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[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[S. 2634 Introduced in Senate (IS)]

113th CONGRESS
  2d Session
                                S. 2634

To provide tax relief for major disaster areas declared in 2012, 2013, 
                   and 2014, and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                             July 22, 2014

  Mr. Pryor (for himself, Mr. Vitter, Mr. Schumer, Mr. Menendez, Mr. 
   Bennet, Ms. Landrieu, Mr. Udall of Colorado, Mrs. Gillibrand, Mr. 
 Rockefeller, and Mr. Booker) introduced the following bill; which was 
          read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL

 
To provide tax relief for major disaster areas declared in 2012, 2013, 
                   and 2014, and for other purposes.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``National Disaster 
Tax Relief Act of 2014''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
   TITLE I--TAX RELIEF RELATING TO DISASTERS IN 2012, 2013, AND 2014

Sec. 101. Expensing of qualified disaster expenses.
Sec. 102. Increased limitation on charitable contributions for disaster 
                            relief.
Sec. 103. Losses attributable to disasters in 2012, 2013, and 2014.
Sec. 104. Net operating losses attributable to disasters in 2012, 2013, 
                            and 2014.
Sec. 105. Waiver of certain mortgage revenue bond requirements 
                            following 2012, 2013, and 2014 disasters.
Sec. 106. Increased expensing and bonus depreciation for qualified 
                            disaster assistance property following 
                            2012, 2013, and 2014 disasters.
Sec. 107. Increase in new markets tax credit for investments in 
                            community development entities serving 
                            2012, 2013, and 2014 disaster areas.
Sec. 108. Special rules for use of retirement funds in connection with 
                            federally declared disasters in 2012, 2013, 
                            or 2014.
Sec. 109. Additional exemption for housing qualified disaster displaced 
                            individuals.
Sec. 110. Exclusions of certain cancellations of indebtedness by reason 
                            of 2012, 2013, or 2014 disasters.
Sec. 111. Special rule for determining earned income of individuals 
                            affected by federally declared disasters.
Sec. 112. Increase in rehabilitation credit for buildings in 2012, 
                            2013, and 2014 disaster areas.
Sec. 113. Advanced refundings of certain tax-exempt bonds.
Sec. 114. Qualified disaster area recovery bonds.
Sec. 115. Additional low-income housing credit allocations.
Sec. 116. Facilitation of transfer of water leasing and water by mutual 
                            ditch or irrigation companies in disaster 
                            areas.
             TITLE II--OTHER DISASTER TAX RELIEF PROVISIONS

Sec. 201. Exclusion for disaster mitigation payments received from 
                            State and local governments.
Sec. 202. Natural disaster funds.

   TITLE I--TAX RELIEF RELATING TO DISASTERS IN 2012, 2013, AND 2014

SEC. 101. EXPENSING OF QUALIFIED DISASTER EXPENSES.

    (a) In General.--Section 198A(b)(2) of the Internal Revenue Code of 
1986 is amended--
            (1) by striking ``before January 1, 2010'' in subparagraph 
        (A) and inserting ``during the period beginning after December 
        31, 2007, and before January 1, 2010, or during the period 
        beginning after December 31, 2011, and before January 1, 
        2015'', and
            (2) by striking ``before such date'' each place it appears 
        in subparagraphs (B) and (C) and inserting ``during any such 
        period''.
    (b) Effective Date.--The amendment made by this section shall apply 
to amounts paid or incurred after December 31, 2011, in connection with 
disasters declared after such date.

SEC. 102. INCREASED LIMITATION ON CHARITABLE CONTRIBUTIONS FOR DISASTER 
              RELIEF.

    (a) Individuals.--Paragraph (1) of section 170(b) of the Internal 
Revenue Code of 1986 is amended by redesignating subparagraphs (F) and 
(G) as subparagraphs (G) and (H), respectively, and by inserting after 
subparagraph (E) the following new subparagraph:
                    ``(F) Qualified disaster contributions.--
                            ``(i) In general.--Any qualified disaster 
                        contribution shall be allowed to the extent 
                        that the aggregate of such contributions does 
                        not exceed the excess of 80 percent of the 
                        taxpayer's contribution base over the amount of 
                        all other charitable contributions allowable 
                        under this paragraph.
                            ``(ii) Carryover.--If the aggregate amount 
                        of contributions described in clause (i) 
                        exceeds the limitation under clause (i), such 
                        excess shall be treated (in a manner consistent 
                        with the rules of subsection (d)(1)) as a 
                        charitable contribution to which clause (i) 
                        applies in each of the 5 succeeding years in 
                        order of time.
                            ``(iii) Coordination with other 
                        subparagraphs.--For purposes of applying this 
                        subsection and subsection (d)(1), contributions 
                        described in clause (i) shall not be treated as 
                        described in subparagraph (A) and such 
                        subparagraph shall be applied without regard to 
                        such contributions.
                            ``(iv) Qualified disaster contributions.--
                        For purposes of this subparagraph, the term 
                        `qualified disaster contribution' means any 
                        charitable contribution if--
                                    ``(I) such contribution is for 
                                relief efforts related to a federally 
                                declared disaster (as defined in 
                                section 165(h)(3)(C)(i)),
                                    ``(II) such contribution is made 
                                during the period beginning on the 
                                applicable disaster date with respect 
                                to the disaster described in subclause 
                                (I) and ending on December 31, 2014, 
                                and
                                    ``(III) such contribution is made 
                                in cash to an organization described in 
                                subparagraph (A) (other than an 
                                organization described in section 
                                509(a)(3)).
                        Such term shall not include a contribution if 
                        the contribution is for establishment of a new, 
                        or maintenance in an existing, donor advised 
                        fund (as defined in section 4966(d)(2)).
                            ``(v) Applicable disaster date.--For 
                        purposes of clause (iv)(II), the term 
                        `applicable disaster date' means, with respect 
                        to any federally declared disaster described in 
                        clause (iv)(I), the date on which the disaster 
                        giving rise to the Presidential declaration 
                        described in section 165(h)(3)(C)(i) occurred.
                            ``(vi) Substantiation requirement.--This 
                        paragraph shall not apply to any qualified 
                        disaster contribution unless the taxpayer 
                        obtains from such organization to which the 
                        contribution was made a contemporaneous written 
                        acknowledgment (within the meaning of 
                        subsection (f)(8)) that such contribution was 
                        used (or is to be used) for a purpose described 
                        in clause (iv)(III).''.
    (b) Corporations.--
            (1) In general.--Paragraph (2) of section 170(b) of the 
        Internal Revenue Code of 1986 is amended by redesignating 
        subparagraph (C) as subparagraph (D) and by inserting after 
        subparagraph (B) the following new subparagraph:
                    ``(C) Qualified disaster contributions.--
                            ``(i) In general.--Any qualified disaster 
                        contribution shall be allowed to the extent 
                        that the aggregate of such contributions does 
                        not exceed the excess of 20 percent of the 
                        taxpayer's taxable income over the amount of 
                        charitable contributions allowed under 
                        subparagraph (A).
                            ``(ii) Carryover.--If the aggregate amount 
                        of contributions described in clause (i) 
                        exceeds the limitation under clause (i), such 
                        excess shall be treated (in a manner consistent 
                        with the rules of subsection (d)(1)) as a 
                        charitable contribution to which clause (i) 
                        applies in each of the 5 succeeding years in 
                        order of time.
                            ``(iii) Qualified disaster contribution.--
                        The term `qualified disaster contribution' has 
                        the meaning given such term under paragraph 
                        (2)(F)(iv).
                            ``(iv) Substantiation requirement.--This 
                        paragraph shall not apply to any qualified 
                        disaster contribution unless the taxpayer 
                        obtains from such organization to which the 
                        contribution was made a contemporaneous written 
                        acknowledgment (within the meaning of 
                        subsection (f)(8)) that such contribution was 
                        used (or is to be used) for a purpose described 
                        in paragraph (1)(F)(iv)(III).''.
            (2) Conforming amendments.--
                    (A) Subparagraph (A) of section 170(b)(2) of such 
                Code is amended by striking ``subparagraph (B) 
                applies'' and inserting ``subparagraphs (B) and (C) 
                apply''.
                    (B) Subparagraph (B) of section 170(b)(2) of such 
                Code is amended by striking ``subparagraph (A)'' and 
                inserting ``subparagraphs (A) and (C)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to disasters arising in taxable years ending after December 31, 
2011.

