‘‘(4) RECAPTURE.—For purposes of this sub-
section, rules similar to the rules under section 
179(d)(10) shall apply with respect to any qualified 
section 179 Gulf Opportunity Zone property which 
ceases to be qualified section 179 Gulf Opportunity 
Zone property. 
‘‘(f) EXPENSING
FOR CERTAIN DEMOLITION
AND 
CLEAN-UP COSTS.— 
‘‘(1) IN GENERAL.—A taxpayer may elect to 
treat 50 percent of any qualified Gulf Opportunity 
Zone clean-up cost as an expense which is not 
chargeable to capital account. Any cost so treated 
shall be allowed as a deduction for the taxable year 
in which such cost is paid or incurred. 
‘‘(2) QUALIFIED
GULF
OPPORTUNITY
ZONE 
CLEAN-UP COST.—For purposes of this subsection, 
the term ‘qualified Gulf Opportunity Zone clean-up 
cost’ means any amount paid or incurred during the 
period beginning on August 28, 2005, and ending on 
December 31, 2007, for the removal of debris from, 
or the demolition of structures on, real property 
which is located in the Gulf Opportunity Zone and 
which is—
‘‘(A) held by the taxpayer for use in a 
trade or business or for the production of in-
come, or 
‘‘(B) 
property 
described 
in 
section 
1221(a)(1) in the hands of the taxpayer. 
For purposes of the preceding sentence, amounts 
paid or incurred shall be taken into account only to 
the extent that such amount would (but for para-
graph (1)) be chargeable to capital account. 
‘‘(g) EXTENSION
OF EXPENSING
FOR ENVIRON-
MENTAL REMEDIATION COSTS.—With respect to any 
qualified environmental remediation expenditure (as de-
fined in section 198(b)) paid or incurred on or after Au-
gust 28, 2005, in connection with a qualified contaminated 
site located in the Gulf Opportunity Zone, section 198 (re-
lating to expensing of environmental remediation costs) 
shall be applied— 
‘‘(1) by substituting ‘December 31, 2007’ for 
‘December 31, 2005’, and 
‘‘(2) except as provided in section 198(d)(2), by 
treating petroleum products (as defined in section 
4612(a)(3)) as a hazardous substance. 
‘‘(h) INCREASE IN REHABILITATION CREDIT.—In the 
case of qualified rehabilitation expenditures (as defined in 
section 47(c)) paid or incurred during the period begin-
ning on August 28, 2005, and ending on December 31, 
2008, with respect to any qualified rehabilitated building 
or certified historic structure (as defined in section 47(c)) 
located in the Gulf Opportunity Zone, subsection (a) of 
section 47 (relating to rehabilitation credit) shall be ap-
plied— 
‘‘(1) by substituting ‘13 percent’ for ‘10 per-
cent’ in paragraph (1) thereof, and 
‘‘(2) by substituting ‘26 percent’ for ‘20 per-
cent’ in paragraph (2) thereof. 
‘‘(i) SPECIAL RULES
FOR SMALL TIMBER PRO-
DUCERS.— 
‘‘(1) INCREASED
EXPENSING
FOR
QUALIFIED 
TIMBER PROPERTY.—In the case of qualified timber 
property any portion of which is located in the Gulf 
Opportunity Zone or in that portion of the Rita GO 
Zone which is not part of the Gulf Opportunity 
Zone, the limitation under subparagraph (B) of sec-
tion 194(b)(1) shall be increased by the lesser of— 
‘‘(A) the limitation which would (but for 
this subsection) apply under such subpara-
graph, or 
‘‘(B) the amount of reforestation expendi-
tures (as defined in section 194(c)(3)) paid or 
incurred by the taxpayer with respect to such
qualified timber property during the specified 
portion of the taxable year. 
‘‘(2) 5 YEAR NOL CARRYBACK OF CERTAIN TIM-
BER LOSSES.—For purposes of determining farming 
loss under section 172(i), income and deductions 
which are allocable to the specified portion of the 
taxable year and which are attributable to qualified 
timber property any portion of which is located in 
the Gulf Opportunity Zone or in that portion of the 
Rita GO Zone which is not part of the Gulf Oppor-
tunity Zone shall be treated as attributable to farm-
ing businesses. 
