TREAD Act

To amend the Internal Revenue Code of 1986 to provide for permanent disaster relief. 1. Short title This Act may be cited as the Tax Relief and Expedited Assistance for Disasters Act of 2019 TREAD Act 2. Definitions For purposes of this Act— (1) Qualified disaster area (A) In general The term qualified disaster area (B) Exception Such term shall not include the California wildfire disaster area (as defined in section 20101 of subdivision 2 of division B of the Bipartisan Budget Act of 2018). (2) Qualified disaster zone The term qualified disaster zone (3) Qualified disaster The term qualified disaster (4) Incident period The term incident period 3. Special disaster-related rules for use of retirement funds (a) Tax-Favored withdrawals from retirement plans (1) In general Section 72(t)(2) (H) Distributions from retirement plans in connection with federally declared disasters Any qualified disaster distribution. . (2) Qualified disaster distribution Section 72(t) of such Code is amended by adding at the end the following new paragraph: (11) Qualified disaster distributions For purposes of paragraph (2)(H)— (A) In general Except as provided in paragraph (2), the term qualified disaster distribution (B) Limitation (i) In general 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. (ii) Treatment of plan distributions If a distribution to an individual would (without regard to clause (i)) be a qualified disaster distribution, a plan shall not be treated as violating any requirement of this title 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. (iii) Controlled group For purposes of clause (ii), the term controlled group (iv) Special rule for individuals affected by more than one disaster The limitation of clause (i) shall be applied separately with respect to distributions made with respect to each qualified disaster. (C) Amount distributed may be repaid (i) 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), as the case may be. (ii) Treatment of repayments of distributions from eligible retirement plans other than IRAs If a contribution is made pursuant to clause (i) 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. (iii) Treatment of repayments of distributions from IRAs If a contribution is made pursuant to clause (i) with respect to a qualified disaster distribution from an individual retirement plan, 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) 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 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. (ii) Special rule For purposes of clause (i), rules similar to the rules of section 408A(d)(3)(E) shall apply. (E) 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 disaster distributions shall not be treated as eligible rollover distributions. (ii) Qualified disaster distributions treated as meeting plan distribution requirements 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). (F) Disaster definitions Any term which is used in this paragraph and is also defined in section 2 of the Tax Relief and Expedited Assistance for Disasters Act of 2019 . (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, the term qualified distribution (A) 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, (B) which was to be used to purchase or construct a principal residence in a qualified disaster area, but which was not so used on account of the qualified disaster with respect to such area, and (C) which was received on or after the date that is 270 days before the first day of incident period of the disaster, and before the date which is 30 days after the last day of the incident period of such qualified disaster. (3) Applicable period For purposes of this subsection, the term applicable period (c) Loans from qualified plans (1) In general Section 72(p) (6) Increase in limit on loans not treated as distributions (A) In general In the case of any loan from a qualified employer plan to a qualified individual made during the period beginning on the first date of the incident period and ending on December 31 of the year after the year in which such first date of the incident period occurs— (i) clause (i) of paragraph (2)(A) shall be applied by substituting $100,000 $50,000 (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 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 respect to any qualified disaster) with an outstanding loan during or after the incident period (of such qualified disaster) 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 incident beginning date of such qualified disaster and ending on December 31 of the year after the year in which the incident period with respect to the disaster begins, 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) of this subparagraph shall be disregarded. (C) Qualified individual For purposes of this paragraph, the term qualified individual (i) whose principal place of abode at any time during the incident period of any qualified disaster is located in the qualified disaster area with respect to such qualified disaster, and (ii) who has sustained an economic loss by reason of such qualified disaster. (D) Disaster definitions Any term which used in this paragraph and is also defined in section 2 of the Tax Relief and Expedited Assistance for Disasters Act of 2019 . (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 (and any amendment made thereby), or pursuant to any regulation issued by the Secretary or the Secretary of Labor under any such provision or amendment, 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. Employee retention credit for employers affected by qualified disasters (a) In general Subpart D of part IV of subchapter A of chapter 1 45T. Employee retention credit for employers affected by qualified