SEC. 103. LOSSES ATTRIBUTABLE TO DISASTERS IN 2012, 2013, AND 2014.

    (a) Waiver of Adjusted Gross Income Limitation; Increase in 
Standard Deduction by Disaster Casualty Loss.--Subclause (I) of section 
165(h)(3)(B)(i) of the Internal Revenue Code of 1986 is amended by 
striking ``before January 1, 2010'' and inserting ``during the period 
beginning after December 31, 2007, and before January 1, 2010, or 
during the period beginning after December 31, 2011, and before January 
1, 2015''.
    (b) Loss Allowed Whether or Not Individual Itemized Deductions.--
Section 62(a) of the Internal Revenue Code of 1986 is amended by 
inserting after paragraph (21) the following new paragraph:
            ``(22) Disaster casualty losses.--Any net disaster loss (as 
        defined in section 165(h)(3)(B)).''.
    (c) Technical Amendment.--Clause (i) of section 165(h)(3)(C) of the 
Internal Revenue Code of 1986 is amended by inserting ``major'' after 
``means any''.
    (d) Effective Date.--The amendments made by this section shall 
apply to disasters declared in taxable years beginning after December 
31, 2011.
    (e) Use of Amended Income Tax Returns To Take Into Account Receipt 
of Certain Casualty Loss Grants by Disallowing Previously Taken 
Casualty Loss Deductions.--
            (1) In general.--Notwithstanding any other provision of the 
        Internal Revenue Code of 1986, if a taxpayer--
                    (A) claims a deduction for any taxable year with 
                respect to a casualty loss to a principal residence 
                (within the meaning of section 121 of such Code) 
                resulting from any federally declared disaster (as 
                defined in section 165(h)(3)(C) of such Code) occurring 
                during the period beginning after December 31, 2011, 
                and before January 1, 2015, and
                    (B) in a subsequent taxable year receives a grant 
                under any Federal or State program as reimbursement for 
                such loss,
        such taxpayer may elect to file an amended income tax return 
        for the taxable year in which such deduction was allowed (and 
        for any taxable year to which such deduction is carried) and 
        reduce (but not below zero) the amount of such deduction by the 
        amount of such reimbursement.
            (2) Time of filing amended return.--Paragraph (1) shall 
        apply with respect to any grant only if any amended income tax 
        returns with respect to such grant are filed not later than the 
        later of--
                    (A) the due date for filing the tax return for the 
                taxable year in which the taxpayer receives such grant, 
                or
                    (B) the date which is 1 year after the date of the 
                enactment of this Act.
            (3) Waiver of penalties and interest.--Any underpayment of 
        tax resulting from the reduction under paragraph (1) of the 
        amount otherwise allowable as a deduction shall not be subject 
        to any penalty or interest under such Code if such tax is paid 
        not later than 1 year after the filing of the amended return to 
        which such reduction relates.

SEC. 104. NET OPERATING LOSSES ATTRIBUTABLE TO DISASTERS IN 2012, 2013, 
              AND 2014.

    (a) In General.--Subclause (I) of section 172(j)(1)(A)(i) of the 
Internal Revenue Code of 1986 is amended by striking ``before January 
1, 2010'' and inserting ``during the period beginning after December 
31, 2007, and before January 1, 2010, or during the period beginning 
after December 31, 2011, and before January 1, 2015''.
    (b) Effective Date.--The amendments made by this section shall 
apply to losses arising in taxable years beginning after December 31, 
2011, in connection with disasters declared after such date.

SEC. 105. WAIVER OF CERTAIN MORTGAGE REVENUE BOND REQUIREMENTS 
              FOLLOWING 2012, 2013, AND 2014 DISASTERS.

    (a) In General.--Section 143(k) of the Internal Revenue Code of 
1986 is amended--
            (1) by redesignating paragraph (12), as added by section 
        709(a) of the Tax Extenders and Alternative Minimum Tax Relief 
        Act of 2008, as paragraph (13), and
            (2) by striking ``before January 1, 2010'' in subparagraphs 
        (A)(i) and (B)(i) of such paragraph and inserting ``during the 
        period beginning after December 31, 2007, and before January 1, 
        2010, or during the period beginning after December 31, 2011, 
        and before January 1, 2015''.
    (b) Effective Date.--The amendments made by this section shall 
apply to disasters occurring after December 31, 2011.

SEC. 106. INCREASED EXPENSING AND BONUS DEPRECIATION FOR QUALIFIED 
              DISASTER ASSISTANCE PROPERTY FOLLOWING 2012, 2013, AND 
              2014 DISASTERS.

    (a) In General.--Subclause (I) of section 168(n)(2)(A)(ii) of the 
Internal Revenue Code of 1986 is amended by striking ``before January 
1, 2010'' and inserting ``during the period beginning after December 
31, 2007, and before January 1, 2010, or during the period beginning 
after December 31, 2011, and before January 1, 2015''.
    (b) Removal of Exclusion.--Section 168(n)(2)(B)(i) of such Code is 
amended by inserting ``and'' at the end of subclause (I), by striking 
``, and'' at the end of subclause (II) and inserting a period, and by 
striking subclause (III).
    (c) Effective Date.--The amendments made by this section shall 
apply to property placed in service after December 31, 2011, with 
respect to disasters declared after such date.

SEC. 107. INCREASE IN NEW MARKETS TAX CREDIT FOR INVESTMENTS IN 
              COMMUNITY DEVELOPMENT ENTITIES SERVING 2012, 2013, AND 
              2014 DISASTER AREAS.

    (a) In General.--Subsection (f) of section 45D of the Internal 
Revenue Code of 1986 is amended by adding at the end the following new 
paragraph:
            ``(4) Increased special allocation for community 
        development entities serving 2012, 2013, and 2014 disaster 
        areas.--
                    ``(A) In general.--In the case of each calendar 
                year which begins after 2012 and before 2017, the new 
                markets tax credit limitation shall be increased by an 
                amount equal to $500,000,000, to be allocated among 
                qualified community development entities to make 
                qualified low-income community investments within any 
                2012, 2013, or 2014 federally declared disaster area.
                    ``(B) Allocation of increase.--The amount of the 
                increase in limitation under subparagraph (A) shall be 
                allocated by the Secretary under paragraph (2) to 
                qualified community development entities and shall give 
                priority to such entities with a record of having 
                successfully provided capital or technical assistance 
                to businesses or communities within any 2012, 2013, or 
                2014 federally declared disaster area or areas for 
                which the allocation is requested.
                    ``(C) Application of carryforward.--Paragraph (3) 
                shall be applied separately with respect to the amount 
                of any increase under subparagraph (A).
                    ``(D) 2012, 2013, or 2014 federally declared 
                disaster area.--For purposes of this paragraph, the 
                term `2012, 2013, or 2014 federally declared disaster 
                area' means any disaster area resulting from any 
                federally declared disaster occurring after December 
                31, 2011, and before January 1, 2015. For purposes of 
                the preceding sentence, the terms `federally declared 
                disaster' and `disaster area' have the meanings given 
                such terms in section 165(h)(3).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to calendar years beginning after 2012.