‘‘(3) RULES NOT APPLICABLE TO LARGE TIM-
BER PRODUCERS.— 
‘‘(A) EXPENSING.—Paragraph (1) shall 
not apply to any taxpayer if such taxpayer 
holds more than 500 acres of qualified timber 
property at any time during the taxable year. 
‘‘(B) NOL CARRYBACK.—Paragraph (2) 
shall not apply with respect to any qualified 
timber property unless— 
‘‘(i) such property was held by the 
taxpayer— 
‘‘(I) on August 28, 2005, in the 
case of qualified timber property any
portion of which is located in the Gulf 
Opportunity Zone, or 
‘‘(II) on September 23, 2005, in 
the case of qualified timber property 
(other than property described in sub-
clause (I)) any portion of which is lo-
cated in that portion of the Rita GO 
Zone which is not part of the Gulf 
Opportunity Zone, and 
‘‘(ii) such taxpayer held not more 
than 500 acres of qualified timber property 
on such date. 
‘‘(C) AGGREGATION RULE.—For purposes 
of subparagraphs (A) and (B), related persons 
shall be treated as one taxpayer. For purposes 
of the preceding sentence, the following shall be 
treated as related persons— 
‘‘(i) 2 or more persons if the relation-
ship between such persons would result in 
a disallowance of losses under section 267 
or 707(b), and 
‘‘(ii) 2 or more persons which are 
members of the same controlled group 
(within 
the 
meaning 
of 
section 
194(b)(2)(A)) of corporations.
For purposes of clause (i), section 267 shall be 
applied without regard to subsection (b)(1) 
thereof. 
‘‘(4) DEFINITIONS.—For purposes of this sub-
section— 
‘‘(A) 
SPECIFIED
PORTION.—The 
term 
‘specified portion’ means— 
‘‘(i) in the case of the Gulf Oppor-
tunity Zone, that portion of the taxable 
year which is on or after August 28, 2005, 
and before January 1, 2007, and 
‘‘(ii) in the case of that portion of the 
Rita GO Zone which is not part of the 
Gulf Opportunity Zone, that portion of the 
taxable year which is on or after Sep-
tember 23, 2005, and before January 1, 
2007. 
‘‘(B) QUALIFIED TIMBER PROPERTY.—The 
term ‘qualified timber property’ has the mean-
ing given such term in section 194(c)(1). 
‘‘(j) SPECIAL RULE FOR GULF OPPORTUNITY ZONE 
PUBLIC UTILITY CASUALTY LOSSES.— 
‘‘(1) IN GENERAL.—The amount described in 
section 172(f)(1)(A) for any taxable year shall be in-
creased by the Gulf Opportunity Zone public utility 
casualty loss for such taxable year. 
‘‘(2) GULF OPPORTUNITY ZONE PUBLIC UTIL-
ITY
CASUALTY
LOSS.—For purposes of this sub-
section, the term ‘Gulf Opportunity Zone public util-
ity casualty loss’ means any casualty loss of public 
utility property (as defined in section 168(i)(10)) lo-
cated in the Gulf Opportunity Zone if— 
‘‘(A) such loss is allowed as a deduction 
under section 165 for the taxable year, 
‘‘(B) such loss is by reason of Hurricane 
Katrina, and 
‘‘(C) the taxpayer elects the application of 
this subsection with respect to such loss. 
‘‘(3) REDUCTION FOR GAINS FROM INVOLUN-
TARY
CONVERSION.—The amount of Gulf Oppor-
tunity Zone public utility casualty loss which would 
(but for this paragraph) be taken into account under 
paragraph (1) for any taxable year shall be reduced 
by the amount of any gain recognized by the tax-
payer for such year from the involuntary conversion 
by reason of Hurricane Katrina of public utility 
property (as so defined) located in the Gulf Oppor-
tunity Zone.
‘‘(4) COORDINATION WITH GENERAL DISASTER 
LOSS RULES.—Section 165(i) shall not apply to any 
Gulf Opportunity Zone public utility casualty loss to 
the extent such loss is taken into account under 
paragraph (1). 
