (2) INCREASE IN PENALTY RELATING TO FIL4 ING OF INFORMATION RETURN BY SPLIT-INTEREST

5 TRUSTS.—Paragraph (2) of section 6652(c) (relating 

6 to returns by exempt organizations and by certain 

7 trusts) is amended by adding at the end the fol8 lowing new subparagraph: 

9 ‘‘(C) SPLIT-INTEREST TRUSTS.—In the 

10 case of a trust which is required to file a return 

11 under section 6034(a), subparagraphs (A) and 

12 (B) of this paragraph shall not apply and para13 graph (1) shall apply in the same manner as if 

14 such return were required under section 6033, 

15 except that— 

16 ‘‘(i) the 5 percent limitation in the 

17 second sentence of paragraph (1)(A) shall 

18 not apply, 

19 ‘‘(ii) in the case of any trust with 

20 gross income in excess of $250,000, the 

21 first sentence of paragraph (1)(A) shall be 

22 applied by substituting ‘$100’ for ‘$20’, 

23 and the second sentence thereof shall be 

24 applied by substituting ‘$50,000’ for 

25 ‘$10,000’, and 
34 

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1 ‘‘(iii) the third sentence of paragraph 

2 (1)(A) shall be disregarded. 

3 In addition to any penalty imposed on the trust 

4 pursuant to this subparagraph, if the person re5 quired to file such return knowingly fails to file 

6 the return, such penalty shall also be imposed 

7 on such person who shall be personally liable 

8 for such penalty.’’. 

9 (3) CONFIDENTIALITY OF NONCHARITABLE

10 BENEFICIARIES.—Subsection (b) of section 6104 

11 (relating to inspection of annual information re12 turns) is amended by adding at the end the fol13 lowing new sentence: ‘‘In the case of a trust which 

14 is required to file a return under section 6034(a), 

15 this subsection shall not apply to information re16 garding beneficiaries which are not organizations de17 scribed in section 170(c).’’. 

18 (c) EFFECTIVE DATES.— 

19 (1) SUBSECTION (a).—The amendment made 

20 by subsection (a) shall apply to distributions made 

21 after August 28, 2005. 

22 (2) SUBSECTION (b).—The amendments made 

23 by subsection (b) shall apply to returns for taxable 

24 years beginning after December 31, 2004. 
35 

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1 SEC. 303. CHARITABLE DEDUCTION FOR CONTRIBUTIONS 

2 OF FOOD INVENTORIES. 

3 (a) IN GENERAL.—Subsection (e) of section 170 (re4 lating to certain contributions of ordinary income and cap5 ital gain property) is amended by adding at the end the 

6 following new paragraph: 

7 ‘‘(7) APPLICATION OF PARAGRAPH (3) TO CER8 TAIN CONTRIBUTIONS OF FOOD INVENTORY.—For 

9 purposes of this section— 

10 ‘‘(A) EXTENSION TO INDIVIDUALS.—In the 

11 case of a charitable contribution of apparently 

12 wholesome food— 

13 ‘‘(i) paragraph (3)(A) shall be applied 

14 without regard to whether the contribution 

15 is made by a C corporation, and 

16 ‘‘(ii) in the case of a taxpayer other 

17 than a C corporation, the aggregate 

18 amount of such contributions for any tax19 able year which may be taken into account 

20 under this section shall not exceed 10 per21 cent of the taxpayer’s net income for such 

22 taxable year from all trades or businesses 

23 from which such contributions were made 

24 for such taxable year, computed without 

25 regard to this section. 
36 

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1 ‘‘(B) LIMITATION ON REDUCTION.—In the 

2 case of a charitable contribution of apparently 

3 wholesome food, notwithstanding paragraph 

4 (3)(B), the amount of the reduction determined 

5 under paragraph (1)(A) shall not exceed the 

6 amount by which the fair market value of such 

7 property exceeds twice the basis of such prop8 erty. 

