369 
expenses relating to the performance of services for com-
pensation. 
‘‘(c) NO DOUBLE BENEFIT.—A taxpayer may not 
claim a deduction or credit under any other provision of 
this title with respect to the expenses under subsection (a). 
‘‘(d) EXEMPTION
FROM
REPORTING
REQUIRE-
MENTS.—Section 6041 shall not apply with respect to re-
imbursements excluded from income under subsection (a). 
‘‘(e) TERMINATION.—This section shall not apply to 
use of a passenger automobile after December 31, 2006.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for part III of subchapter B of chapter 1 is amended by 
inserting after the item relating to section 139A the fol-
lowing new item: 
‘‘Sec. 139B. Mileage reimbursements to charitable volunteers.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to the use of a passenger auto-
mobile after the date of the enactment of this Act, in tax-
able years ending after such date. 
CHAPTER IV—ADDITIONAL TAX RELIEF 
PROVISIONS 
SEC. 721. EXCLUSIONS OF CERTAIN CANCELLATIONS OF IN-
DEBTEDNESS FOR VICTIMS OF HURRICANE 
KATRINA. 
(a) IN GENERAL.—For purposes of the Internal Rev-
enue Code of 1986, gross income shall not include any
370 
amount which (but for this section) would be includible 
in gross income by reason of the discharge (in whole or 
in part) of indebtedness of a natural person by an applica-
ble entity (as defined in section 6050P(c)(1)) if the dis-
charge is by reason of the damage sustained by the tax-
payer in connection with Hurricane Katrina. 
(b) EXCEPTION.—Subsection (a) shall not apply to 
any indebtedness incurred in connection with a trade or 
business. 
(c) 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 such Code. 
(d) EFFECTIVE DATE.—This section shall apply to 
discharges made on or after August 29, 2005, and before 
January 1, 2007. 
SEC. 722. 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.
371 
SEC. 723. REQUIRED EXERCISE OF AUTHORITY UNDER SEC-
TION 7508A FOR TAX RELIEF FOR VICTIMS OF 
HURRICANE KATRINA. 
(a) AUTHORITY INCLUDES SUSPENSION
OF PAY-
MENT OF EMPLOYMENT AND EXCISE TAXES.—Subpara-
graphs (A) and (B) of section 7508(a)(1) are amended 
to read as follows: 
‘‘(A) Filing any return of income, estate, 
gift, employment, or excise tax; 
‘‘(B) Payment of any income, estate, gift, 
employment, or excise tax or any installment 
thereof or of any other liability to the United 
States in respect thereof;’’. 
(b) APPLICATION
TO
VICTIMS
OF
HURRICANE 
KATRINA.—In the case of any taxpayer determined by the 
Secretary of the Treasury to be affected by the Presi-
dentially declared disaster relating to Hurricane Katrina, 
any relief provided by the Secretary of the Treasury under 
section 7508A of the Internal Revenue Code of 1986 shall 
be for a period ending not earlier than February 28, 2006, 
and shall be treated as applying to the filing of returns 
relating to, and the payment of, employment and excise 
taxes. 
(c) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply for any period for performing 
an act which has not expired before August 29, 2005.
372 
SEC. 724. SPECIAL MORTGAGE FINANCING RULES FOR 
RESIDENCES 
LOCATED 
IN 
HURRICANE 
KATRINA DISASTER AREA. 
In the case of a residence located in a Hurricane 
Katrina disaster area which replaces a residence destroyed 
by Hurricane Katrina or which is being repaired for dam-
age caused by Hurricane Katrina, section 143 of the In-
ternal Revenue Code of 1986 shall be applied with the fol-
lowing modifications to financing provided with respect to 
such residence within 3 years after the date of the disaster 
declaration: 
(1) Subsections (d) of such section 143 shall be 
applied as if such residence were a targeted area 
residence. 
(2) The limitation under subsection (k)(4) of 
such section 143 shall be increased (but not above 
$150,000) to the extent the qualified home-improve-
ment loan is for the repair of damage caused by 
Hurricane Katrina. 