‘‘(5) ELECTION.—Any election under paragraph 
(2)(C) shall be made in such manner as may be pre-
scribed by the Secretary and shall be made by the 
due date (including extensions of time) for filing the 
taxpayer’s return for the taxable year of the loss. 
Such election, once made for any taxable year, shall 
be irrevocable for such taxable year. 
‘‘(k) SPECIAL NOL CARRYBACK OF COST RECOVERY 
DEDUCTIONS FOR QUALIFIED GO ZONE PROPERTY.— 
‘‘(1) IN
GENERAL.—For purposes of section 
172, the GO Zone cost recovery loss for any taxable 
year ending on or after August 28, 2005, and before 
January 1, 2009, shall be a net operating loss 
carryback to each of the 5 taxable years preceding 
the taxable year of the loss. 
‘‘(2) GO ZONE
COST
RECOVERY
LOSS.—For 
purposes of this subsection, the term ‘GO Zone cost 
recovery loss’ means, with respect to any taxable 
year, the lesser of—
‘‘(A) the aggregate amount of the deduc-
tions allowed under sections 167 and 168 with 
respect to qualified Gulf Opportunity Zone 
property (as defined in subsection (d)(2), but 
without regard to subparagraph (B)(iv) thereof) 
which is placed in service during such taxable 
year, or 
‘‘(B) the excess of— 
‘‘(i) the net operating loss for such 
taxable year, over 
‘‘(ii) the specified liability loss for 
such taxable year to which a 10-year 
carryback 
applies 
under 
section 
172(b)(1)(C). 
‘‘(3) COORDINATION WITH ORDERING RULE.— 
For purposes of applying section 172(b)(2), a GO 
Zone cost recovery loss to which paragraph (1) ap-
plies shall be treated in a manner similar to the 
manner in which a specified liability loss is treated. 
‘‘(4) ELECTION
OUT.—A rule similar to the 
rule of section 172(j) shall apply for purposes of this 
subsection. 
‘‘(l) CREDIT TO HOLDERS OF GULF TAX CREDIT 
BONDS.—
‘‘(1) ALLOWANCE OF CREDIT.—If a taxpayer 
holds a Gulf tax credit bond on one or more credit 
allowance dates of the bond occurring during any 
taxable year, there shall be allowed as a credit 
against the tax imposed by this chapter for the tax-
able year an amount equal to the sum of the credits 
determined under paragraph (2) with respect to 
such dates. 
‘‘(2) AMOUNT OF CREDIT.— 
‘‘(A) IN
GENERAL.—The amount of the 
credit determined under this paragraph with re-
spect to any credit allowance date for a Gulf 
tax credit bond is 25 percent of the annual 
credit determined with respect to such bond. 
‘‘(B) ANNUAL CREDIT.—The annual credit 
determined with respect to any Gulf tax credit 
bond is the product of— 
‘‘(i) the credit rate determined by the 
Secretary under subparagraph (C) for the 
day on which such bond was sold, multi-
plied by 
‘‘(ii) the outstanding face amount of 
the bond. 
‘‘(C) DETERMINATION.—For purposes of 
subparagraph (B), with respect to any Gulf tax
credit bond, the Secretary shall determine daily 
or cause to be determined daily a credit rate 
which shall apply to the first day on which 
there is a binding, written contract for the sale 
or exchange of the bond. The credit rate for 
any day is the credit rate which the Secretary 
or the Secretary’s designee estimates will per-
mit the issuance of Gulf tax credit bonds with 
a specified maturity or redemption date without 
discount and without interest cost to the issuer. 
‘‘(D) CREDIT
ALLOWANCE
DATE.—For 
purposes of this subsection, the term ‘credit al-
lowance date’ means March 15, June 15, Sep-
tember 15, and December 15. Such term also 
includes the last day on which the bond is out-
standing. 
‘‘(E) SPECIAL RULE FOR ISSUANCE AND 
REDEMPTION.—In the case of a bond which is 
issued during the 3-month period ending on a 
credit allowance date, the amount of the credit 
determined under this paragraph with respect 
to such credit allowance date shall be a ratable 
portion of the credit otherwise determined 
based on the portion of the 3-month period dur-
ing which the bond is outstanding. A similar