SEC. 108. SPECIAL RULES FOR USE OF RETIREMENT FUNDS IN CONNECTION WITH 
              FEDERALLY DECLARED DISASTERS IN 2012, 2013, OR 2014.

    (a) Tax-Favored Withdrawals From Retirement Plans.--
            (1) In general.--Paragraph (2) of section 72(t) of the 
        Internal Revenue Code of 1986 is amended by adding at the end 
        the following new subparagraph:
                    ``(H) Distributions from retirement plans in 
                connection with federally declared disasters during 
                2012, 2013, and 2014.--Any qualified 2012, 2013, or 
                2014 disaster recovery distribution.''.
            (2) Qualified disaster recovery distribution.--Section 
        72(t) of such Code is amended by adding at the end the 
        following new paragraph:
            ``(11) Qualified 2012, 2013, or 2014 disaster recovery 
        distribution.--For purposes of paragraph (2)(H)--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `qualified 2012, 2013, or 
                2014 disaster recovery distribution' means, with 
                respect to any federally declared disaster occurring 
                during 2012, 2013, or 2014, any distribution from an 
                eligible retirement plan made on or after the 
                applicable disaster date and before January 1, 2016, to 
                an individual whose principal place of abode on the 
                applicable disaster date, is located in the disaster 
                area and who has sustained an economic loss by reason 
                of such federally declared disaster.
                    ``(B) Dollar limitation.--
                            ``(i) In general.--For purposes of this 
                        subsection, the aggregate amount of 
                        distributions received by an individual with 
                        respect to any federally declared disaster 
                        occurring during 2012, 2013, or 2014 shall not 
                        exceed $100,000.
                            ``(ii) Treatment of plan distributions.--If 
                        a distribution to an individual would (without 
                        regard to clause (i)) be a qualified 2012, 
                        2013, or 2014 disaster recovery distribution, a 
                        plan shall not be treated as violating any 
                        requirement of this title merely because the 
                        plan treats such distribution as a qualified 
                        2012, 2013, or 2014 disaster recovery 
                        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 with respect to any federally 
                        declared disaster occurring during 2012, 2013, 
                        or 2014 exceeds $100,000.
                            ``(iii) Controlled group.--For purposes of 
                        clause (ii), the term `controlled group' means 
                        any group treated as a single employer under 
                        subsection (b), (c), (m), or (o) of section 
                        414.
                    ``(C) Amount distributed may be repaid.--
                            ``(i) In general.--Any individual who 
                        receives a qualified 2012, 2013, or 2014 
                        disaster recovery 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), as the case may be.
                            ``(ii) Treatment of repayments of 
                        distributions from eligible retirement plans 
                        other than iras.--For purposes of this title, 
                        if a contribution is made pursuant to clause 
                        (i) with respect to a qualified 2012, 2013, or 
                        2014 disaster recovery 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 2012, 2013, or 2014 disaster recovery 
                        distribution in an eligible rollover 
                        distribution (as defined in section 402(c)(4)) 
                        and as having transferred the amount to the 
                        eligible retirement plan in a direct trustee to 
                        trustee transfer within 60 days of the 
                        distribution.
                            ``(iii) Treatment of repayments for 
                        distributions from iras.--For purposes of this 
                        title, if a contribution is made pursuant to 
                        clause (i) with respect to a qualified 2012, 
                        2013, or 2014 disaster recovery distribution 
                        from an individual retirement plan (as defined 
                        by section 7701(a)(37)), then, to the extent of 
                        the amount of the contribution, the qualified 
                        2012, 2013, or 2014 disaster recovery 
                        distribution shall be treated as a distribution 
                        described in section 408(d)(3) and as having 
                        been transferred to the eligible retirement 
                        plan in a direct trustee to trustee transfer 
                        within 60 days of the distribution.
                    ``(D) Income inclusion spread over 3-year period.--
                            ``(i) In general.--In the case of any 
                        qualified 2012, 2013, or 2014 disaster recovery 
                        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.
                            ``(ii) Special rule.--For purposes of 
                        clause (i), rules similar to the rules of 
                        subparagraph (E) of section 408A(d)(3) shall 
                        apply.
                    ``(E) Other definitions.--
                            ``(i) Federally declared disaster; disaster 
                        area.--The terms `federally declared disaster' 
                        and `disaster area' have the meanings given 
                        such terms under section 165(h)(3)(C).
                            ``(ii) Applicable disaster date.--The term 
                        `applicable disaster date' means, with respect 
                        to any federally declared disaster, the date on 
                        which such federally declared disaster occurs.
                            ``(iii) Eligible retirement plan.--The term 
                        `eligible retirement plan' shall have the 
                        meaning given such term by section 
                        402(c)(8)(B).
                    ``(F) Special rules.--
                            ``(i) Exemption of distributions from 
                        trustee to trustee transfer and withholding 
                        rules.--For purposes of sections 401(a)(31), 
                        402(f), and 3405, qualified 2012 or 2013 
                        disaster recovery distributions shall not be 
                        treated as eligible rollover distributions.
                            ``(ii) Qualified 2012, 2013, or 2014 
                        disaster recovery distributions treated as 
                        meeting plan distribution requirements.--For 
                        purposes of this title, a qualified 2012, 2013, 
                        or 2014 disaster recovery 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).''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to distributions with respect to disaster declared 
        after December 31, 2011.
    (b) Loans From Qualified Plans.--
            (1) In general.--Subsection (p) of section 72 of the 
        Internal Revenue Code of 1986 is amended by adding at the end 
        the following new paragraph:
            ``(6) Increase in limit on loans not treated as 
        distributions with respect to 2012, 2013, and 2014 disasters.--
                    ``(A) In general.--In the case of any loan from a 
                qualified employer plan to a qualified individual made 
                during the applicable period--
                            ``(i) clause (i) of paragraph (2)(A) shall 
                        be applied by substituting `$100,000' for 
                        `$50,000', and
                            ``(ii) clause (ii) of such paragraph shall 
                        be applied by substituting `the present value 
                        of the nonforfeitable accrued benefit of the 
                        employee under the plan' for `one-half of the 
                        present value of the nonforfeitable accrued 
                        benefit of the employee under the plan'.
                    ``(B) Delay of repayment.--In the case of a 
                qualified individual with an outstanding loan on or 
                after the applicable disaster date from a qualified 
                employer plan--
                            ``(i) if the due date pursuant to 
                        subparagraph (B) or (C) of paragraph (2) for 
                        any repayment with respect to such loan occurs 
                        during the period beginning on the applicable 
                        disaster date and ending on December 31, 2014, 
                        such due date shall be delayed for 1 year,
                            ``(ii) any subsequent repayments with 
                        respect to any such loan shall be appropriately 
                        adjusted to reflect the delay in the due date 
                        under clause (i) and any interest accruing 
                        during such delay, and
                            ``(iii) in determining the 5-year period 
                        and the term of a loan under subparagraph (B) 
                        or (C) of paragraph (2), the period described 
                        in clause (i) shall be disregarded.
                    ``(C) Definitions.--For purposes of this 
                paragraph--
                            ``(i) Qualified individual.--The term 
                        `qualified individual' means, with respect to 
                        any federally declared disaster occurring 
                        during 2012, 2013, or 2014, an individual whose 
                        principal place of abode on the applicable 
                        disaster date is located in the disaster area 
                        and who has sustained an economic loss by 
                        reason of such federally declared disaster.
                            ``(ii) Applicable period.--The applicable 
                        period is the period beginning on the 
                        applicable disaster date and ending on December 
                        31, 2014.
                            ``(iii) Federally declared disaster; 
                        disaster area.--The terms `federally declared 
                        disaster' and `disaster area' have the meanings 
                        given such terms under section 165(h)(3)(C).
                            ``(iv) Applicable disaster date.--The term 
                        `applicable disaster date' means, with respect 
                        to any federally declared disaster, the date on 
                        which such federally declared disaster 
                        occurs.''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply to loans made with respect to disaster declared 
        after December 31, 2011.
    (c) 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, or 
                        amendment made by, this section, or pursuant to 
                        any regulation issued by the Secretary or the 
                        Secretary of Labor under any provision of, or 
                        amendment made by, this section, and
                            (ii) on or before the last day of the first 
                        plan year beginning on or after January 1, 
                        2015, or such later date as the Secretary may 
                        prescribe.
                In the case of a governmental plan (as defined in 
                section 414(d)), 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 the 
                                provisions of, and amendments made by, 
                                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 the 
                                provisions of, or amendments made 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.