9 ‘‘(C) DETERMINATION OF BASIS.—If a 

10 taxpayer— 

11 ‘‘(i) does not account for inventories 

12 under section 471, and 

13 ‘‘(ii) is not required to capitalize indi14 rect costs under section 263A, 

15 the taxpayer may elect, solely for purposes of 

16 paragraph (3)(B), to treat the basis of any ap17 parently wholesome food as being equal to 25 

18 percent of the fair market value of such food. 

19 ‘‘(D) DETERMINATION OF FAIR MARKET

20 VALUE.—In the case of a charitable contribu21 tion of apparently wholesome food which is a 

22 qualified contribution (within the meaning of 

23 paragraph (3), as modified by subparagraph 

24 (A) of this paragraph) and which, solely by rea25 son of internal standards of the taxpayer or 
37 

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1 lack of market, cannot or will not be sold, the 

2 fair market value of such contribution shall be 

3 determined— 

4 ‘‘(i) without regard to such internal 

5 standards or such lack of market and 

6 ‘‘(ii) by taking into account the price 

7 at which the same or substantially the 

8 same food items (as to both type and qual9 ity) are sold by the taxpayer at the time of 

10 the contribution (or, if not so sold at such 

11 time, in the recent past). 

12 ‘‘(E) APPARENTLY WHOLESOME FOOD.— 

13 For purposes of this paragraph, the term ‘ap14 parently wholesome food’ has the meaning given 

15 such term by section 22(b)(2) of the Bill Emer16 son Good Samaritan Food Donation Act (42 

17 U.S.C. 1791(b)(2)), as in effect on the date of 

18 the enactment of this paragraph. 

19 ‘‘(F) APPLICATION.—This paragraph shall 

20 apply to contributions made after August 28, 

21 2005, and before January 1, 2006.’’. 

22 (b) EFFECTIVE DATE.—The amendment made by 

23 this section shall apply to contributions made after August 

24 28, 2005. 
38 

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1 SEC. 304. CHARITABLE DEDUCTION FOR CONTRIBUTIONS 

2 OF BOOK INVENTORIES. 

3 (a) IN GENERAL.—Section 170(e)(3) (relating to cer4 tain contributions of ordinary income and capital gain 

5 property) is amended by redesignating subparagraph (C) 

6 as subparagraph (D) and by inserting after subparagraph 

7 (B) the following new subparagraph: 

8 ‘‘(C) SPECIAL RULE FOR CONTRIBUTIONS

9 OF BOOK INVENTORY FOR EDUCATIONAL PUR10 POSES.— 

11 ‘‘(i) CONTRIBUTIONS OF BOOK INVEN12 TORY.—In determining whether a qualified 

13 book contribution is a qualified contribu14 tion, subparagraph (A) shall be applied 

15 without regard to whether— 

16 ‘‘(I) the donee is an organization 

17 described in the matter preceding 

18 clause (i) of subparagraph (A), and 

19 ‘‘(II) the property is to be used 

20 by the donee solely for the care of the 

21 ill, the needy, or infants. 

22 ‘‘(ii) AMOUNT OF REDUCTION.—Not23 withstanding subparagraph (B), the 

24 amount of the reduction determined under 

25 paragraph (1)(A) shall not exceed the 

26 amount by which the fair market value of 
39 

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1 the contributed property (as determined by 

2 the taxpayer using a bona fide published 

3 market price for such book) exceeds twice 

4 the basis of such property. 

5 ‘‘(iii) QUALIFIED BOOK CONTRIBU6 TION.—For purposes of this paragraph, 

7 the term ‘qualified book contribution’ 

8 means a charitable contribution of books, 

9 but only if the requirements of clauses (iv) 

10 and (v) are met. 

11 ‘‘(iv) IDENTITY OF DONEE.—The re12 quirement of this clause is met if the con13 tribution is to an organization— 

14 ‘‘(I) described in subclause (I) or 

15 (III) of paragraph (6)(B)(i), or 

16 ‘‘(II) described in section 

17 501(c)(3) and exempt from tax under 

18 section 501(a) (other than a private 

19 foundation, as defined in section 

20 509(a), which is not an operating 

21 foundation, as defined in section 

22 4942(j)(3)), which is organized pri23 marily to make books available to the 

24 general public at no cost or to operate 

25 a literacy program. 
40 

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1 ‘‘(v) CERTIFICATION BY DONEE.—The 

2 requirement of this clause is met if, in ad3 dition to the certifications required by sub4 paragraph (A) (as modified by this sub5 paragraph), the donee certifies in writing 

6 that— 

7 ‘‘(I) the books are suitable, in 

8 terms of currency, content, and quan9 tity, for use in the donee’s educational 

10 programs, and 

11 ‘‘(II) the donee will use the books 

12 in its educational programs. 

