I 
117TH CONGRESS 
1ST SESSION H. R. 3954 
To amend the Internal Revenue Code of 1986 to provide disaster tax relief, 
exclude from gross income amounts received from State-based catas-
trophe loss mitigation programs, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
JUNE 16, 2021 
Mr. THOMPSON of California introduced the following bill; which was referred 
to the Committee on Ways and Means, and in addition to the Committees 
on Small Business, and Agriculture, for a period to be subsequently de-
termined by the Speaker, in each case for consideration of such provisions 
as fall within the jurisdiction of the committee concerned 
A BILL 
To amend the Internal Revenue Code of 1986 to provide 
disaster tax relief, exclude from gross income amounts 
received from State-based catastrophe loss mitigation 
programs, and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Disaster Tax Relief 
Act of 2021’’. 
SEC. 2. DEFINITIONS. 
For purposes of this Act— 
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(1) QUALIFIED DISASTER AREA.— 
(A) IN
GENERAL.—The term ‘‘qualified 
disaster area’’ means any area with respect to 
which a major disaster was declared, during the 
period beginning on December 28, 2020, and 
ending on the date which is 60 days after the 
date of the enactment of this Act, by the Presi-
dent under section 401 of the Robert T. Staf-
ford Disaster Relief and Emergency Assistance 
Act if the incident period of the disaster with 
respect to which such declaration is made be-
gins on or before the date of the enactment of 
this Act. 
(B) COVID–19 EXCEPTION.—Such term 
shall not include any area with respect to which 
such a major disaster has been so declared only 
by reason of COVID–19. 
(2) QUALIFIED
DISASTER
ZONE.—The term 
‘‘qualified disaster zone’’ means that portion of any 
qualified disaster area which was determined by the 
President, during the period beginning on December 
28, 2020, and ending on the date which is 60 days 
after the date of the enactment of this Act, to war-
rant individual or individual and public assistance 
from the Federal Government under the Robert T. 
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Stafford Disaster Relief and Emergency Assistance 
Act by reason of the qualified disaster with respect 
to such disaster area. 
(3) QUALIFIED
DISASTER.—The term ‘‘quali-
fied disaster’’ means, with respect to any qualified 
disaster area, the disaster by reason of which a 
major disaster was declared with respect to such 
area. 
(4) INCIDENT PERIOD.—The term ‘‘incident pe-
riod’’ means, with respect to any qualified disaster, 
the period specified by the Federal Emergency Man-
agement Agency as the period during which such 
disaster occurred (except that for purposes of this 
Act such period shall not be treated as beginning be-
fore December 28, 2020, or ending after the date 
which is 30 days after the date of the enactment of 
this Act). 
SEC. 3. SPECIAL DISASTER-RELATED RULES FOR USE OF 
RETIREMENT FUNDS. 
(a) TAX-FAVORED WITHDRAWALS FROM RETIRE-
MENT PLANS.— 
(1) IN GENERAL.—Section 72(t) of the Internal 
Revenue Code of 1986 shall not apply to any quali-
fied disaster distribution. 
(2) AGGREGATE DOLLAR LIMITATION.— 
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employer under subsection (b), (c), (m), or (o) 
of section 414 of the Internal Revenue Code of 
1986. 
(D) SPECIAL RULE FOR INDIVIDUALS AF-
FECTED 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. 
(3) AMOUNT DISTRIBUTED MAY BE REPAID.— 
(A) IN GENERAL.—Any individual who re-
ceives a qualified disaster distribution may, at 
any time during the 3-year period beginning on 
the day after the date on which such distribu-
tion was received, make 1 or more contributions 
in an aggregate amount not to exceed the 
amount of such distribution to an eligible retire-
ment plan of which such individual is a bene-
ficiary 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 DIS-
TRIBUTIONS
FROM
ELIGIBLE
RETIREMENT 
PLANS
OTHER
THAN
IRAS.—For purposes of 
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the Internal Revenue Code of 1986, if a con-
tribution 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 con-
tribution, be treated as having received the 
qualified disaster distribution in an eligible roll-
over 
distribution 
(as 
defined 
in 
section 
402(c)(4) of such Code) and as having trans-
ferred the amount to the eligible retirement 
plan in a direct trustee to trustee transfer with-
in 60 days of the distribution. 
