Hurricanes Florence and Michael and California Wildfire Tax Relief Act

To provide tax relief for the victims of Hurricane Florence, Hurricane Michael, and certain California wildfires. 1. Short title This Act may be cited as the Hurricanes Florence and Michael and California Wildfire Tax Relief Act 2. Definitions For purposes of this Act— (1) Hurricane Florence disaster zone The term Hurricane Florence disaster zone (2) Hurricane Florence disaster area The term Hurricane Florence disaster area (3) Hurricane Michael disaster zone The term Hurricane Michael disaster zone (4) Hurricane Michael disaster area The term Hurricane Michael disaster area (5) Mendocino and Carr wildfires (A) Mendocino and Carr wildfire disaster zone The term Mendocino and Carr wildfire disaster zone (B) Mendocino and Carr wildfire disaster area The term Mendocino and Carr wildfire disaster area (6) Camp, Woolsey, and Hill wildfires (A) Camp, Woolsey, and Hill wildfire disaster zone The term Camp, Woolsey, and Hill wildfire disaster zone (B) Camp, Woolsey, and Hill wildfire disaster area The term Camp, Woolsey, and Hill wildfire disaster area 3. Special disaster-related rules for use of retirement funds (a) Tax-Favored withdrawals from retirement plans (1) In general Section 72(t) (2) Aggregate dollar limitation (A) In general For purposes of this subsection, the aggregate amount of distributions received by an individual which may be treated as qualified disaster distributions for any taxable year shall not exceed the excess (if any) of— (i) $100,000, over (ii) the aggregate amounts treated as qualified disaster distributions received by such individual for all prior taxable years. (B) Treatment of plan distributions If a distribution to an individual would (without regard to subparagraph (A)) be a qualified disaster distribution, a plan shall not be treated as violating any requirement of the Internal Revenue Code of 1986 merely because the plan treats such distribution as a qualified disaster distribution, unless the aggregate amount of such distributions from all plans maintained by the employer (and any member of any controlled group which includes the employer) to such individual exceeds $100,000. (C) Controlled group For purposes of subparagraph (B), the term controlled group section 414 (D) Special rule for individuals affected by more than one disaster The limitation of subparagraph (A) shall be applied separately with respect to distributions described in each clause of paragraph (4)(A). (3) Amount distributed may be repaid (A) In general Any individual who receives a qualified disaster distribution may, at any time during the 3-year period beginning on the day after the date on which such distribution was received, make one or more contributions in an aggregate amount not to exceed the amount of such distribution to an eligible retirement plan of which such individual is a beneficiary and to which a rollover contribution of such distribution could be made under section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16), of the Internal Revenue Code of 1986, as the case may be. (B) Treatment of repayments of distributions from eligible retirement plans other than IRAs For purposes of the Internal Revenue Code of 1986, if a contribution is made pursuant to subparagraph (A) with respect to a qualified disaster 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 disaster distribution in an eligible rollover distribution (as defined in section 402(c)(4) of such Code) and as having transferred the amount to the eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution. (C) Treatment of repayments for distributions from IRAs For purposes of the Internal Revenue Code of 1986, if a contribution is made pursuant to subparagraph (A) with respect to a qualified disaster distribution from an individual retirement plan (as defined by section 7701(a)(37) of such Code), then, to the extent of the amount of the contribution, the qualified disaster distribution shall be treated as a distribution described in section 408(d)(3) of such Code and as having been transferred to the eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution. (4) Definitions For purposes of this subsection— (A) Qualified disaster distribution Except as provided in paragraph (2), the term qualified disaster distribution (i) any distribution from an eligible retirement plan made on or after September 7, 2018, and before January 1, 2020, to an individual whose principal place of abode on September 7, 2018, is located in the Hurricane Florence disaster area and who has sustained an economic loss by reason of Hurricane Florence, (ii) any distribution from an eligible retirement plan made on or after October 7, 2018, and before January 1, 2020, to an individual whose principal place of abode on October 7, 2018, is located in the Hurricane Michael disaster area and who has sustained an