SEC. 109. ADDITIONAL EXEMPTION FOR HOUSING QUALIFIED DISASTER DISPLACED 
              INDIVIDUALS.

    (a) In General.--Section 151 of the Internal Revenue Code of 1986 
is amended by adding at the end the following new subsection:
    ``(g) Additional Exemption for Certain Disaster-Displaced 
Individuals.--
            ``(1) In general.--In the case of any taxable year 
        beginning in 2012, 2013, or 2014, there shall be allowed an 
        exemption of $500 for each qualified disaster-displaced 
        individual with respect to the taxpayer for the taxable year.
            ``(2) Limitations.--
                    ``(A) Dollar limitation.--The exemption under 
                paragraph (1) shall not exceed $2,000, reduced by the 
                amount of the exemption under this subsection for all 
                prior taxable years.
                    ``(B) Individuals taken into account only once.--An 
                individual shall not be taken into account under 
                paragraph (1) if such individual was taken into account 
                under this subsection by the taxpayer for any prior 
                taxable year.
                    ``(C) Identifying information required.--An 
                individual shall not be taken into account under 
                paragraph (1) for a taxable year unless the taxpayer 
                identification number of such individual is included on 
                the return of the taxpayer for such taxable year.
            ``(3) Qualified disaster-displaced individual.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `qualified disaster-displaced individual' 
                means, with respect to any taxpayer for any taxable 
                year, any qualified individual if such individual is 
                provided housing free of charge by the taxpayer in the 
                principal residence of the taxpayer for a period of 60 
                consecutive days which ends in such taxable year. Such 
                term shall not include the spouse or any dependent of 
                the taxpayer.
                    ``(B) Qualified individual.--The term `qualified 
                individual' means any individual who--
                            ``(i) on the date of a federally declared 
                        disaster occurring during 2012, 2013, or 2014 
                        maintained such individual's principal place of 
                        abode in the disaster area declared with 
                        respect to such disaster, and
                            ``(ii) was displaced from such principal 
                        place of abode by reason of the federally 
                        declared disaster.
                For purposes of the preceding sentence, the terms 
                `federally declared disaster' and `disaster area' have 
                the meanings given such terms in section 165(h)(3).
            ``(4) Compensation for housing.--No deduction shall be 
        allowed under this subsection if the taxpayer receives any rent 
        or other amount (from any source) in connection with the 
        providing of such housing.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2011.

SEC. 110. EXCLUSIONS OF CERTAIN CANCELLATIONS OF INDEBTEDNESS BY REASON 
              OF 2012, 2013, OR 2014 DISASTERS.

    (a) In General.--Section 108 of the Internal Revenue Code of 1986 
is amended by adding at the end the following new subsection:
    ``(j) Discharge of Indebtedness for Individuals Affected by 2012, 
2013, and 2014 Disasters.--
            ``(1) In general.--Except as provided in paragraph (2), 
        gross income shall not include any amount which (but for this 
        subsection) would be includible in gross income by reason of 
        any discharge (in whole or in part) of indebtedness of a 
        natural person described in paragraph (3) by an applicable 
        entity (as defined in section 6050P(c)(1)) during the 
        applicable period.
            ``(2) Exceptions for business indebtedness.--Paragraph (1) 
        shall not apply to any indebtedness incurred in connection with 
        a trade or business.
            ``(3) Persons described.--A natural person is described in 
        this paragraph if the principal place of abode of such person 
        on the applicable disaster date was located in the disaster 
        area with respect to any federally declared disaster occurring 
        during 2012, 2013, or 2014.
            ``(4) Applicable period.--For purposes of this subsection, 
        the term `applicable period' means the period beginning on the 
        applicable disaster date and ending on the date which is 14 
        months after such date.
            ``(5) Other definitions.--For purposes of this subsection--
                    ``(A) Federally declared disaster; disaster area.--
                The terms `federally declared disaster' and `disaster 
                area' have the meanings given such terms under section 
                165(h)(3)(C).
                    ``(B) Applicable disaster date.--The term 
                `applicable disaster date' means, with respect to any 
                federally declared disaster, the date on which such 
                federally declared disaster occurs.''.
    (b) Effective Date.--This section shall apply to discharges made on 
or after December 31, 2011.

SEC. 111. SPECIAL RULE FOR DETERMINING EARNED INCOME OF INDIVIDUALS 
              AFFECTED BY FEDERALLY DECLARED DISASTERS.