disasters (a) In general For purposes of section 38, in the case of an eligible employer, the qualified disaster employee retention credit for any taxable year is an amount equal to 40 percent of the qualified wages with respect to each eligible employee of such employer for such taxable year. For purposes of the preceding sentence, the amount of qualified wages which may be taken into account with respect to any individual shall not exceed $6,000. (b) Definitions For purposes of this section— (1) Eligible employer The term eligible employer (A) which conducted an active trade or business in a qualified disaster zone at any time during the incident period of the qualified disaster with respect to such qualified disaster zone, and (B) with respect to whom the trade or business described in subparagraph (A) is inoperable at any time after the incident beginning date of such qualified disaster, and before January 1 of the year after the year of such incident beginning date, as a result of damage sustained by reason of such qualified disaster. (2) Eligible employee The term eligible employee (3) Qualified wages The term qualified wages (A) beginning on the date on which the trade or business described in paragraph (1) first became inoperable at the principal place of employment of the employee immediately before the qualified disaster referred to in such paragraph, and (B) 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. (4) Disaster definitions Any term which is used in this section and is also defined in section 2 of the Tax Relief and Expedited Assistance for Disasters Act of 2019 (c) Certain rules To apply For purposes of this subsection, rules similar to the rules of sections 51(i)(1), 52, and 280C(a) shall apply. (d) 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 with respect to such employee for such period. . (b) General business credit Section 38(b) of such Code is amended by striking plus , plus (33) the qualified disaster employee retention credit determined under section 45T(a). . (c) Clerical amendment The table of sections for subpart D of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item: Sec. 45T. Employee retention credit for employers affected by qualified disasters. . (d) Effective date The amendments made by this section shall apply to disasters occurring after December 31, 2017. 5. Other disaster-related tax relief provisions (a) Temporary suspension of limitations on charitable contributions Section 170 (p) Temporary suspension of limitations on charitable contributions (1) In general Except as otherwise provided in paragraph (2), subsection (b) shall not apply to qualified contributions and such contributions shall not be taken into account for purposes of applying subsections (b) and (d) to other contributions. (2) Treatment of excess contributions (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 over the amount of all other charitable contributions allowed under subsection (b)(1). (ii) Carryover If the aggregate amount of qualified contributions made in the contribution year (within the meaning of subsection (d)(1)) exceeds the limitation of clause (i), such excess shall be added to the excess described in the portion of subparagraph (A) of such subsection which precedes clause (i) thereof for purposes of applying such subsection. (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 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 (i) such contribution— (I) is made for relief efforts in one or more qualified disaster areas, and (II) is paid during the period beginning on the first day of the incident period for any such disaster, and ending on December 31 of the year in which such incident period begins, in cash to an organization described in subsection (b)(1)(A), (ii) the taxpayer obtains from such organization contemporaneous written acknowledgment that such contribution was used (or is to be used) for relief efforts described in clause (i)(I), 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), or (ii) for the establishment of a new, or maintenance of an existing, donor advised fund (as defined in section 4966(d)(2)). (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. (4) Disaster definitions Any term which is used in this subsection and is also defined in section 2 of the Tax Relief and Expedited Assistance for Disasters Act of 2019 . (b) Special rules for qualified disaster-Related personal casualty losses Section 165(h) of such Code is amended by redesignating paragraphs (3), (4), and (5) as paragraphs (4), (5), and (6), respectively, and by inserting after paragraph (2) the following new paragraph: (3) Special rules for qualified disaster-related personal casualty losses (A) In general If an individual has a net disaster loss for any taxable year— (i) 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, (ii) paragraph (1) shall be applied by substituting $500 $500 ($100 for taxable years beginning after December 31, 2009) (iii) the standard deduction determined under section 63(c) shall be increased by the net disaster loss, and (iv) section 56(b)(1)(E) shall not apply to so much of the standard deduction as is attributable to the increase under subparagraph (C) of this paragraph. (B) Net disaster loss For purposes of this paragraph, the term net disaster loss (C) Qualified disaster-related personal casualty losses For purposes of this paragraph, the term qualified disaster-related personal casualty losses Tax Relief and Expedited Assistance for Disasters Act of 2019 . (c) Special rule for determining earned income Section 32 (n) 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 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 applicable taxable year. (2) Qualified individual For