13 ‘‘(vi) BONA FIDE PUBLISHED MARKET

14 PRICE.—For purposes of this subpara15 graph, the term ‘bona fide published mar16 ket price’ means, with respect to any book, 

17 a price— 

18 ‘‘(I) determined using the same 

19 printing and edition, 

20 ‘‘(II) determined in the usual 

21 market in which such a book has been 

22 customarily sold by the taxpayer, and 

23 ‘‘(III) for which the taxpayer can 

24 demonstrate to the satisfaction of the 

25 Secretary that the taxpayer custom-
41 

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1 arily sold such books in arm’s length 

2 transactions within 7 years preceding 

3 the contribution of such a book. 

4 ‘‘(vii) APPLICATION.—This subpara5 graph shall apply to contributions made 

6 after August 28, 2005, and before January 

7 1, 2006.’’. 

8 (b) EFFECTIVE DATE.—The amendments made by 

9 this section shall apply to contributions made after August 

10 28, 2005. 

11 SEC. 305. ADDITIONAL PERSONAL EXEMPTION AMOUNT 

12 FOR HURRICANE KATRINA HOUSEGUEST. 

13 (a) IN GENERAL.—In the case of the taxpayer’s tax14 able year beginning in 2005, the amount allowed as a de15 duction in computing taxable income of the taxpayer 

16 under section 151 of the Internal Revenue Code of 1986 

17 shall be increased by the lesser of— 

18 (1) the product of— 

19 (A) $500, and 

20 (B) the number of Hurricane Katrina 

21 houseguests of the taxpayer, or 

22 (2) $2,000. 

23 (b) HURRICANE KATRINA HOUSEGUEST.—For pur24 poses of this section, the term ‘‘Hurricane Katrina house25 guest’’ means any individual— 
42 

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1 (1) who would not otherwise qualify for an ex2 emption amount with respect to the taxpayer for the 

3 taxable year, 

4 (2) whose principal place of abode in a Hurri5 cane Katrina disaster area was rendered uninhabit6 able after August 28, 2005, and 

7 (3) is provided shelter without remuneration for 

8 not less than 60 days after August 28, 2005, and 

9 before January 1, 2006, by the taxpayer in the tax10 payer’s principal place of abode. 

11 (c) LIMITATION.—No deduction shall be allowed 

12 under this section if the taxpayer receives any rent or 

13 other amount (from any source) in connection with the 

14 providing of such shelter. 

15 SEC. 306. INCREASE IN STANDARD MILEAGE RATE FOR 

16 CHARITABLE USE OF PASSENGER AUTO17 MOBILE. 

18 Notwithstanding section 170(i) of the Internal Rev19 enue Code of 1986, for purposes of computing the deduc20 tion under section 170 of such Code for use of a passenger 

21 automobile for the period beginning on August 29, 2005, 

22 and ending before January 1, 2006, the standard mileage 

23 rate shall be 50 percent of the standard mileage rate in 

24 effect under section 162(a) of such Code at the time of 
43 

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1 such use. Any increase under this section shall be rounded 

2 to the next highest cent. 

3 TITLE IV—ADDITIONAL TAX 

4 RELIEF PROVISIONS 

5 SEC. 401. EXCLUSIONS OF CERTAIN CANCELLATIONS OF IN6 DEBTEDNESS FOR VICTIMS OF HURRICANE 

7 KATRINA. 

8 (a) IN GENERAL.—For purposes of the Internal Rev9 enue Code of 1986, gross income shall not include any 

10 amount which (but for this section) would be includible 

11 in gross income by reason of the discharge (in whole or 

12 in part) of indebtedness of a natural person by an applica13 ble entity (as defined in section 6050P(c)(1)) if the dis14 charge is by reason of the damage sustained by the tax15 payer in connection with Hurricane Katrina. 