economic loss by reason of Hurricane Michael, (iii) any distribution from an eligible retirement plan made on or after July 23, 2018, and before January 1, 2020, to an individual whose principal place of abode during any portion of the period from July 23, 2018, to September 19, 2018, is located in the Mendocino and Carr wildfire disaster area and who has sustained an economic loss by reason of the wildfires to which the declaration of such area relates, and (iv) any distribution from an eligible retirement plan made on or after November 8, 2018, and before January 1, 2020, to an individual whose principal place of abode during any portion of the period from November 8, 2018, to December 15, 2018, is located in the Camp, Woolsey, and Hill wildfire disaster area and who has sustained an economic loss by reason of the wildfires to which the declaration of such area relates. (B) Eligible retirement plan The term eligible retirement plan section 402(c)(8)(B) (5) Income inclusion spread over 3-year period (A) In general In the case of any qualified disaster distribution, unless the taxpayer elects not to have this paragraph apply for any taxable year, any amount required to be included in gross income for such taxable year shall be so included ratably over the 3-taxable-year period beginning with such taxable year. (B) Special rule For purposes of subparagraph (A), rules similar to the rules of subparagraph (E) of section 408A(d)(3) (6) Special rules (A) Exemption of distributions from trustee to trustee transfer and withholding rules For purposes of sections 401(a)(31), 402(f), and 3405 of the Internal Revenue Code of 1986, qualified disaster distributions shall not be treated as eligible rollover distributions. (B) Qualified disaster distributions treated as meeting plan distribution requirements For purposes the Internal Revenue Code of 1986, a qualified disaster distribution shall be treated as meeting the requirements of sections 401(k)(2)(B)(i), 403(b)(7)(A)(ii), 403(b)(11), and 457(d)(1)(A) of such Code. (b) Recontributions of withdrawals for home purchases (1) Recontributions (A) In general Any individual who received a qualified distribution may, during the applicable period, make one or more contributions in an aggregate amount not to exceed the amount of such qualified distribution to an eligible retirement plan (as defined in section 402(c)(8)(B) (B) Treatment of repayments Rules similar to the rules of subparagraphs (B) and (C) of subsection (a)(3) shall apply for purposes of this subsection. (2) Qualified distribution For purposes of this subsection— (A) In general The term qualified distribution (B) Qualified Florence distribution The term qualified Florence distribution (i) described in section 401(k)(2)(B)(i)(IV), 403(b)(7)(A)(ii) (but only to the extent such distribution relates to financial hardship), 403(b)(11)(B), or 72(t)(2)(F), of the Internal Revenue Code of 1986, (ii) received after February 28, 2018, and before November 8, 2018, and (iii) which was to be used to purchase or construct a principal residence in the Hurricane Florence disaster area, but which was not so purchased or constructed on account of Hurricane Florence. (C) Qualified Michael distribution The term qualified Michael distribution (i) described in section 401(k)(2)(B)(i)(IV), 403(b)(7)(A)(ii) (but only to the extent such distribution relates to financial hardship), 403(b)(11)(B), or 72(t)(2)(F), of the Internal Revenue Code of 1986, (ii) received after February 28, 2018, and before November 23, 2018, and (iii) which was to be used to purchase or construct a principal residence in the Hurricane Michael disaster area, but which was not so purchased or constructed on account of Hurricane Michael. (D) Qualified Mendocino and Carr distribution The term qualified Mendocino and Carr distribution (i) described in section 401(k)(2)(B)(i)(IV), 403(b)(7)(A)(ii) (but only to the extent such distribution relates to financial hardship), 403(b)(11)(B), or 72(t)(2)(F), of the Internal Revenue Code of 1986, (ii) received after February 28, 2018, and before October 19, 2018, and (iii) which was to be used to purchase or construct a principal residence in the Mendocino and Carr wildfire disaster area, but which was not so purchased or constructed on account of the wildfires to which the declaration of such area relates. (E) Qualified Camp, Woolsey, and Hill distribution The term qualified Camp, Woolsey, and Hill distribution (i) described in section 401(k)(2)(B)(i)(IV), 403(b)(7)(A)(ii) (but only to the extent such distribution relates to financial hardship), 403(b)(11)(B), or 72(t)(2)(F), of the Internal Revenue Code of 1986, (ii) received after February 28, 2018, and before December 30, 2018, and (iii) which was to be used to purchase or construct a principal residence in the Camp, Woolsey, and Hill wildfire disaster area, but which was not so purchased or constructed