purposes of this subsection, the term qualified individual (A) in the qualified disaster zone with respect to such qualified disaster, or (B) in the qualified disaster area with respect to such qualified disaster (but outside the qualified disaster zone with respect to such qualified disaster) and such individual was displaced from such principal place of abode by reason of such qualified disaster. (3) Applicable taxable year The term applicable taxable year (4) Definition and special rules (A) Disaster definitions Any term which is used in this subsection and is also defined in section 2 of the Tax Relief and Expedited Assistance for Disasters Act of 2019 (B) 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. (C) Uniform application of election Any election made under paragraph (1) shall apply with respect to both this section and section 24(d). (D) 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. (E) 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). . (d) Child tax credit Section 24(d) of such Code is amended by inserting after paragraph (2) the following new paragraph: (3) 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). . (e) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2017. 6. Treatment of certain possessions (a) Payments to Guam and the Commonwealth of the Northern Mariana Islands The Secretary of the Treasury shall pay to Guam and the Commonwealth of the Northern Mariana Islands amounts equal to the loss to that possession by reason of the application of the provisions of this Act. Such amounts shall be determined by the Secretary of the Treasury based on information provided by the government of the respective possession. (b) Payments to American Samoa (1) In general The Secretary of the Treasury shall pay to American Samoa amounts estimated by the Secretary of the Treasury as being equal to the aggregate benefits that would have been provided to residents of American Samoa by reason of the provisions of this Act if a mirror code tax system had been in effect in American Samoa. The preceding sentence shall not apply unless American Samoa has a plan, which has been approved by the Secretary of the Treasury, under which American Samoa will promptly distribute such payments to its residents. (2) Mirror code tax system For purposes of this subsection, the term mirror code tax system (c) Treatment of payments For purposes of section 1324 of title 31, United States Code, the payments under this section shall be treated in the same manner as a refund due from a credit provision referred to in subsection (b)(2) of such section. 7. Automatic extension of filing deadlines in case of certain taxpayers affected by Federally declared disasters (a) In general Section 7508A (d) Mandatory 60-Day extension (1) In general In the case of any qualified taxpayer, the period— (A) beginning on the earliest incident date specified in the declaration to which the disaster area referred to in paragraph (2) relates, and (B) ending on the date which is 60 days after the latest incident date so specified, shall be disregarded in the same manner as a period specified under subsection (a). (2) Qualified taxpayer For purposes of this subsection, the term qualified taxpayer (A) any individual whose principal residence (for purposes of section 1033(h)(4)) is located in a disaster area, (B) any taxpayer if the taxpayer’s principal place of business (other than the business of performing services as an employee) is located in a disaster area, (C) any individual who is a relief worker affiliated with a recognized government or philanthropic organization and who is assisting in a disaster area, (D) any taxpayer whose records necessary to meet a deadline for an act described in section 7508(a)(1) are maintained in a disaster area, (E) any individual visiting a disaster area who was killed or injured as a result of the disaster, and (F) solely with respect to a joint return, any spouse of an individual described in any preceding subparagraph of this paragraph. (3) Disaster area For purposes of this subsection, the term disaster area (4) Application to rules regarding pensions In the case of any person described in subsection (b), a rule similar to the rule of paragraph (1) shall apply for purposes of subsection (b) with respect to— (A) making contributions to a qualified retirement plan (within the meaning of section 4974(c)) under section 219(f)(3), 404(a)(6), 404(h)(1)(B), or 404(m)(2), (B) making distributions under section 408(d)(4), (C) recharacterizing contributions under section 408A(d)(6), and (D) making a rollover under section 402(c), 403(a)(4), 403(b)(8), or 408(d)(3). (5) Coordination with periods specified by the Secretary Any period described in paragraph (1) with respect to any person (including by reason of the application of paragraph (4)) shall be in addition to (or concurrent with, as the case may be) any period specified under subsection (a) or (b) with respect to such person. . (b) Effective date The amendment made by this section shall apply to federally declared disasters declared after the date of the enactment of this Act.

Summary: Tax Relief and Expedited Assistance for Disasters Act of 2019 or the TREAD Act This bill provides tax relief for qualified disaster areas (i.e., an area, excluding a California wildfire disaster area, for which a major disaster was declared on or after January 1, 2018). Specifically, the bill provides for distributions and loans from retirement plans for disaster assistance, a tax credit for wages paid by employers in a qualified disaster area, a temporary suspension of limitations on the deductibility of charitable contributions, and an automatic extension of filing deadlines for taxpayers affected by disasters.