16 (b) EXCEPTION.—Subsection (a) shall not apply to 

17 any indebtedness incurred in connection with a trade or 

18 business. 

19 (c) DENIAL OF DOUBLE BENEFIT.—The amount ex20 cluded from gross income under subsection (a) shall be 

21 applied to reduce the tax attributes of the taxpayer as pro22 vided in section 108(b) of such Code. 

23 (d) EFFECTIVE DATE.—This section shall apply to 

24 discharges made on or after August 29, 2005, and before 

25 January 1, 2007. 
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1 SEC. 402. MODIFICATION TO CASUALTY LOSS RULES FOR 

2 VICTIMS OF HURRICANE KATRINA. 

3 In the case of an individual with a personal casualty 

4 loss which arises in connection with Hurricane Katrina— 

5 (1) section 165(h)(2)(A) of the Internal Rev6 enue Code of 1986 shall not apply, and 

7 (2) in applying such section to other personal 

8 casualty losses during the taxable year, losses to 

9 which this section applies shall be disregarded. 

10 SEC. 403. REQUIRED EXERCISE OF AUTHORITY UNDER SEC11 TION 7508A FOR TAX RELIEF FOR VICTIMS OF 

12 HURRICANE KATRINA. 

13 (a) AUTHORITY INCLUDES SUSPENSION OF PAY14 MENT OF EMPLOYMENT AND EXCISE TAXES.—Subpara15 graphs (A) and (B) of section 7508(a)(1) are amended 

16 to read as follows: 

17 ‘‘(A) Filing any return of income, estate, 

18 gift, employment, or excise tax; 

19 ‘‘(B) Payment of any income, estate, gift, 

20 employment, or excise tax or any installment 

21 thereof or of any other liability to the United 

22 States in respect thereof;’’. 

23 (b) APPLICATION TO VICTIMS OF HURRICANE

24 KATRINA.—In the case of any taxpayer determined by the 

25 Secretary of the Treasury to be affected by the Presi26 dentially declared disaster relating to Hurricane Katrina, 
45 

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1 any relief provided by the Secretary of the Treasury under 

2 section 7508A of the Internal Revenue Code of 1986 shall 

3 be for a period ending not earlier than February 28, 2006, 

4 and shall be treated as applying to the filing of returns 

5 relating to, and the payment of, employment and excise 

6 taxes. 

7 (c) EFFECTIVE DATE.—The amendment made by 

8 subsection (a) shall apply for any period for performing 

9 an act which has not expired before August 29, 2005. 

10 SEC. 404. SPECIAL MORTGAGE FINANCING RULES FOR 

11 RESIDENCES LOCATED IN HURRICANE 

12 KATRINA DISASTER AREA. 

13 In the case of a residence located in a Hurricane 

14 Katrina disaster area, section 143 of the Internal Revenue 

15 Code of 1986 shall be applied with the following modifica16 tions to financing provided with respect to such residence 

17 within 3 years after the date of the disaster declaration: 

18 (1) Subsections (d), (e) and (f) of such section 

19 143 shall be applied as if such residence were a tar20 geted area residence. 

21 (2) Subsection (f)(3) of such section 143 shall 

22 be applied without regard to subparagraph (A) 

23 thereof. 

24 (3) The limitation under subsection (k)(4) of 

25 such section 143 shall be increased (but not above 
46 

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1 $150,000) to the extent the qualified home-improve2 ment loan is for the repair of damage caused by 

3 Hurricane Katrina. 

4 This section shall apply only with respect to bonds issued 

5 after August 28, 2005, and before August 29, 2008. 

6 SEC. 405. EXTENSION OF REPLACEMENT PERIOD FOR NON7 RECOGNITION OF GAIN FOR PROPERTY LO8 CATED IN HURRICANE KATRINA DISASTER 

9 AREA. 

10 Notwithstanding subsections (g) and (h) of section 

11 1033 of the Internal Revenue Code of 1986, clause (i) of 

12 section 1033(a)(2)(B) of such Code shall be applied by 

13 substituting ‘‘5 years’’ for ‘‘2 years’’ with respect to prop14 erty which is compulsorily or involuntarily converted as 

15 a result of Hurricane Katrina in a Hurricane Katrina dis16 aster area, but only if substantially all of the use of the 

17 replacement property is in such area. 

