2018 Natural Disasters Tax Relief Act

To provide for disaster tax relief. 1. Short title; table of contents (a) Short title This Act may be cited as the 2018 Natural Disasters Tax Relief Act (b) Table of contents The table of contents for this Act is as follows: Sec. 1. Short title; table of contents. Sec. 2. Definitions. Sec. 3. Special disaster-related rules for use of retirement funds. Sec. 4. Employee retention credit for employers affected by qualified disasters. Sec. 5. Other disaster-related tax relief provisions. Sec. 6. Treatment of certain possessions. Sec. 7. Automatic extension of filing deadline. 2. Definitions For purposes of this Act— (1) General definitions (A) Qualified disaster area The term qualified disaster area (B) Qualified disaster zone The term qualified disaster zone (C) Qualified disaster The term qualified disaster (2) Hurricane Florence (A) Hurricane Florence disaster area The term Hurricane Florence disaster area (B) Incident beginning date The incident beginning date of Hurricane Florence is September 7, 2018. (C) Incident period The incident period of Hurricane Florence is the period beginning on the incident beginning date of Hurricane Florence and ending on October 8, 2018. (3) Hurricane Michael (A) Hurricane Michael disaster area The term Hurricane Michael disaster area (B) Incident beginning date The incident beginning date of Hurricane Michael is October 7, 2018. (C) Incident period The incident period of Hurricane Michael is the period beginning on the incident beginning date of Hurricane Michael and ending on October 23, 2018. (4) Typhoon Mangkhut (A) Typhoon Mangkhut disaster area The term Typhoon Mangkhut disaster area (B) Incident beginning date The incident beginning date of Typhoon Mangkhut is September 10, 2018. (C) Incident period The incident period of Typhoon Mangkhut is the period beginning on the incident beginning date of Typhoon Mangkhut and ending on September 11, 2018. (5) Typhoon Yutu (A) Typhoon Yutu disaster area The term Typhoon Yutu disaster area (B) Incident beginning date The incident beginning date of Typhoon Yutu is October 24, 2018. (C) Incident period The incident period of Typhoon Yutu is the period beginning on the incident beginning date of Typhoon Yutu and ending on October 26, 2018. (6) Mendocino wildfire (A) Mendocino wildfire disaster area The term Mendocino wildfire disaster area (B) Incident beginning date The incident beginning date of the wildfires referred to in subparagraph (A) is July 23, 2018. (C) Incident period The incident period of the wildfires referred to in subparagraph (A) is the period beginning on the incident beginning date of such wildfires and ending on September 19, 2018. (7) Camp and Woolsey wildfires (A) Camp and Woolsey wildfire disaster area The term Camp and Woolsey wildfire disaster area (B) Incident beginning date The incident beginning date of the wildfires referred to in subparagraph (A) is November 8, 2018. (C) Incident period The incident period of the wildfires referred to in subparagraph (A) is the period beginning on the incident beginning date of such wildfires and ending on November 25, 2018. (8) Kilauea volcanic eruption and earthquakes (A) Kilauea volcanic eruption and earthquakes disaster area The term Kilauea volcanic eruption and earthquakes disaster area (B) Incident beginning date The incident beginning date of the volcanic eruption and earthquakes referred to in subparagraph (A) is May 3, 2018. (C) Incident period The incident period of the volcanic eruption and earthquakes referred to in subparagraph (A) is the period beginning on the incident beginning date with respect to such eruption and earthquakes and ending on August 17, 2018. (9) Hawaii severe storms, flooding, landslides, and mudslides (A) Hawaii severe storms, flooding, landslides, and mudslides disaster area The term Hawaii severe storms, flooding, landslides, and mudslides disaster area (B) Incident beginning date The incident beginning date of the severe storms, flooding, landslides, and mudslides referred to in subparagraph (A) is April 13, 2018. (C) Incident period The incident period of the severe storms, flooding, landslides, and mudslides referred to in subparagraph (A) is the period beginning on the incident beginning date with respect to such severe storms, flooding, landslides, and mudslides and ending on April 16, 2018. (10) Wisconsin severe storms, tornadoes, straight-line winds, flooding, and landslides (A) Wisconsin severe storms, tornadoes, straight-line winds, flooding, and landslides disaster area The term Wisconsin severe storms, tornadoes, straight-line winds, flooding, and landslides disaster area (B) Incident beginning date The incident beginning date of the severe storms, tornadoes, straight-line winds, flooding, and landslides referred to in subparagraph (A) is August 17, 2018. (C) Incident period The incident period of the severe storms, tornadoes, straight-line winds, flooding, and landslides referred to in subparagraph (A) is the period beginning on the incident beginning date with respect to such severe storms, tornadoes, straight-line winds, flooding, and landslides and ending on September 14, 2018. (11) Texas severe storms and flooding (A) Texas severe storms and flooding disaster area The term Texas severe storms and flooding disaster area (B) Incident beginning date The incident beginning date of the severe storms and flooding referred to in subparagraph (A) is June 19, 2018. (C) Incident period The incident period of the severe storms and flooding