on account of the wildfires to which the declaration of such area relates. (3) Applicable period For purposes of this subsection, the term applicable period (A) with respect to any qualified Florence distribution, the period beginning on September 7, 2018, and ending on February 28, 2019, (B) with respect to any qualified Michael distribution, the period beginning on October 7, 2018, and ending on February 28, 2019, (C) with respect to any qualified Mendocino and Carr distribution, the period beginning on July 23, 2018, and ending on February 28, 2019, and (D) with respect to any qualified Camp, Woolsey, and Hill distribution, the period beginning on November 8, 2018, and ending on February 28, 2019. (c) Loans from qualified plans (1) Increase in limit on loans not treated as distributions In the case of any loan from a qualified employer plan (as defined under section 72(p)(4) (A) clause (i) of section 72(p)(2)(A) of such Code shall be applied by substituting $100,000 $50,000 (B) clause (ii) of such section shall be applied by substituting the present value of the nonforfeitable accrued benefit of the employee under the plan one-half of the present value of the nonforfeitable accrued benefit of the employee under the plan (2) Delay of repayment In the case of a qualified individual with an outstanding loan on or after the qualified beginning date from a qualified employer plan (as defined in section 72(p)(4) (A) if the due date pursuant to subparagraph (B) or (C) of section 72(p)(2) of such Code for any repayment with respect to such loan occurs during the period beginning on the qualified beginning date and ending on December 31, 2019, such due date shall be delayed for 1 year, (B) any subsequent repayments with respect to any such loan shall be appropriately adjusted to reflect the delay in the due date under paragraph (1) and any interest accruing during such delay, and (C) in determining the 5-year period and the term of a loan under subparagraph (B) or (C) of section 72(p)(2) of such Code, the period described in subparagraph (A) shall be disregarded. (3) Qualified individual For purposes of this subsection— (A) In general The term qualified individual (B) Qualified Hurricane Florence individual The term qualified Hurricane Florence individual (C) Qualified Hurricane Michael individual The term qualified Hurricane Michael individual (D) Qualified Mendocino and Carr individual The term qualified Mendocino and Carr individual (E) Qualified Camp, Woolsey, and Hill individual The term qualified Camp, Woolsey, and Hill individual (4) Qualified beginning date For purposes of this subsection— (A) Hurricane Florence In the case of any qualified Florence individual, the qualified beginning date is September 7, 2018. (B) Hurricane Michael In the case of any qualified Michael individual, the qualified beginning date is October 7, 2018. (C) Mendocino and Carr wildfire In the case of any qualified Mendocino and Carr individual, the qualified beginning date is July 23, 2018. (D) Camp, Woolsey, and Hill wildfire In the case of any qualified Camp, Woolsey, and Hill individual, the qualified beginning date is November 8, 2018. (d) Provisions relating to plan amendments (1) In general If this subsection applies to any amendment to any plan or annuity contract, such plan or contract shall be treated as being operated in accordance with the terms of the plan during the period described in paragraph (2)(B)(i). (2) Amendments to which subsection applies (A) In general This subsection shall apply to any amendment to any plan or annuity contract which is made— (i) pursuant to any provision of this section, or pursuant to any regulation issued by the Secretary or the Secretary of Labor under any provision of this section, and (ii) on or before the last day of the first plan year beginning on or after January 1, 2020, or such later date as the Secretary may prescribe. In the case of a governmental plan (as defined in section 414(d) of the Internal Revenue Code of 1986), clause (ii) shall be applied by substituting the date which is 2 years after the date otherwise applied under clause (ii). (B) Conditions This subsection shall not apply to any amendment unless— (i) during the period— (I) beginning on the date that this section or the regulation described in subparagraph (A)(i) takes effect (or in the case of a plan or contract amendment not required by this section or such regulation, the effective date specified by the plan), and (II) ending on the date described in subparagraph (A)(ii) (or, if earlier, the date the plan or contract amendment is adopted), the plan or contract is operated as if such plan or contract amendment were in effect, and (ii) such plan or contract amendment applies retroactively for such period. 