    (a) In General.--Section 32 of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new subsection:
    ``(n) Special Rule for Determining Earned Income of Taxpayers 
Affected by Federally Declared Disasters.--
            ``(1) In general.--In the case of a qualified individual 
        with respect to any federally declared disaster occurring 
        during 2012, 2013, or 2014, if the earned income of the 
        taxpayer for the taxable year which includes the applicable 
        disaster date is less than the earned income of the taxpayer 
        for the preceding taxable year, the credit allowed under this 
        section and section 24(d) may, at the election of the taxpayer, 
        be determined by substituting--
                    ``(A) such earned income for the preceding taxable 
                year, for
                    ``(B) such earned income for the taxable year which 
                includes the applicable date.
            ``(2) Qualified individual.--For purposes of this 
        subsection, the term `qualified individual' means, with respect 
        to any federally declared disaster occurring during 2012, 2013, 
        or 2014, any individual whose principal place of abode on the 
        applicable disaster date, was located--
                    ``(A) in any portion of a disaster area determined 
                by the President to warrant individual or individual 
                and public assistance under the Robert T. Stafford 
                Disaster Relief and Emergency Assistance Act by reason 
                of the federally declared disaster, or
                    ``(B) in any portion of the disaster area not 
                described in subparagraph (A) and such individual was 
                displaced from such principal place of abode by reason 
                of the federally declared disaster.
            ``(3) Other definitions.--For purposes of this paragraph--
                    ``(A) Federally declared disaster; disaster area.--
                The terms `federally declared disaster' and `disaster 
                area' have the meanings given such terms under section 
                165(h)(3)(C).
                    ``(B) Applicable disaster date.--The term 
                `applicable disaster date' means, with respect to any 
                federally declared disaster, the date on which such 
                federally declared disaster occurs.
            ``(4) Special rules.--
                    ``(A) Application to joint returns.--For purposes 
                of paragraph (1), in the case of a joint return for a 
                taxable year which includes the disaster date--
                            ``(i) such paragraph shall apply if either 
                        spouse is a qualified individual, and
                            ``(ii) the earned income of the taxpayer 
                        for the preceding taxable year shall be the sum 
                        of the earned income of each spouse for such 
                        preceding taxable year.
                    ``(B) Uniform application of election.--Any 
                election made under paragraph (1) shall apply with 
                respect to both sections 24(d) and this section.
                    ``(C) Errors treated as mathematical error.--For 
                purposes of section 6213, an incorrect use on a return 
                of earned income pursuant to paragraph (1) shall be 
                treated as a mathematical or clerical error.
                    ``(D) No effect on determination of gross income, 
                etc.--Except as otherwise provided in this subsection, 
                this title shall be applied without regard to any 
                substitution under paragraph (1).''.
    (b) Child Tax Credit.--Section 24(d) of the Internal Revenue Code 
of 1986 is amended by adding at the end the following new paragraph:
            ``(5) Special rule for determining earned income of 
        taxpayers affected by federally declared disasters.--For 
        election by qualified individuals with respect to certain 
        federally declared disasters to substitute earned income from 
        the preceding taxable year, see section 32(n).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2011.

SEC. 112. INCREASE IN REHABILITATION CREDIT FOR BUILDINGS IN 2012, 
              2013, AND 2014 DISASTER AREAS.

    (a) In General.--Section 47 of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new subsection:
    ``(e) Special Rule for Expenditures Made in Connection With Certain 
Disasters.--
            ``(1) In general.--In the case of qualified rehabilitation 
        expenditures paid or incurred during the applicable period with 
        respect to any qualified rehabilitated building or certified 
        historic structure located in a disaster area with respect to 
        any federally declared disaster occurring in 2012, 2013, or 
        2014, subsection (a) shall be applied--
                    ``(A) by substituting `13 percent' for `10 percent' 
                in paragraph (1) thereof, and
                    ``(B) by substituting `26 percent' for `20 percent' 
                in paragraph (2) thereof.
            ``(2) Definitions.--For purposes of this subsection--
                    ``(A) Federally declared disaster; disaster area.--
                The terms `federally declared disaster' and `disaster 
                area' have the meanings given such terms under section 
                165(h)(3)(C).
                    ``(B) Applicable period.--The term `applicable 
                period' means the period beginning on the applicable 
                disaster date and ending on December 31, 2015.
                    ``(C) Applicable disaster date.--The term 
                `applicable disaster date' means, with respect to any 
                federally declared disaster, the date on which such 
                federally declared disaster occurs.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred after December 31, 2011.

SEC. 113. ADVANCED REFUNDINGS OF CERTAIN TAX-EXEMPT BONDS.

    (a) In General.--Section 149(d) of the Internal Revenue Code of 
1986 is amended by redesignating paragraph (7) as paragraph (8) and by 
inserting after paragraph (6) the following new paragraph:
            ``(7) Special rule with respect to certain natural 
        disasters.--
                    ``(A) In general.--With respect to a bond described 
                in subparagraph (C), one additional advance refunding 
                after the date of the enactment of this paragraph and 
                before January 1, 2018, shall be allowed under the 
                rules of this subsection if--
                            ``(i) the Governor of the State designates 
                        the advance refunding bond for purposes of this 
                        subsection, and
                            ``(ii) the requirements of subparagraph (E) 
                        are met.
                    ``(B) Certain private activity bonds.--With respect 
                to a bond described in subparagraph (C) which is an 
                exempt facility bond described in paragraph (1) or (2) 
                of section 142(a), one advance refunding after the date 
                of the enactment of this paragraph and before January 
                1, 2018, shall be allowed under the applicable rules of 
                this subsection (notwithstanding paragraph (2) thereof) 
                if the requirements of clauses (i) and (ii) of 
                subparagraph (A) are met.
                    ``(C) Bonds described.--A bond is described in this 
                paragraph if, with respect to any federally declared 
                disaster, such bond--
                            ``(i) was outstanding on the applicable 
                        disaster date, and
                            ``(ii) is issued by an applicable State or 
                        a political subdivision thereof.
                    ``(D) Aggregate limit.--The maximum aggregate face 
                amount of bonds which may be designated under this 
                subsection by the Governor of a State shall not exceed 
                $4,500,000,000.
                    ``(E) Additional requirements.--The requirements of 
                this subparagraph are met with respect to any advance 
                refunding of a bond described in subparagraph (C) if--
                            ``(i) no advance refundings of such bond 
                        would be allowed under this title on or after 
                        the applicable disaster date,
                            ``(ii) the advance refunding bond is the 
                        only other outstanding bond with respect to the 
                        refunded bond, and
                            ``(iii) the requirements of section 148 are 
                        met with respect to all bonds issued under this 
                        paragraph.
                    ``(F) Definitions.--For purposes of this 
                subsection--
                            ``(i) Federally declared disaster; disaster 
                        area.--The terms `federally declared disaster' 
                        and `disaster area' have the meanings given 
                        such terms under section 165(h)(3)(C).
                            ``(ii) Applicable disaster date.--The term 
                        `applicable disaster date' means, with respect 
                        to any federally declared disaster, the date on 
                        which such federally declared disaster occurs.
                            ``(iii) Applicable state.--The term 
                        `applicable State' means, with respect to any 
                        federally declared disaster, any State in which 
                        a portion of the disaster area is located.''.

SEC. 114. QUALIFIED DISASTER AREA RECOVERY BONDS.

    (a) In General.--Subpart A of part IV of subchapter B of chapter 1 
of the Internal Revenue Code of 1986 is amended by inserting after 
section 146 the following new section:

``SEC. 146A. QUALIFIED DISASTER AREA RECOVERY BONDS.