referred to in subparagraph (A) is the period beginning on the incident beginning date with respect to such severe storms and flooding and ending on July 13, 2018. (12) North Carolina tornado and severe storms (A) North Carolina tornado and severe storms disaster area The term North Carolina tornado and severe storms disaster area (B) Incident beginning date; incident period The incident beginning date, and the incident period, of the tornado and severe storms referred to in subparagraph (A) is April 15, 2018. (13) Indiana severe storms and flooding (A) Indiana severe storms and flooding disaster area The term Indiana severe storms and flooding disaster area (B) Incident beginning date The incident beginning date of the severe storms and flooding referred to in subparagraph (A) is February 14, 2018. (C) Incident period The incident period of the severe storms and flooding referred to in subparagraph (A) is the period beginning on the incident beginning date with respect to such severe storms and flooding and ending on March 4, 2018. (14) Alabama severe storms and tornadoes (A) Alabama severe storms and tornadoes disaster area The term Alabama severe storms and tornadoes disaster area (B) Incident beginning date The incident beginning date of the severe storms and tornadoes referred to in subparagraph (A) is March 19, 2018. (C) Incident period The incident period of the severe storms and tornadoes referred to in subparagraph (A) is the period beginning on the incident beginning date with respect to such severe storms and tornadoes and ending on March 20, 2018. (15) Tropical Storm Gita (A) Tropical Storm Gita disaster area The term Tropical Storm Gita disaster area (B) Incident beginning date The incident beginning date of Tropical Storm Gita is February 7, 2018. (C) Incident period The incident period of Tropical Storm Gita is the period beginning on the incident beginning date of Tropical Storm Gita and ending on February 12, 2018. 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 made with respect to each qualified disaster which is described in a separate paragraph of section 2. (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 1 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 of 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 (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 of 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 1 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 January 1, 2018, 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) 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 respect to any qualified disaster) with an outstanding loan on or after the incident beginning date (of such qualified disaster) 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 incident beginning date of such qualified disaster 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) of this paragraph shall be disregarded. (3) Qualified individual For purposes of this subsection, the term qualified individual (A) 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 (B) who has sustained an economic loss by reason of such qualified disaster. (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. Employee retention credit for employers affected by qualified disasters (a) In general For purposes of section 38 (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, 2019, 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 section 51(c)(1) (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. (c) 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. (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 5. Other 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 February 7, 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 one or more qualified disaster areas, (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 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, 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) 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). 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 deadline (a) In general Section 7508A is amended by adding at the end the following new subsection: (d) Mandatory 60-Day extension In the case of— (1) any individual whose principal place of abode is in a disaster area (as defined in section 165(i)(5)(B)), and (2) any taxpayer if the taxpayer’s principal place of business (other than the business of performing services of an employee) is located in a disaster area (as so defined), the period beginning on the earliest incident date specified in the declaration to which such area relates and 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). . (b) Effective date The amendment made by this section shall apply to federally declared disasters declared after December 31, 2018.

Summary: 2018 Natural Disasters Tax Relief Act This bill permits penalty-free distributions from tax-exempt retirement plans for disaster-related purposes. It also allows an employer whose business was closed during a natural disaster an employee retention credit for 40% of the first $6,000 in wages paid to an eligible employee. The bill allows a temporary suspension of limitations on charitable contributions made for relief efforts in one or more qualified disaster areas and sets forth special rules for personal casualty losses and for determining the earned income tax credit for individuals residing in qualified disaster areas or zones. The bill provides for a mandatory 60-day extension of certain tax deadlines for individuals and business owners in a disaster area.