This section shall apply only with respect to bonds issued 
after August 28, 2005, and before August 29, 2008.
373 
SEC. 825. EXTENSION OF REPLACEMENT PERIOD FOR NON-
RECOGNITION 
OF 
GAIN 
FOR 
PROPERTY 
7OCATED IN HURRICANE KATRINA DISASTER 
AREA. 
Notwithstanding subsections (g) and (h) of section 
1033 of the Internal Revenue Code of 1986, clause (i) of 
section 1033(a)(2)(B) of such Code shall be applied by 
substituting ‘‘5 years’’ for ‘‘2 years’’ with respect to prop-
erty which is compulsorily or involuntarily converted as 
a result of Hurricane Katrina in a Hurricane Katrina dis-
aster area, but only if substantially all of the use of the 
replacement property is in such area. 
SEC. 726. SPECIAL RULE FOR DETERMINING EARNED IN-
COME. 
(a) IN GENERAL.—In the case of a qualified indi-
vidual, if the earned income of the taxpayer for the taxable 
year of such taxpayer which includes August 28, 2005, 
is less than the earned income which is attributable to the 
taxpayer for the preceding taxable year, the credits al-
lowed under sections 24(d) and 32 of the Internal Revenue 
Code of 1986 may, at the election of the taxpayer, be de-
termined by substituting— 
(1) such earned income for the preceding tax-
able year, for 
(2) such earned income for the taxable year 
which includes August 28, 2005.
374 
(b) QUALIFIED INDIVIDUAL.—For purposes of this 
section, the term ‘‘qualified individual’’ means any indi-
vidual whose principal place of abode was (as of August 
28, 2005) in any Hurricane Katrina disaster area. 
(c) EARNED INCOME.—For purposes of this section, 
the term ‘‘earned income’’ has the meaning given such 
term under section 32(c) of such Code. 
(d) SPECIAL RULES.— 
(1) APPLICATION
TO
JOINT
RETURNS.—For 
purpose of subsection (a), in the case of a joint re-
turn for a taxable year which includes August 28, 
2005, 
(A) such subsection shall apply if either 
spouse is a qualified individual, 
(B) the earned income which is attrib-
utable to the taxpayer for the preceding taxable 
year shall be the sum of the earned income 
which is attributable to each spouse for such 
preceding taxable year, and 
(C) the substitution described in such sub-
section shall apply only with respect to earned 
income which is attributable to a spouse who is 
a qualified individual. 
(2) UNIFORM
APPLICATION
OF
ELECTION.— 
Any election made under subsection (a) shall apply
375 
with respect to both section 24(d) and section 32 of 
such Code. 
(3) ERRORS
TREATED
AS
MATHEMATICAL 
ERROR.—For purposes of section 6213 of such 
Code, an incorrect use on a return of earned income 
pursuant to subsection (a) shall be treated as a 
mathematical or clerical error. 
(4) NO EFFECT ON DETERMINATION OF GROSS 
INCOME.—For purposes of the Internal Revenue 
Code of 1986, gross income shall be determined 
without regard to any substitution under subsection 
(a). 
SEC. 727. SECRETARIAL AUTHORITY TO MAKE ADJUST-
MENTS REGARDING TAXPAYER AND DEPEND-
ENCY STATUS. 
With respect to taxable years beginning in 2005 or 
2006, the Secretary of the Treasury or the Secretary’s del-
egate may make such adjustments in the application of 
the internal revenue laws as may be necessary to ensure 
that taxpayers do not lose any deduction or credit or expe-
rience a change of filing status by reason of temporary 
relocations after Hurricane Katrina or by reason of the 
receipt of hurricane relief. Any adjustments made under 
the preceding sentence shall ensure that an individual is
376 
not taken into account by more than one taxpayer with 
respect to the same tax benefit. 
CHAPTER V—EMERGENCY REQUIREMENT 
SEC. 731. EMERGENCY REQUIREMENT. 
Any provision of this Act causing an effect on re-
ceipts, budget authority, or outlays is designated as an 
emergency requirement pursuant to section 402 of H. 
