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(d) EXCEPTION FOR REAL PROPERTY OUTSIDE DIS-
ASTER AREA.—Subsection (a) shall not apply to any dis-
charge of indebtedness to the extent that real property 
constituting security for such indebtedness is located out-
side of the area described in subsection (c). 
(e) DENIAL OF DOUBLE BENEFIT.—The amount ex-
cluded from gross income under subsection (a) shall be 
applied to reduce the tax attributes of the taxpayer as pro-
vided in section 108(b) of the Internal Revenue Code of 
1986. 
(f) APPLICATION.—This section shall not apply to 
discharges after December 31, 2006. 
SEC. 105. SPECIAL RULES FOR MORTGAGE REVENUE 
BONDS. 
(a) IN GENERAL.—In the case of financing provided 
with respect to a qualified Hurricane Katrina recovery res-
idence, subsection (d) of section 143 of the Internal Rev-
enue Code of 1986 shall be applied as if such residence 
were a targeted area residence. 
(b) QUALIFIED HURRICANE KATRINA RECOVERY 
RESIDENCE.—For purposes of this section, the term 
‘‘qualified Hurricane Katrina recovery residence’’ means 
any residence if such residence is located in an area which 
is determined by the President to warrant individual or 
individual and public assistance from the Federal Govern-
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ment under the Robert T. Stafford Disaster Relief and 
Emergency Assistance Act by reason of Hurricane 
Katrina. 
(c) APPLICATION.—Subsection (a) shall not apply to 
financing provided after December 31, 2007. 
SEC. 106. SUSPENSION OF CERTAIN LIMITATIONS ON PER-
SONAL CASUALTY LOSSES. 
Paragraphs (1) and (2)(A) of section 165(h) of the 
Internal Revenue Code of 1986 shall not apply to losses 
described in section 165(c)(3) of such Code which are at-
tributable to Hurricane Katrina. In the case of any other 
losses, section 165(h)(2)(A) of such Code shall be applied 
without regard to the losses referred to in the preceding 
sentence. 
SEC. 107. ADDITIONAL EXEMPTION FOR HOUSING HURRI-
CANE KATRINA DISPLACED INDIVIDUALS. 
(a) IN GENERAL.—In the case of taxable years of a 
natural person beginning in 2005 and 2006, for purposes 
of the Internal Revenue Code of 1986, taxable income 
shall be reduced by $500 for each Hurricane Katrina dis-
placed individual of the taxpayer for the taxable year. 
(b) LIMITATIONS.— 
(1) DOLLAR LIMITATION.—The reduction under 
subsection (a) shall not exceed $2,000, reduced by
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the amount of the reduction under this section for 
all previous taxable years. 
(2) INDIVIDUALS TAKEN INTO ACCOUNT ONLY 
ONCE.—An individual shall not be taken into ac-
count under subsection (a) if such individual was 
taken into account under such subsection by the tax-
payer in any prior taxable year. 
(c) HURRICANE KATRINA DISPLACED INDIVIDUAL.— 
For purposes of this subsection, the term ‘‘Hurricane 
Katrina displaced individual’’ means, with respect to any 
taxpayer for any taxable year, a natural person who— 
(1) was (as of August 28, 2005) a resident of 
any area which is determined by the President to 
warrant individual or individual and public assist-
ance from the Federal Government under the Robert 
T. Stafford Disaster Relief and Emergency Assist-
ance Act by reason of Hurricane Katrina, 
(2) is displaced from the person’s residence lo-
cated in the area described in paragraph (1), and 
(3) 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.