18 SEC. 406. SPECIAL RULE FOR DETERMINING EARNED IN19 COME. 

20 (a) IN GENERAL.—In the case of a qualified indi21 vidual, if the earned income of the taxpayer for the taxable 

22 year of such taxpayer which includes August 28, 2005, 

23 is less than the earned income which attributable to the 

24 taxpayer for the preceding taxable year, the credits al25 lowed under sections 24(d) and 32 of the Internal Revenue 
47 

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1 Code of 1986 may, at the election of the taxpayer, be de2 termined by substituting— 

3 (1) such earned income for the preceding tax4 able year, for 

5 (2) such earned income for the taxable year 

6 which includes August 28, 2005. 

7 (b) QUALIFIED INDIVIDUAL.—For purposes of this 

8 section, the term ‘‘qualified individual’’ means any indi9 vidual who was (as of August 28, 2005) a resident of any 

10 area which is determined by the President to warrant indi11 vidual or individual and public assistance from the Federal 

12 Government under the Robert T. Stafford Disaster Relief 

13 and Emergency Assistance Act by reason of Hurricane 

14 Katrina. 

15 (c) EARNED INCOME.—For purposes of this section, 

16 the term ‘‘earned income’’ has the meaning given such 

17 term under section 32(c) of such Code. 

18 (d) SPECIAL RULES.— 

19 (1) APPLICATION TO JOINT RETURNS.—For 

20 purpose of subsection (a), in the case of a joint re21 turn for a taxable year which includes August 28, 

22 2005— 

23 (A) such subsection shall apply if either 

24 spouse is a qualified individual, 
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1 (B) the earned income which is attrib2 utable to the taxpayer for the preceding taxable 

3 year shall be the sum of the earned income 

4 which is attibutable to each spouse for such 

5 preceding taxable year, and 

6 (C) the substitution described in such sub7 section shall apply only with respect to earned 

8 income which is attributable to a spouse who is 

9 a qualified individual. 

10 (2) UNIFORM APPLICATION OF ELECTION.— 

11 Any election made under subsection (a) shall apply 

12 with respect to both section 24(d) and section 32 of 

13 such Code. 

14 (3) ERRORS TREATED AS MATHEMATICAL

15 ERROR.—For purposes of section 6213 of such 

16 Code, an incorrect use on a return of earned income 

17 pursuant to subsection (a) shall be treated as a 

18 mathematical or clerical error. 

19 (4) NO EFFECT ON DETERMINATION OF GROSS

20 INCOME.—For purposes of the Internal Revenue 

21 Code of 1986, gross income shall be determined 

22 without regard to any substitution under subsection 

23 (a). 
49 

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1 SEC. 407. SECRETARIAL AUTHORITY TO MAKE ADJUST2 MENTS REGARDING TAXPAYER AND DEPEND3 ENCY STATUS. 

4 With respect to taxable years beginning in 2005 or 

5 2006, the Secretary of the Treasury or the Secretary’s del6 egate may make such adjustments in the application of 

7 the internal revenue laws as may be necessary to ensure 

8 that taxpayers do not lose any deduction or credit or expe9 rience a change of filing status by reason of temporary 

10 relocations after Hurricane Katrina or by reason of the 

11 receipt of hurricane relief. Any adjustments made under 

12 the preceding sentence shall ensure that an individual is 

13 not taken into account by more than one taxpayer with 

14 respect to the same tax benefit. 

