(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. 109. 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 his delegate, may 
make such adjustments in the application of the internal 
revenue laws as may be necessary to ensure that taxpayers 
do not lose dependency exemptions or child credits or ex-
perience 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 
not taken into account by more than one taxpayer with 
respect to the same tax benefit. 
SEC. 110. WORK OPPORTUNITY TAX CREDIT FOR HURRI-
CANE KATRINA EMPLOYEES. 
(a) IN GENERAL.—For purposes of section 51 of the 
Internal Revenue Code of 1986, a Hurricane Katrina em-
ployee shall be treated as a member of a targeted group.
(b) HURRICANE KATRINA EMPLOYEE.—For pur-
poses of this section, the term ‘‘Hurricane Katrina em-
ployee’’ means any individual who, on August 28, 2005, 
had a principal place of abode in a Hurricane Katrina dis-
aster area. 
(c) SPECIAL RULES FOR DETERMINING CREDIT.—
For purposes of applying subpart F of part IV of sub-
chapter A of chapter 1 of such Code to wages paid or in-
curred to any Hurricane Katrina employee—
(1) section 51(c)(4) of such Code shall not 
apply, and 
(2) except in the case of an employee of the em-
ployer (within the meaning of section 51 of such 
Code) on August 28, 2005, or an employee initially 
hired after such date, section 51(i)(2) of such Code 
shall not apply. 
(d) APPLICATION OF SECTION.—This section shall 
apply only to wages (within the meaning on section 51(c) 
of such Code) paid or incurred to any individual who—
(1) is being hired for a position the principal 
place of employment of which is located in a Hurri-
cane Katrina disaster area, and 
(2) who begins work for the employer during 
the 2-year period beginning on August 29, 2005.
(e) HURRICANE KATRINA DISASTER AREA.—For 
purposes of this section, the term ‘‘Hurricane Katrina dis-
aster area’’ means any area which is determined by the 
President to warrant individual or individual and public 
assistance from the Federal Government under the Robert 
T. Stafford Disaster Relief and Emergency Assistance Act 
by reason of Hurricane Katrina. 
TITLE II—PENALTY FREE USE 
OF RETIREMENT FUNDS IN 
THE CASE OF NATURAL DIS-
ASTERS 
SEC. 201. PENALTY FREE WITHDRAWALS FROM RETIRE-
MENT PLANS UPON FEDERAL DECLARATION 
OF NATURAL DISASTER. 
(a) IN GENERAL.—Paragraph (2) of section 72(t) of 
the Internal Revenue Code of 1986 (relating to 10-percent 
additional tax on early distributions from qualified retire-
ment plans) is amended by adding at the end the following 
new subparagraph: 
‘‘(G) DISTRIBUTIONS FROM RETIREMENT 
PLANS UPON FEDERAL DECLARATION OF NAT-
URAL DISASTER.—
‘‘(i) IN GENERAL.—Any qualified dis-
aster-relief distribution.
‘‘(ii) AGGREGATE
LIMITATION.—The 
aggregate amount of payments or distribu-
tions received by an individual which may 
be treated as qualified disaster-relief dis-
tributions for any taxable year shall not 
exceed the excess (if any) of —
‘‘(I) $100,000, over 
‘‘(II) 
the 
aggregate 
amounts 
treated as qualified disaster-relief dis-
tributions with respect to such indi-
vidual for all prior taxable years. 
‘‘(iii) AMOUNT DISTRIBUTED MAY BE 
REPAID.—
‘‘(I) IN
GENERAL.—Any indi-
vidual who receives a qualified dis-
aster-relief distribution may, at any 
time during the 3-year period begin-
ning on the day after the date on 
which such distribution was made, 
make one or more contributions in an 
aggregate amount not to exceed the 
amount of such distribution to an eli-
gible retirement plan (as defined in 
section 402(c)(8)(B)) of which such 
individual is a beneficiary and to