    ``(a) In General.--For purposes of this title, any qualified 
disaster area recovery bond shall--
            ``(1) be treated as an exempt facility bond, and
            ``(2) not be subject to section 146.
    ``(b) Qualified Disaster Area Recovery Bond.--For purposes of this 
section, the term `qualified disaster area recovery bond' means any 
bond issued as part of an issue if--
            ``(1) 95 percent or more of the net proceeds of such issue 
        are to be used for qualified project costs,
            ``(2) such bond is issued by a State or any political 
        subdivision thereof any part of which is in a qualified 
        disaster area,
            ``(3) the Governor of the issuing State designates such 
        bond for purposes of this section, and
            ``(4) such bond is issued after the date of the enactment 
        of this section and before January 1, 2017.
    ``(c) Limitation on Amount of Bonds.--
            ``(1) In general.--The maximum aggregate face amount of 
        bonds which may be designated under this section by any State 
        shall not exceed $10,000,000,000.
            ``(2) Movable property.--No bonds shall be issued which are 
        to be used for movable fixtures and equipment.
            ``(3) Treatment of current refunding bonds.--Paragraph (1) 
        shall not apply to any bond (or series of bonds) issued to 
        refund a qualified disaster area recovery bond, if--
                    ``(A) the average maturity date of the issue of 
                which the refunding bond is a part is not later than 
                the average maturity date of the bonds to be refunded 
                by such issue,
                    ``(B) the amount of the refunding bond does not 
                exceed the outstanding amount of the refunded bond, and
                    ``(C) the net proceeds of the refunding bond are 
                used to redeem the refunded bond not later than 90 days 
                after the date of the issuance of the refunding bond.
        For purposes of subparagraph (A), average maturity shall be 
        determined in accordance with section 147(b)(2)(A).
    ``(d) Qualified Project Costs.--For purposes of this section, the 
term `qualified project costs' means the cost of acquisition, 
construction, reconstruction, and renovation of--
            ``(1) residential rental property (as defined in section 
        142(d)),
            ``(2) nonresidential real property (including fixed 
        improvements associated with such property),
            ``(3) a facility described in paragraph (2) or (3) of 
        section 142(a), or
            ``(4) public utility property (as defined in section 
        168(i)(10)),
which is located in a qualified disaster area and was damaged or 
destroyed by reason of a federally declared disaster.
    ``(e) Special Rules.--In applying this title to any qualified 
disaster area recovery bond, the following modifications shall apply:
            ``(1) Section 147(d) (relating to acquisition of existing 
        property not permitted) shall be applied by substituting `50 
        percent' for `15 percent' each place it appears.
            ``(2) Section 148(f)(4)(C) (relating to exception from 
        rebate for certain proceeds to be used to finance construction 
        expenditures) shall apply to the available construction 
        proceeds of bonds issued under this section. For purposes of 
        the preceding sentence, the following spending requirements 
        shall apply in lieu of the requirements in clause (ii) of such 
        section:
                    ``(A) 40 percent of such available construction 
                proceeds are spent for the governmental purposes of the 
                issue within the 2-year period beginning on the date 
                the bonds are issued,
                    ``(B) 60 percent of such proceeds are spent for 
                such purposes within the 3-year period beginning on 
                such date,
                    ``(C) 80 percent of such proceeds are spent for 
                such purposes within the 4-year period beginning on 
                such date, and
                    ``(D) 100 percent of such proceeds are spent for 
                such purposes within the 5-year period beginning on 
                such date.
            ``(3) Repayments of principal on financing provided by the 
        issue--
                    ``(A) may not be used to provide financing, and
                    ``(B) must be used not later than the close of the 
                1st semiannual period beginning after the date of the 
                repayment to redeem bonds which are part of such issue.
        The requirement of subparagraph (B) shall be treated as met 
        with respect to amounts received within 5 years after the date 
        of issuance of the issue (or, in the case of a refunding bond, 
        the date of issuance of the original bond) if such amounts are 
        used by the close of such 5 years to redeem bonds which are 
        part of such issue.
            ``(4) Section 57(a)(5) shall not apply.
    ``(f) Separate Issue Treatment of Portions of an Issue.--This 
section shall not apply to the portion of an issue which (if issued as 
a separate issue) would be treated as a qualified bond or as a bond 
that is not a private activity bond (determined without regard to 
paragraph (1)), if the issuer elects to so treat such portion.
    ``(g) Qualified Disaster Area; Federally Declared Disaster.--
            ``(1) Qualified disaster area.--The term `qualified 
        disaster area' means any area determined to warrant individual 
        or individual and public assistance from the Federal Government 
        under the Robert T. Stafford Disaster Relief and Emergency 
        Assistance Act by reason of a federally declared disaster 
        occurring during the period beginning after December 31, 2011, 
        and before January 1, 2015.
            ``(2) Federally declared disaster.--The term `federally 
        declared disaster' has the meaning given to such term under 
        section 165(h)(3)(C).''.
    (b) Clerical Amendment.--The table of sections for subpart A of 
part IV of subchapter B of chapter 1 of such Code is amended by 
inserting after the item relating to section 146 the following new 
item:

``Sec. 146A. Qualified disaster area recovery bonds.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to obligations issued after the date of the enactment of this 
Act.

SEC. 115. ADDITIONAL LOW-INCOME HOUSING CREDIT ALLOCATIONS.

    (a) In General.--Paragraph (3) of section 42(h) of the Internal 
Revenue Code of 1986 (relating to limitation on aggregate credit 
allowable with respect to projects located in a State) is amended by 
adding at the end the following new subparagraph:
                    ``(J) Increase in state housing credit for states 
                damaged by natural disasters.--
                            ``(i) In general.--In the case of calendar 
                        year 2015, the State housing credit ceiling of 
                        each State any portion of which includes any 
                        portion of a qualifying disaster area shall be 
                        increased by so much of the aggregate housing 
                        credit dollar amount as does not exceed the 
                        applicable limitation allocated by the State 
                        housing credit agency of such State for such 
                        calendar year to buildings located in 
                        qualifying disaster areas.
                            ``(ii) Applicable limitation.--For purposes 
                        of clause (i), the applicable limitation is the 
                        greater of--
                                    ``(I) $8 multiplied by the 
                                population of the qualifying disaster 
                                areas in such State, or
                                    ``(II) 50 percent of the State 
                                housing credit ceiling (determined 
                                without regard to this subparagraph) 
                                for 2014.
                            ``(iii) Applicable percentage.--For 
                        purposes of this section, the applicable 
                        percentage with respect to any building to 
                        which amounts allocated under clause (i) shall 
                        be determined under subsection (b)(2), except 
                        that subparagraph (A) thereof shall be applied 
                        by substituting `January 1, 2015' for `January 
                        1, 2014'.
                            ``(iv) Allocations treated as made first 
                        from additional allocation amount for purposes 
                        of determining carryover.--For purposes of 
                        determining the unused State housing credit 
                        ceiling under subparagraph (C) for any calendar 
                        year, any increase in the State housing credit 
                        ceiling under clause (i) shall be treated as an 
                        amount described in clause (ii) of such 
                        subparagraph.
                            ``(v) Qualifying disaster area.--For 
                        purposes of this subparagraph, the term 
                        `qualifying federally declared disaster area' 
                        means--
                                    ``(I) each county which is 
                                determined to warrant individual or 
                                individual and public assistance from 
                                the Federal Government under a 
                                qualifying natural disaster declaration 
                                described in clause (vi)(I), and
                                    ``(II) each county not described in 
                                subclause (I) which is included in the 
                                geographical area covered by a 
                                qualifying natural disaster declaration 
                                described in subclause (II) or (III) of 
                                clause (vi).
                            ``(vi) Qualifying natural disaster 
                        declaration.--For purposes of clause (v), the 
                        term `qualifying natural disaster declaration' 
                        means--
                                    ``(I) a federally declared disaster 
                                (as defined in section 165(h)(3)(C)) 
                                occurring during the period beginning 
                                after December 31, 2011, and before 
                                January 1, 2015,
                                    ``(II) a natural disaster declared 
                                by the Secretary of Agriculture in 2011 
                                due to damaging weather and other 
                                conditions relating to Hurricane Irene 
                                or Tropical Storm Lee under section 
                                321(a) of the Consolidated Farm and 
                                Rural Development Act (7 U.S.C. 
                                1961(a)), or
                                    ``(III) a major disaster or 
                                emergency designated by the President 
                                in 2011 due to damaging weather and 
                                other conditions relating to Hurricane 
                                Irene or Tropical Storm Lee under the 
                                Robert T. Stafford Disaster Relief and 
                                Emergency Assistance Act (42 U.S.C. 
                                5121 et seq.).''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.