Con. Res. 95 (109th Congress). 
Subtitle II—Additional Tax 
Incentives 
SEC. 741. TAX BENEFITS FOR THE MAJOR DISASTER AREA 
DAMAGED IN HURRICANE KATRINA. 
(a) IN GENERAL.—Chapter 1 is amended by adding 
at the end the following new subchapter: 
‘‘Subchapter Z—Hurricane Katrina Disaster 
Zone Benefits 
‘‘Sec. 1400M. Tax benefits for Hurricane Katrina Disaster Zone. 
‘‘SEC. 1400M. TAX BENEFITS FOR HURRICANE KATRINA DIS-
ASTER ZONE. 
‘‘(a) SPECIAL ALLOWANCE FOR CERTAIN PROPERTY 
ACQUIRED AFTER AUGUST 28, 2005.— 
‘‘(1) ADDITIONAL ALLOWANCE.—In the case of 
any qualified Hurricane Katrina Disaster Zone prop-
erty—
377 
‘‘(A) the depreciation deduction provided 
by section 167(a) for the taxable year in which 
such property is placed in service shall include 
an allowance equal to 50 percent of the ad-
justed basis of such property, and 
‘‘(B) the adjusted basis of the qualified 
Hurricane Katrina Disaster Zone property shall 
be reduced by the amount of such deduction be-
fore computing the amount otherwise allowable 
as a depreciation deduction under this chapter 
for such taxable year and any subsequent tax-
able year. 
‘‘(2) QUALIFIED
HURRICANE
KATRINA
DIS-
ASTER ZONE PROPERTY.—For purposes of this sub-
section— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
Hurricane Katrina Disaster Zone property’ 
means property— 
‘‘(i)(I) which is described in section 
168(k)(2)(A)(i), or 
‘‘(II) which is nonresidential real 
property, or residential rental property, 
which is described in subparagraph (B), 
‘‘(ii) substantially all of the use of 
which is in the Hurricane Katrina Disaster
378 
Zone and is in the active conduct of a 
trade or business by the taxpayer in such 
Zone, 
‘‘(iii) the original use of which in the 
Hurricane Katrina Disaster Zone com-
mences with the taxpayer after August 29, 
2005, 
‘‘(iv) which is acquired by the tax-
payer by purchase (as defined in section 
179(d)) after August 28, 2005, but only if 
no written binding contract for the acquisi-
tion was in effect before August 29, 2005, 
and 
‘‘(v) which is placed in service by the 
taxpayer on or before the termination date. 
The term ‘termination date’ means December 
31, 2012 (December 31, 2015, in the case of 
nonresidential real property and residential 
rental property). 
‘‘(B) ELIGIBLE
REAL
PROPERTY.—Non-
residential real property or residential rental 
property is described in this subparagraph only 
to the extent it rehabilitates real property dam-
aged, or replaces real property destroyed or 
condemned, as a result of Hurricane Katrina.
379 
For purposes of the preceding sentence, prop-
erty shall be treated as replacing real property 
destroyed or condemned if, as part of an inte-
grated plan, such property replaces real prop-
erty which is included in a continuous area 
which includes real property destroyed or con-
demned. 
‘‘(C) EXCEPTIONS.— 
‘‘(i) 
ALTERNATIVE
DEPRECIATION 
PROPERTY.—The term ‘qualified Hurri-
cane Katrina Disaster Zone property’ shall 
not include any property described in sec-
tion 168(k)(2)(D)(i). 
‘‘(ii) QUALIFIED HURRICANE KATRINA 
DISASTER
ZONE
LEASEHOLD
IMPROVE-
MENT PROPERTY.—Such term shall not in-
clude any qualified Hurricane Katrina Dis-
aster Zone leasehold improvement prop-
erty. 
‘‘(iii) ELECTION OUT.—For purposes 
of this subsection, rules similar to the rules 
of section 168(k)(2)(D)(iii) shall apply. 
‘‘(D) SPECIAL
RULES.—For purposes of 
this subsection, rules similar to the rules of sec-
tion 168(k)(2)(E) shall apply, except that