(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2011. 
SEC. 110. EXCLUSIONS OF CERTAIN CANCELLATIONS OF IN-
DEBTEDNESS BY REASON OF 2012, 2013, 2014, 
AND 2015 DISASTERS. 
(a) IN GENERAL.—Section 108 of the Internal Rev-
enue Code of 1986 is amended by adding at the end the 
following new subsection: 
‘‘(j) DISCHARGE OF INDEBTEDNESS FOR INDIVID-
UALS AFFECTED BY DISASTERS IN ANY CALENDAR YEAR 
AFTER 2011.— 
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), gross income shall not include any 
amount which (but for this subsection) would be in-
cludible in gross income by reason of any discharge 
(in whole or in part) of indebtedness of a natural 
person described in paragraph (3) by an applicable 
entity (as defined in section 6050P(c)(1)) during the 
applicable period. 
‘‘(2) EXCEPTIONS
FOR
BUSINESS
INDEBTED-
NESS.—Paragraph (1) shall not apply to any indebt-
edness incurred in connection with a trade or busi-
ness. 
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‘‘(3) PERSONS DESCRIBED.—A natural person 
is described in this paragraph if the principal place 
of abode of such person on the applicable disaster 
date was located in the disaster area with respect to 
any federally declared disaster occurring during any 
calendar year beginning after 2011 and before 2016. 
‘‘(4) APPLICABLE
PERIOD.—For purposes of 
this subsection, the term ‘applicable period’ means 
the period beginning on the applicable disaster date 
and ending on the date which is 14 months after 
such date. 
‘‘(5) OTHER
DEFINITIONS.—For purposes of 
this subsection— 
‘‘(A) FEDERALLY
DECLARED
DISASTER; 
DISASTER AREA.—The terms ‘federally declared 
disaster’ and ‘disaster area’ have the meanings 
given such terms under section 165(i)(5). 
‘‘(B) APPLICABLE DISASTER DATE.—The 
term ‘applicable disaster date’ means, with re-
spect to any federally declared disaster, the 
date on which such federally declared disaster 
occurs.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to discharges made on or after De-
cember 31, 2011. 
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SEC. 111. SPECIAL RULE FOR DETERMINING EARNED IN-
COME OF INDIVIDUALS AFFECTED BY FEDER-
ALLY DECLARED DISASTERS. 
(a) IN GENERAL.—Section 32 of the Internal Rev-
enue Code of 1986 is amended by adding at the end the 
following new subsection: 
‘‘(n) SPECIAL RULE FOR DETERMINING EARNED IN-
COME OF TAXPAYERS AFFECTED BY FEDERALLY DE-
CLARED DISASTERS.— 
‘‘(1) IN GENERAL.—In the case of a qualified 
individual with respect to any federally declared dis-
aster occurring during any calendar year beginning 
after 2011, if the earned income of the taxpayer for 
the taxable year which includes the applicable dis-
aster date is less than the earned income of the tax-
payer for the preceding taxable year, the credit al-
lowed under this section and section 24(d) may, at 
the election of the taxpayer, be determined by sub-
stituting— 
‘‘(A) such earned income for the preceding 
taxable year, for 
‘‘(B) such earned income for the taxable 
year which includes the applicable date. 
‘‘(2) QUALIFIED INDIVIDUAL.—For purposes of 
this subsection, the term ‘qualified individual’ 
means, with respect to any federally declared dis-
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aster occurring during in any calendar year begin-
ning after 2011 and before 2016, any individual 
whose principal place of abode on the applicable dis-
aster date, was located— 
‘‘(A) in any portion of a disaster area de-
termined by the President to warrant individual 
or individual and public assistance under the 
Robert T. Stafford Disaster Relief and Emer-
gency Assistance Act by reason of the federally 
declared disaster, or 
‘‘(B) in any portion of the disaster area 
not described in subparagraph (A) and such in-
dividual was displaced from such principal place 
of abode by reason of the federally declared dis-
aster. 
‘‘(3) OTHER
DEFINITIONS.—For purposes of 
this paragraph— 
‘‘(A) FEDERALLY
DECLARED
DISASTER; 
DISASTER AREA.—The terms ‘federally declared 
disaster’ and ‘disaster area’ have the meanings 
given such terms under section 165(i)(5). 
‘‘(B) APPLICABLE DISASTER DATE.—The 
term ‘applicable disaster date’ means, with re-
spect to any federally declared disaster, the 
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date on which such federally declared disaster 
occurs. 
‘‘(4) SPECIAL RULES.— 
‘‘(A) APPLICATION TO JOINT RETURNS.— 
For purposes of paragraph (1), in the case of 
a joint return for a taxable year which includes 
the disaster date— 
‘‘(i) such paragraph shall apply if ei-
ther spouse is a qualified individual, and 
‘‘(ii) the earned income of the tax-
payer for the preceding taxable year shall 
be the sum of the earned income of each 
spouse for such preceding taxable year. 
‘‘(B) UNIFORM
APPLICATION
OF
ELEC-
TION.—Any election made under paragraph (1) 
shall apply with respect to both section 24(d) 
and this section. 
‘‘(C) ERRORS TREATED AS MATHEMATICAL 
ERROR.—For purposes of section 6213, an in-
correct use on a return of earned income pursu-
ant to paragraph (1) shall be treated as a 
mathematical or clerical error. 
‘‘(D) NO EFFECT ON DETERMINATION OF 
GROSS INCOME, ETC.—Except as otherwise pro-
vided in this subsection, this title shall be ap-
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plied without regard to any substitution under 
paragraph (1).’’. 