4. Employment relief (a) Employee retention credit for employers affected by Hurricane Florence (1) In general For purposes of section 38 (2) Definitions For purposes of this subsection— (A) Eligible employer The term eligible employer (i) which conducted an active trade or business on September 7, 2018, in the Hurricane Florence disaster zone, and (ii) with respect to whom the trade or business described in clause (i) is inoperable on any day after September 7, 2018, and before January 1, 2019, as a result of damage sustained by reason of Hurricane Florence. (B) Eligible employee The term eligible employee (C) Qualified wages The term qualified wages section 51(c)(1) (i) beginning on the date on which the trade or business described in subparagraph (A) first became inoperable at the principal place of employment of the employee immediately before Hurricane Florence, and (ii) ending on the date on which such trade or business has resumed significant operations at such principal place of employment. Such term shall include wages paid without regard to whether the employee performs no services, performs services at a different place of employment than such principal place of employment, or performs services at such principal place of employment before significant operations have resumed. (3) Certain rules to apply For purposes of this subsection, rules similar to the rules of sections 51(i)(1), 52, and 280C(a), of the Internal Revenue Code of 1986, shall apply. (4) Employee not taken into account more than once An employee shall not be treated as an eligible employee for purposes of this subsection for any period with respect to any employer if such employer is allowed a credit under section 51 (b) Employee retention credit for employers affected by Hurricane Michael (1) In general For purposes of section 38 (2) Definitions For purposes of this subsection— (A) Eligible employer The term eligible employer (i) which conducted an active trade or business on October 7, 2018, in the Hurricane Michael disaster zone, and (ii) with respect to whom the trade or business described in clause (i) is inoperable on any day after October 7, 2018, and before January 1, 2019, as a result of damage sustained by reason of Hurricane Michael. (B) Eligible employee The term eligible employee (C) Qualified wages The term qualified wages section 51(c)(1) (i) beginning on the date on which the trade or business described in subparagraph (A) first became inoperable at the principal place of employment of the employee immediately before Hurricane Michael, and (ii) ending on the date on which such trade or business has resumed significant operations at such principal place of employment. Such term shall include wages paid without regard to whether the employee performs no services, performs services at a different place of employment than such principal place of employment, or performs services at such principal place of employment before significant operations have resumed. (3) Certain rules to apply For purposes of this subsection, rules similar to the rules of sections 51(i)(1), 52, and 280C(a), of the Internal Revenue Code of 1986, shall apply. (4) Employee not taken into account more than once An employee shall not be treated as an eligible employee for purposes of this subsection for any period with respect to any employer if such employer is allowed a credit under section 51 (c) Employee retention credit for employers affected by Mendocino and Carr wildfires (1) In general For purposes of section 38 (2) Definitions For purposes of this subsection— (A) Eligible employer The term eligible employer (i) which conducted an active trade or business for any portion of the period from July 23, 2018, to September 19, 2018, in the Mendocino and Carr wildfire disaster zone, and (ii) with respect to whom the trade or business described in clause (i) is inoperable on any day after July 23, 2018, and before January 1, 2019, as a result of damage sustained by reason of the wildfires to which the declaration of the Mendocino and Carr wildfire disaster area relates. (B) Eligible employee The term eligible employee (C) Qualified wages The term qualified wages section 51(c)(1) (i) beginning on the date on which the trade or business described in subparagraph (A) first became inoperable at the principal place of employment of the employee immediately before the wildfires to which the declaration of the Mendocino and Carr wildfire disaster area relates, and (ii) ending on the date on which such trade or business has resumed significant operations at such principal place of employment. Such term shall include wages paid without regard to whether the employee performs no services, performs services at a different place of employment than such principal place of employment, or performs services at such principal place of employment before significant operations have resumed. (3) Certain rules to apply For purposes of this subsection, rules similar to the rules of sections 51(i)(1), 52, and 280C(a), of the