SEC. 116. FACILITATION OF TRANSFER OF WATER LEASING AND WATER BY MUTUAL 
              DITCH OR IRRIGATION COMPANIES IN DISASTER AREAS.

    (a) In General.--Paragraph (12) of section 501(c) of the Internal 
Revenue Code of 1986 is amended by adding at the end the following new 
subparagraph:
                    ``(I) Treatment of mutual ditch or irrigation 
                companies in certain disaster areas.--
                            ``(i) In general.--In the case of a 
                        qualified mutual ditch or irrigation company or 
                        like organization, subparagraph (A) shall be 
                        applied without taking into account any income 
                        received or accrued during the applicable 
                        period--
                                    ``(I) from the sale, lease, or 
                                exchange of fee or other interests in 
                                real property, including interests in 
                                water,
                                    ``(II) from the sale or exchange of 
                                stock in a mutual ditch or irrigation 
                                company or like organization or 
                                contract rights for the delivery or use 
                                of water,
                                    ``(III) from the investment of 
                                proceeds from sales, leases, or 
                                exchanges under subclauses (I) and 
                                (II), or
                                    ``(IV) from the United States, or a 
                                State or local government, resulting 
                                from the federally declared disaster,
                        except that any income received under subclause 
                        (I), (II), (III), or (IV) which is distributed 
                        or expended for expenses (other than for 
                        operations, maintenance, and capital 
                        improvements) of the qualified mutual ditch or 
                        irrigation company or like organization shall 
                        be treated as nonmember income in the year in 
                        which it is distributed or expended.
                            ``(ii) Qualified mutual ditch or irrigation 
                        company or like organization.--For purposes of 
                        this paragraph--
                                    ``(I) In general.--The term 
                                `qualified mutual ditch or irrigation 
                                company or like organization' means any 
                                mutual ditch or irrigation company or 
                                like organization to a mutual ditch or 
                                irrigation company that diverted, 
                                delivered, transported, stored, or used 
                                its water for agricultural irrigation 
                                purposes on its own or through its 
                                shareholders in a qualified disaster 
                                area during 2012, 2013, or 2014.
                                    ``(II) Qualified asset.--The term 
                                `qualified asset' means any real 
                                property or tangible personal property 
                                used in the mutual ditch or irrigation 
                                company's (or like organization's) 
                                system.
                                    ``(III) Multiple areas.--Under 
                                regulations, if the qualified assets of 
                                any mutual ditch or irrigation company 
                                or like organization are located in 
                                more than 1 qualified disaster area, 
                                all such areas shall be treated as 1 
                                area and if more than 1 federally 
                                declared disaster is involved, the date 
                                on which the last of such disasters 
                                occurred shall be the date used for 
                                purposes of this paragraph.
                            ``(iii) Applicable period.--For purposes of 
                        this paragraph, the term `applicable period' 
                        means the taxable year in which the federally 
                        declared disaster occurred and the 5 following 
                        taxable years.
                            ``(iv) Other definitions.--
                                    ``(I) Qualified disaster area.--The 
                                term `qualified disaster area' means 
                                any area determined to warrant 
                                individual or individual and public 
                                assistance from the Federal Government 
                                under the Robert T. Stafford Disaster 
                                Relief and Emergency Assistance Act by 
                                reason of a federally declared disaster 
                                occurring during the period beginning 
                                on January 1, 2012, and ending on 
                                December 31, 2014.
                                    ``(II) Federally declared 
                                disaster.--The term `federally declared 
                                disaster' has the meaning given to such 
                                term under section 165(h)(3)(C).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years ending after December 31, 2011.

             TITLE II--OTHER DISASTER TAX RELIEF PROVISIONS

SEC. 201. EXCLUSION FOR DISASTER MITIGATION PAYMENTS RECEIVED FROM 
              STATE AND LOCAL GOVERNMENTS.

    (a) In General.--Paragraph (2) of section 139(g) of the Internal 
Revenue Code of 1986 is amended by inserting ``, or any other amount 
which is paid by a State or local government or agency or 
instrumentality thereof,'' after ``(as in effect on such date)''.
    (b) Effective Date.--The amendment made by this section shall apply 
to payments received after the date of the enactment of this Act.

SEC. 202. NATURAL DISASTER FUNDS.

    (a) Natural Disaster Fund.--Subpart C of part II of subchapter E of 
chapter 1 of the Internal Revenue Code of 1986 is amended by inserting 
after section 468B the following new section:

``SEC. 468C. SPECIAL RULES FOR NATURAL DISASTER FUNDS.