15 TITLE V—ADDITIONAL 

16 PROVISIONS 

17 SEC. 501. DISCLOSURE TO STATE OFFICIALS OF PROPOSED 

18 ACTIONS RELATED TO EXEMPT ORGANIZA19 TIONS. 

20 (a) IN GENERAL.—Subsection (c) of section 6104 is 

21 amended by striking paragraph (2) and inserting the fol22 lowing new paragraphs: 

23 ‘‘(2) DISCLOSURE OF PROPOSED ACTIONS RE24 LATED TO CHARITABLE ORGANIZATIONS.— 

25 ‘‘(A) SPECIFIC NOTIFICATIONS.—In the 

26 case of an organization to which paragraph (1) 
50 

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1 applies, the Secretary may disclose to the ap2 propriate State officer— 

3 ‘‘(i) a notice of proposed refusal to 

4 recognize such organization as an organi5 zation described in section 501(c)(3) or a 

6 notice of proposed revocation of such orga7 nization’s recognition as an organization 

8 exempt from taxation, 

9 ‘‘(ii) the issuance of a letter of pro10 posed deficiency of tax imposed under sec11 tion 507 or chapter 41 or 42, and 

12 ‘‘(iii) the names, addresses, and tax13 payer identification numbers of organiza14 tions which have applied for recognition as 

15 organizations described in section 

16 501(c)(3). 

17 ‘‘(B) ADDITIONAL DISCLOSURES.—Returns 

18 and return information of organizations with 

19 respect to which information is disclosed under 

20 subparagraph (A) may be made available for in21 spection by or disclosed to an appropriate State 

22 officer. 

23 ‘‘(C) PROCEDURES FOR DISCLOSURE.—In24 formation may be inspected or disclosed under 

25 subparagraph (A) or (B) only— 
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1 ‘‘(i) upon written request by an ap2 propriate State officer, and 

3 ‘‘(ii) for the purpose of, and only to 

4 the extent necessary in, the administration 

5 of State laws regulating such organiza6 tions. 

7 Such information may only be inspected by or 

8 disclosed to a person other than the appropriate 

9 State officer if such person is an officer or em10 ployee of the State and is designated by the ap11 propriate State officer to receive the returns or 

12 return information under this paragraph on be13 half of the appropriate State officer. 

14 ‘‘(D) DISCLOSURES OTHER THAN BY RE15 QUEST.—The Secretary may make available for 

16 inspection or disclose returns and return infor17 mation of an organization to which paragraph 

18 (1) applies to an appropriate State officer of 

19 any State if the Secretary determines that such 

20 inspection or disclosure may facilitate the reso21 lution of Federal or State issues relating to the 

22 tax-exempt status of such organization. 

23 ‘‘(3) DISCLOSURE WITH RESPECT TO CERTAIN

24 OTHER EXEMPT ORGANIZATIONS.—Upon written re25 quest by an appropriate State officer, the Secretary 
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1 may make available for inspection or disclosure re2 turns and return information of an organization de3 scribed in paragraph (2), (4), (6), (7), (8), (10), or 

4 (13) of section 501(c) for the purpose of, and to the 

5 extent necessary in, the administration of State laws 

6 regulating the solicitation or administration of the 

7 charitable funds or charitable assets of such organi8 zations. Such information may only be inspected by 

9 or disclosed to a person other than the appropriate 

10 State officer if such person is an officer or employee 

11 of the State and is designated by the appropriate 

12 State officer to receive the returns or return infor13 mation under this paragraph on behalf of the appro14 priate State officer. 

15 ‘‘(4) USE IN CIVIL JUDICIAL AND ADMINISTRA16 TIVE PROCEEDINGS.—Returns and return informa17 tion disclosed pursuant to this subsection may be 

18 disclosed in civil administrative and civil judicial pro19 ceedings pertaining to the enforcement of State laws 

20 regulating such organizations in a manner pre21 scribed by the Secretary similar to that for tax ad22 ministration proceedings under section 6103(h)(4). 

23 ‘‘(5) NO DISCLOSURE IF IMPAIRMENT.—Re24 turns and return information shall not be disclosed 

25 under this subsection, or in any proceeding described 
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1 in paragraph (4), to the extent that the Secretary 

2 determines that such disclosure would seriously im3 pair Federal tax administration. 

4 ‘‘(6) DEFINITIONS.—For purposes of this sub5 section— 

6 ‘‘(A) RETURN AND RETURN INFORMA7 TION.—The terms ‘return’ and ‘return informa8 tion’ have the respective meanings given to such 

9 terms by section 6103(b). 