Internal Revenue Code of 1986, shall apply. (4) Employee not taken into account more than once An employee shall not be treated as an eligible employee for purposes of this subsection for any period with respect to any employer if such employer is allowed a credit under section 51 (d) Employee retention credit for employers affected by Camp, Woolsey, and Hill wildfires (1) In general For purposes of section 38 (2) Definitions For purposes of this subsection— (A) Eligible employer The term eligible employer (i) which conducted an active trade or business for any portion of the period from November 8, 2018, to December 15, 2018, in the Camp, Woolsey, and Hill wildfire disaster zone, and (ii) with respect to whom the trade or business described in clause (i) is inoperable on any day after November 8, 2018, and before January 1, 2019, as a result of damage sustained by reason of the wildfires to which the declaration of the Camp, Woolsey, and Hill wildfire disaster area relates. (B) Eligible employee The term eligible employee (C) Qualified wages The term qualified wages section 51(c)(1) (i) beginning on the date on which the trade or business described in subparagraph (A) first became inoperable at the principal place of employment of the employee immediately before the wildfires to which the declaration of the Camp, Woolsey, and Hill wildfire disaster area relates, and (ii) ending on the date on which such trade or business has resumed significant operations at such principal place of employment. Such term shall include wages paid without regard to whether the employee performs no services, performs services at a different place of employment than such principal place of employment, or performs services at such principal place of employment before significant operations have resumed. (3) Certain rules to apply For purposes of this subsection, rules similar to the rules of sections 51(i)(1), 52, and 280C(a), of the Internal Revenue Code of 1986, shall apply. (4) Employee not taken into account more than once An employee shall not be treated as an eligible employee for purposes of this subsection for any period with respect to any employer if such employer is allowed a credit under section 51 5. Additional disaster-related tax relief provisions (a) Temporary suspension of limitations on charitable contributions (1) In general Except as otherwise provided in paragraph (2), subsection (b) of section 170 (2) Treatment of excess contributions For purposes of section 170 (A) Individuals In the case of an individual— (i) Limitation Any qualified contribution shall be allowed only to the extent that the aggregate of such contributions does not exceed the excess of the taxpayer's contribution base (as defined in subparagraph (H) of section 170(b)(1) of such Code) over the amount of all other charitable contributions allowed under section 170(b)(1) of such Code. (ii) Carryover If the aggregate amount of qualified contributions made in the contribution year (within the meaning of section 170(d)(1) of such Code) exceeds the limitation of clause (i), such excess shall be added to the excess described in the portion of subparagraph (A) of such section which precedes clause (i) thereof for purposes of applying such section. (B) Corporations In the case of a corporation— (i) Limitation Any qualified contribution shall be allowed only to the extent that the aggregate of such contributions does not exceed the excess of the taxpayer’s taxable income (as determined under paragraph (2) of section 170(b) of such Code) over the amount of all other charitable contributions allowed under such paragraph. (ii) Carryover Rules similar to the rules of subparagraph (A)(ii) shall apply for purposes of this subparagraph. (3) Qualified contributions (A) In general For purposes of this subsection, the term qualified contribution section 170(c) (i) such contribution— (I) is paid during the period beginning on July 23, 2018, and ending on December 31, 2018, in cash to an organization described in section 170(b)(1)(A) of such Code, and (II) is made for relief efforts in the Hurricane Florence disaster area, the Hurricane Michael disaster area, the Mendocino and Carr wildfire disaster area, or the Camp, Woolsey, and Hill wildfire disaster area, (ii) the taxpayer obtains from such organization contemporaneous written acknowledgment (within the meaning of section 170(f)(8) of such Code) that such contribution was used (or is to be used) for relief efforts described in clause (i)(II), and (iii) the taxpayer has elected the application of this subsection with respect to such contribution. (B) Exception Such term shall not include a contribution by a donor if the contribution is— (i) to an organization described in section 509(a)(3) (ii) for the establishment of a new, or maintenance of an existing, donor advised fund (as defined in section 4966(d)(2) of such Code). (C) Application