    ``(a) In General.--If a qualified taxpayer elects the application 
of this section, there shall be allowed as a deduction for any taxable 
year the amount of payments made by the taxpayer to a natural disaster 
fund during such taxable year.
    ``(b) Natural Disaster Fund.--The term `natural disaster fund' 
means a fund meeting the following requirements:
            ``(1) Designation.--The taxpayer designates--
                    ``(A) the fund as a natural disaster fund in the 
                manner prescribed by the Secretary, and
                    ``(B) the line or lines of business to which the 
                fund applies.
            ``(2) Segregation.--The assets of the fund are segregated 
        from other assets of the taxpayer.
            ``(3) Investments.--
                    ``(A) The assets of the fund are maintained in one 
                or more qualified accounts and are invested only in--
                            ``(i) deposits with banks whose deposits 
                        are insured subject to applicable limits by the 
                        Federal Deposit Insurance Corporation, or
                            ``(ii) in stock or other securities in 
                        which the fund would be permitted to invest if 
                        it were a capital construction fund subject to 
                        the investment limitations of paragraphs (2) 
                        and (3) of section 7518(b)(2).
                    ``(B) All investment earnings (including gains and 
                losses) from investments of the fund become part of the 
                fund.
            ``(4) Contributions to the fund.--The fund does not accept 
        any deposits (or other amounts) other than cash payments with 
        respect to which a deduction is allowable under subsection (a) 
        and earnings (including gains and losses) from fund 
        investments.
            ``(5) Purpose.--The fund is established and maintained for 
        the purposes of covering costs, expenses, and losses (including 
        business interruption losses) resulting from a Federally 
        declared natural disaster to the extent such costs are not 
        covered by insurance.
            ``(6) Maximum balance.--The balance of the fund does not 
        exceed the lesser of--
                    ``(A) the sum of--
                            ``(i) 150 percent of the maximum 
                        deductible, and
                            ``(ii) 100 percent of the maximum co-
                        insurance (to the extent not taken into account 
                        in clause (i)),
                that, in the case of a Federally declared natural 
                disaster resulting in losses, the taxpayer could be 
                expected to pay with respect to property and business 
                interruption insurance maintained by the taxpayer for 
                the line of business to which the fund applies and that 
                would cover losses resulting from a Federally declared 
                natural disaster, and
                    ``(B) the maximum loss under any insurance coverage 
                that the taxpayer could reasonably expect to occur for 
                the line of business in the case of a severe natural 
                disaster.
            ``(7) Financial statements.--The fund or the balance of the 
        fund is recorded in the taxpayer's financial statements in 
        accordance with generally accepted accounting principles and 
        not as a current asset and the footnotes to the taxpayer's 
        financial statements include a short description of the fund 
        and its purposes.
            ``(8) Insurance.--The taxpayer property insurance 
        maintained by the qualified taxpayer applies to 75 percent or 
        more of the property used--
                    ``(A) in the qualified taxpayer's line of business 
                to which the fund relates, and
                    ``(B) in the United States.
    ``(c) Qualified Taxpayer.--For purposes of this section, the term 
`qualified taxpayer' means any taxpayer that--
            ``(1) actively conducts a trade or business, and
            ``(2) maintains property insurance with respect to such 
        trade or business that insures against losses in natural 
        disasters.
    ``(d) Failure To Meet Requirements.--If a fund that was a natural 
disaster fund ceases to meet any of the requirements of subsection (b) 
or a taxpayer who has a natural disaster fund ceases to meet the 
requirement of subsection (c), the entire balance of the fund shall be 
deemed distributed in a nonqualified distribution at the time the fund 
ceases to meet such requirements.
    ``(e) Taxation of Fund.--
            ``(1) In general.--The earnings (including gains and 
        losses) from the investment and reinvestment of amounts held in 
        the fund shall not be taken into account in determining the 
        gross income of the taxpayer that owns the fund.
            ``(2) Not a separate taxpayer.--A natural disaster fund 
        shall not be considered a separate taxpayer for purposes of 
        this subtitle.
    ``(f) Taxation of Distributions From the Fund.--
            ``(1) Qualified distributions.--For purposes of this 
        chapter, qualified distributions shall be treated in the same 
        manner as proceeds from property or business interruption 
        insurance.
            ``(2) Nonqualified distributions.--
                    ``(A) In general.--In the case of any taxable year 
                for which there is a nonqualified distribution--
                            ``(i) such nonqualified distributions shall 
                        be excluded from the gross income of the 
                        taxpayer, and
                            ``(ii) the tax imposed by this chapter 
                        (determined without regard to this subsection) 
                        shall be increased by the product of the amount 
                        of such nonqualified distribution and the 
                        highest rate of tax specified in section 1 
                        (section 11 in the case of a corporation).
                    ``(B) Tax benefit rule; coordination with deduction 
                for net operating losses.--Rules similar to the rules 
                of subparagraphs (B) and (C) of section 7518(g)(6) 
                shall apply for purposes of this paragraph.
            ``(3) Additional tax.--The tax imposed by this chapter for 
        any taxable year on any taxpayer that a owns natural disaster 
        fund shall be increased by the greater of--
                    ``(A) 20 percent of the amount of any non-qualified 
                distributions from the fund in the taxable year, and
                    ``(B) an amount equal to interest, at the 
                underpayment rate established under section 6621, on 
                the nonqualified distribution from the time the amount 
                is added to the fund to the time the amount is 
                distributed.
            ``(4) Interest calculation.--For purposes of calculating 
        interest under paragraph (3)(B)--
                    ``(A) all investment earnings (including gains or 
                losses) in taxable year shall be treated as added to 
                the fund on the last day of the taxable year, and
                    ``(B) amounts distributed from the fund shall be 
                treated as distributed on a first-in, first-out basis.
    ``(g) Definitions.--For purposes of this section--
            ``(1) Federally declared natural disaster.--The term 
        `Federally declared natural disaster' means a natural disaster 
        that is determined by Presidential declaration under the Robert 
        T. Stafford Disaster Relief and Emergency Assistance Act to 
        warrant individual or individual and public assistance under 
        such Act.
            ``(2) Nonqualified distribution.--The term `nonqualified 
        distribution' means a distribution from a natural disaster fund 
        other than a qualified distribution.
            ``(3) Qualified account.--The term `qualified account' 
        means an account with a bank (as defined in section 581) or a 
        brokerage account but only if the investments of such accounts 
        are limited to those permitted by subsection (b)(3) and no 
        investments are made in a related person (as defined in section 
        465(b)(3)(C)) to the taxpayer.
            ``(4) Qualified distribution.--
                    ``(A) In general.--The term `qualified 
                distribution' means with respect to natural disaster 
                fund an amount equal to the excess of--
                            ``(i) costs, expenses, and losses 
                        (including losses of a type reimbursable by 
                        proceeds of business interruption insurance) 
                        incurred by the taxpayer as a result of the 
                        Federally declared natural disaster with 
                        respect to the line or lines of business for 
                        which the fund was designated, over
                            ``(ii) the proceeds of property and 
                        business interruption insurance paid for the 
                        benefit of the taxpayer with respect to costs, 
                        expenses, and losses described in clause (i).
                    ``(B) Limitation.--A distribution from a natural 
                disaster fund shall not be treated as a qualified 
                distribution if such distribution is allocated to a 
                Federally declared natural disaster occurring more than 
                3 years before the date of such distribution.
    ``(h) Special Rules.--For purposes of this section--
            ``(1) No double counting.--Any portion of any deductible or 
        coinsurance taken into account under subsection (b)(6) in 
        determining the maximum balance for a natural disaster fund 
        shall not be taken into account in determining the maximum 
        balance for another natural disaster fund.
            ``(2) Excess balance.--
                    ``(A) In general.--If the balance of a natural 
                disaster fund exceeds the maximum balance permitted by 
                subsection (b)(6) by reason of investment earnings or a 
                reduction in the maximum balance, the account shall not 
                cease to be a natural disaster fund as the result of 
                exceeding such limit if the excess is distributed 
                within 120 days of the date that such excess first 
                occurred.
                    ``(B) Treatment of distributions of excess 
                balance.--In the case of any distribution of the excess 
                balance of a natural disaster fund within 120 days of 
                the date that such excess first occurred--
                            ``(i) paragraphs (2) and (3) of subsection 
                        (f) shall not apply to the distribution of such 
                        excess if distributed within such period, and
                            ``(ii) the amount of such distribution 
                        shall be included in the gross income of the 
                        taxpayer in the year such distribution was 
                        made.
                    ``(C) Anti-abuse rule.--Subparagraph (B) shall not 
                apply in the case of any reduction in the maximum 
                balance resulting from any action of the taxpayer the 
                primary purpose of which was to reduce the maximum 
                balance to enable a distribution that would not be 
                subject to the maximum tax rate calculation or the 
                additional tax.
            ``(3) Certain asset acquisitions.--The transfer of a 
        natural disaster fund (or the portion of a natural disaster 
        fund) from one person to another person shall not constitute a 
        nonqualified distribution if--
                    ``(A) such transfer is part of a transaction--
                            ``(i) to which section 381 applies,
                            ``(ii) the transferee acquires 
                        substantially all of the assets of the 
                        transferor used in the line or lines of 
                        business for which the fund was designated,
                            ``(iii) the transferee acquires 
                        substantially all of the assets of the 
                        transferor used in one, but not all, of the 
                        lines of business for which the fund was 
                        designated, or
                            ``(iv) the transferee acquires 
                        substantially all of the transferor's assets 
                        located in a geographical area and used in a 
                        line of business for which the fund was 
                        designated, and
                    ``(B) the transferee elects to treat the acquired 
                natural disaster fund (or portion thereof) as a natural 
                disaster fund for the line of business for which the 
                transferor had previously designated the fund and as a 
                continuation of the fund (or pro rata portion thereof) 
                for purposes of determining the additional tax imposed 
                by subsection (f)(4).
    ``(i) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the provisions of this 
section.''.
    (b) Clerical Amendment.--The table of sections for subpart C of 
part II of subchapter E of chapter 1 of the Internal Revenue Code of 
1986 is amended by inserting after the item relating to section 468B 
the following new item:

``Sec. 468C. Special rules for natural disaster funds.''.
    (c) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2013.
                                 <all>
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