(C) TREATMENT OF REPAYMENTS OF DIS-
TRIBUTIONS FROM IRAS.—For purposes of the 
Internal Revenue Code of 1986, if a contribu-
tion 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 treat-
ed as a distribution described in section 
408(d)(3) of such Code and as having been 
transferred to the eligible retirement plan in a 
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direct trustee to trustee transfer within 60 days 
of the distribution. 
(4) DEFINITIONS.—For purposes of this sub-
section— 
(A) 
QUALIFIED
DISASTER
DISTRIBU-
TION.—Except as provided in paragraph (2), 
the term ‘‘qualified disaster distribution’’ means 
any distribution from an eligible retirement 
plan made— 
(i) on or after the first day of the in-
cident period of a qualified disaster and 
before the date which is 180 days after the 
date of the enactment of this Act, and 
(ii) to an individual whose principal 
place of abode at any time during the inci-
dent period of such qualified disaster is lo-
cated in the qualified disaster area with re-
spect to such qualified disaster and who 
has sustained an economic loss by reason 
of such qualified disaster. 
(B) ELIGIBLE
RETIREMENT
PLAN.—The 
term ‘‘eligible retirement plan’’ shall have the 
meaning 
given 
such 
term 
by 
section 
402(c)(8)(B) of the Internal Revenue Code of 
1986. 
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(5) INCOME INCLUSION SPREAD OVER 3-YEAR 
PERIOD.— 
(A) IN
GENERAL.—In the case of any 
qualified disaster distribution, unless the tax-
payer 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 sub-
paragraph (A), rules similar to the rules of sub-
paragraph (E) of section 408A(d)(3) of the In-
ternal Revenue Code of 1986 shall apply. 
(6) SPECIAL RULES.— 
(A) EXEMPTION OF DISTRIBUTIONS FROM 
TRUSTEE TO TRUSTEE TRANSFER AND WITH-
HOLDING
RULES.—For purposes of sections 
401(a)(31), 402(f), and 3405 of the Internal 
Revenue Code of 1986, qualified disaster dis-
tributions shall not be treated as eligible roll-
over distributions. 
(B) QUALIFIED DISASTER DISTRIBUTIONS 
TREATED AS MEETING PLAN DISTRIBUTION RE-
QUIREMENTS.—For purposes the Internal Rev-
enue Code of 1986, a qualified disaster dis-
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tribution shall be treated as meeting the re-
quirements 
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 re-
ceived 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 eli-
gible retirement plan (as defined in section 
402(c)(8)(B) of the Internal Revenue Code of 
1986) of which such individual is a beneficiary 
and to which a rollover contribution of such dis-
tribution could be made under section 402(c), 
403(a)(4), 403(b)(8), or 408(d)(3), of such 
Code, as the case may be. 
(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. 
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(2) QUALIFIED DISTRIBUTION.—For purposes 
of this subsection, the term ‘‘qualified distribution’’ 
means any 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 finan-
cial 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 ac-
count of the qualified disaster with respect to 
such area, and 
(C) which was received during the period 
beginning on the date which is 180 days before 
the first day of the incident period of such 
qualified disaster and ending on the date which 
is 30 days after the last day of such incident 
period. 
(3) APPLICABLE PERIOD.—For purposes of this 
subsection, the term ‘‘applicable period’’ means, in 
the case of a principal residence in a qualified dis-
aster area with respect to any qualified disaster, the 
period beginning on the first day of the incident pe-
riod of such qualified disaster and ending on the 
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