of election to partnerships and S corporations In the case of a partnership or S corporation, the election under subparagraph (A)(iii) shall be made separately by each partner or shareholder. (b) Special rules for qualified disaster-Related personal casualty losses (1) In general If an individual has a net disaster loss for any taxable year— (A) the amount determined under section 165(h)(2)(A)(ii) (i) such net disaster loss, and (ii) so much of the excess referred to in the matter preceding clause (i) of section 165(h)(2)(A) of such Code (reduced by the amount in clause (i) of this subparagraph) as exceeds 10 percent of the adjusted gross income of the individual, (B) section 165(h)(1) of such Code shall be applied by substituting $500 $500 ($100 for taxable years beginning after December 31, 2009) (C) the standard deduction determined under section 63(c) of such Code shall be increased by the net disaster loss, and (D) section 56(b)(1)(E) of such Code shall not apply to so much of the standard deduction as is attributable to the increase under subparagraph (C) of this paragraph. (2) Net disaster loss For purposes of this subsection, the term net disaster loss section 165(h)(3)(A) (3) Qualified disaster-related personal casualty losses For purposes of this subsection, the term qualified disaster-related personal casualty losses (A) losses described in section 165(c)(3) (B) losses described in section 165(c)(3) (C) losses described in section 165(c)(3) (D) losses described in section 165(c)(3) (c) Special rule for determining earned income (1) In general In the case of a qualified individual, if the earned income of the taxpayer for the applicable taxable year is less than the earned income of the taxpayer for the preceding taxable year, the credits allowed under sections 24(d) and 32 of the Internal Revenue Code of 1986 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 applicable taxable year. (2) Qualified individual For purposes of this subsection— (A) In general The term qualified individual (B) Qualified Hurricane Florence individual The term qualified Hurricane Florence individual (i) in the Hurricane Florence disaster zone, or (ii) in the Hurricane Florence disaster area (but outside the Hurricane Florence disaster zone) and such individual was displaced from such principal place of abode by reason of Hurricane Florence. (C) Qualified Hurricane Michael individual The term qualified Hurricane Michael individual (i) in the Hurricane Michael disaster zone, or (ii) in the Hurricane Michael disaster area (but outside the Hurricane Michael disaster zone) and such individual was displaced from such principal place of abode by reason of Hurricane Michael. (D) Qualified Mendocino and Carr individual The term qualified Mendocino and Carr individual (i) in the Mendocino and Carr wildfire disaster zone, or (ii) in the Mendocino and Carr wildfire disaster area (but outside the Mendocino and Carr wildfire disaster zone) and such individual was displaced from such principal place of abode by reason of the wildfires to which the declaration of such area relates. (E) Qualified Camp, Woolsey, and Hill individual The term qualified Camp, Woolsey, and Hill individual (i) in the Camp, Woolsey, and Hill wildfire disaster zone, or (ii) in the Camp, Woolsey, and Hill wildfire disaster area (but outside the Camp, Woolsey, and Hill disaster zone) and such individual was displaced from such principal place of abode by reason of the wildfires to which the declaration of such area relates. (3) Applicable taxable year The term applicable taxable year (A) in the case of a qualified Hurricane Florence individual, September 7, 2018, (B) in the case of a qualified Hurricane Michael individual, October 7, 2018, (C) in the case of a qualified Mendocino and Carr individual, any portion of the period from July 23, 2018, to September 19, 2018, and (D) in the case of a qualified Camp, Woolsey, and Hill individual, any portion of the period from November 8, 2018, to December 15, 2018. (4) Earned income For purposes of this subsection, the term earned income section 32(c) (5) Special rules (A) Application to joint returns For purposes of paragraph (1), in the case of a joint return for an applicable taxable year— (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 32, of the Internal Revenue Code of 1986. (C) Errors treated as mathematical error For purposes of section 6213 (D) No effect on determination of gross income, etc Except as otherwise provided in this subsection, the Internal Revenue Code of 1986 shall be applied without regard to any substitution under paragraph (1).

Summary: Hurricanes Florence and Michael and California Wildfire Tax Relief Act This bill allows various tax credits, tax deductions, and modifications to existing tax rules for individuals and businesses affected by Hurricane Florence, Hurricane Michael, and wildfires in California.