10 ‘‘(B) APPROPRIATE STATE OFFICER.—The 

11 term ‘appropriate State officer’ means— 

12 ‘‘(i) the State attorney general, 

13 ‘‘(ii) the State tax officer, 

14 ‘‘(iii) in the case of an organization to 

15 which paragraph (1) applies, any other 

16 State official charged with overseeing orga17 nizations of the type described in section 

18 501(c)(3), and 

19 ‘‘(iv) in the case of an organization to 

20 which paragraph (3) applies, the head of 

21 an agency designated by the State attorney 

22 general as having primary responsibility 

23 for overseeing the solicitation of funds for 

24 charitable purposes.’’. 

25 (b) CONFORMING AMENDMENTS.— 
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1 (1) Subparagraph (A) of section 6103(p)(3) is 

2 amended by inserting ‘‘and section 6104(c)’’ after 

3 ‘‘section’’ in the first sentence. 

4 (2) Paragraph (4) of section 6103(p) is amend5 ed— 

6 (A) in the matter preceding subparagraph 

7 (A), by inserting ‘‘, or any appropriate State of8 ficer (as defined in section 6104(c)),’’ before 

9 ‘‘or any other person’’, 

10 (B) in subparagraph (F)(i), by inserting 

11 ‘‘or any appropriate State officer (as defined in 

12 section 6104(c)),’’ before ‘‘or any other per13 son’’, and 

14 (C) in the matter following subparagraph 

15 (F), by inserting ‘‘, an appropriate State officer 

16 (as defined in section 6104(c)),’’ after ‘‘includ17 ing an agency’’ each place it appears. 

18 (3) The heading for paragraph (1) of section 

19 6104(c) is amended by inserting ‘‘FOR CHARITABLE

20 ORGANIZATIONS’’ after ‘‘RULE’’. 

21 (4) Paragraph (2) of section 7213(a) is amend22 ed by inserting ‘‘or under section 6104(c)’’ after 

23 ‘‘6103’’. 

24 (5) Paragraph (2) of section 7213A(a) is 

25 amended by inserting ‘‘or 6104(c)’’ after ‘‘6103’’. 
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1 (6) Paragraph (2) of section 7431(a) is amend2 ed by inserting ‘‘(including any disclosure in viola3 tion of section 6104(c))’’ after ‘‘6103’’. 

4 (c) EFFECTIVE DATE.—The amendments made by 

5 this section shall take effect on the date of the enactment 

6 of this Act but shall not apply to requests made before 

7 such date. 

8 SEC. 502. DEDICATION AND USE OF CERTAIN FEES. 

9 Notwithstanding section 202(c) of Public Law 108– 

10 89, the Secretary of the Treasury may retain and use fees 

11 from employee plan and exempt organization letter rulings 

12 and determination letters charged under section 7528 of 

13 the Internal Revenue Code of 1986— 

14 (1) in fiscal years 2005 and 2006— 

15 (A) for the administration of the provisions 

16 of, and amendments made by, this Act, 

17 (B) to provide taxpayer assistance to any 

18 taxpayer determined by the Secretary of the 

19 Treasury to be affected by the Presidentially 

20 declared disaster relating to Hurricane Katrina, 

21 and 

22 (C) to aid the Internal Revenue Service in 

23 repairing, rebuilding, and recovering from the 

24 damage to Internal Revenue Service offices, 
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1 equipment, and support caused by Hurricane 

2 Katrina, and 

3 (2) in any fiscal year after 2006— 

4 (A) on oversight, enforcement, and admin5 istration by the Tax-Exempt and Government 

6 Entities Division of the Internal Revenue Serv7 ice, and 

8 (B) on oversight, enforcement, and admin9 istration of section 170 of such Code. 

Calendar No. 212 

109TH CONGRESS 

1ST SESSION S. 1696 

A BILL 

To provide tax relief for the victims of Hurricane 

ing, and for other purposes. Katrina, to provide incentives for charitable givSEPTEMBER 15, 2005 

Committee discharged; amended and ordered to be placed 

on the calendar