(b) CHILD TAX CREDIT.—Section 24(d) of the Inter-
nal Revenue Code of 1986 is amended by inserting after 
paragraph (2) the following new paragraph: 
‘‘(3) 
SPECIAL
RULE
FOR
DETERMINING 
EARNED INCOME OF TAXPAYERS AFFECTED BY FED-
ERALLY
DECLARED
DISASTERS.—For election by 
qualified individuals with respect to certain federally 
declared disasters to substitute earned income from 
the preceding taxable year, see section 32(n).’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2011. 
SEC. 112. INCREASE IN REHABILITATION CREDIT FOR 
BUILDINGS IN 2012, 2013, 2014, AND 2015 DIS-
ASTER AREAS. 
(a) IN GENERAL.—Section 47 of the Internal Rev-
enue Code of 1986 is amended by adding at the end the 
following new subsection: 
‘‘(e) SPECIAL RULE FOR EXPENDITURES MADE IN 
CONNECTION WITH CERTAIN DISASTERS.— 
‘‘(1) IN GENERAL.—In the case of qualified re-
habilitation expenditures paid or incurred during the 
applicable period with respect to any qualified reha-
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(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts paid or incurred after 
December 31, 2011. 
SEC. 113. ADVANCED REFUNDINGS OF CERTAIN TAX-EX-
EMPT BONDS. 
(a) IN GENERAL.—Section 149(d) of the Internal 
Revenue Code of 1986 is amended by redesignating para-
graph (7) as paragraph (8) and by inserting after para-
graph (6) the following new paragraph: 
‘‘(7) SPECIAL RULE WITH RESPECT TO CER-
TAIN NATURAL DISASTERS.— 
‘‘(A) IN
GENERAL.—With respect to a 
bond described in subparagraph (C), one addi-
tional advance refunding after the date of the 
enactment of this paragraph and before Janu-
ary 1, 2018, shall be allowed under the rules of 
this subsection if— 
‘‘(i) the Governor of the State des-
ignates the advance refunding bond for 
purposes of this subsection, and 
‘‘(ii) the requirements of subpara-
graph (E) are met. 
‘‘(B) 
CERTAIN
PRIVATE
ACTIVITY 
BONDS.—With respect to a bond described in 
subparagraph (C) which is an exempt facility 
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bond described in paragraph (1) or (2) of sec-
tion 142(a), one advance refunding after the 
date of the enactment of this paragraph and be-
fore January 1, 2018, shall be allowed under 
the applicable rules of this subsection (notwith-
standing paragraph (2) thereof) if the require-
ments of clauses (i) and (ii) of subparagraph 
(A) are met. 
‘‘(C) BONDS DESCRIBED.—A bond is de-
scribed in this paragraph if, with respect to any 
federally declared disaster, such bond— 
‘‘(i) was outstanding on the applicable 
disaster date, and 
‘‘(ii) is issued by an applicable State 
or a political subdivision thereof. 
‘‘(D) AGGREGATE LIMIT.—The maximum 
aggregate face amount of bonds which may be 
designated under this subsection by the Gov-
ernor 
of 
a 
State 
shall 
not 
exceed 
$4,500,000,000. 
‘‘(E) ADDITIONAL
REQUIREMENTS.—The 
requirements of this subparagraph are met with 
respect to any advance refunding of a bond de-
scribed in subparagraph (C) if— 
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‘‘(i) no advance refundings of such 
bond would be allowed under this title on 
or after the applicable disaster date, 
‘‘(ii) the advance refunding bond is 
the only other outstanding bond with re-
spect to the refunded bond, and 
‘‘(iii) the requirements of section 148 
are met with respect to all bonds issued 
under this paragraph. 
‘‘(F) DEFINITIONS.—For purposes of this 
subsection— 
‘‘(i) 
FEDERALLY
DECLARED
DIS-
ASTER; DISASTER AREA.—The terms ‘fed-
erally declared disaster’ and ‘disaster area’ 
have the meanings given such terms under 
section 165(i)(5). 
‘‘(ii) APPLICABLE DISASTER DATE.— 
The term ‘applicable disaster date’ means, 
with respect to any federally declared dis-
aster, the date on which such federally de-
clared disaster occurs. 
‘‘(iii) APPLICABLE STATE.—The term 
‘applicable State’ means, with respect to 
any federally declared disaster, any State 
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in which a portion of the disaster area is 
located.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to bonds issued after the date of 
the enactment of this Act. 
SEC. 114. QUALIFIED DISASTER AREA RECOVERY BONDS. 
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter B of chapter 1 of the Internal Revenue Code of 
1986 is amended by inserting after section 146 the fol-
lowing new section: 
‘‘SEC. 146A. QUALIFIED DISASTER AREA RECOVERY BONDS. 
‘‘(a) IN GENERAL.—For purposes of this title, any 
qualified disaster area recovery bond shall— 
‘‘(1) be treated as an exempt facility bond, and 
‘‘(2) not be subject to section 146. 
‘‘(b) 
QUALIFIED
DISASTER
AREA
RECOVERY 
BOND.—For purposes of this section, the term ‘qualified 
disaster area recovery bond’ means any bond issued as 
part of an issue if— 
‘‘(1) 95 percent or more of the net proceeds of 
such issue are to be used for qualified project costs, 
‘‘(2) such bond is issued by a State or any po-
litical subdivision thereof any part of which is in a 
qualified disaster area, 
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‘‘(3) the Governor of the issuing State des-
ignates such bond for purposes of this section, and 
‘‘(4) such bond is issued after the date of the 
enactment of this section and before January 1, 
2017. 
‘‘(c) LIMITATION ON AMOUNT OF BONDS.— 
‘‘(1) IN
GENERAL.—The maximum aggregate 
face amount of bonds which may be designated 
under this section by any State shall not exceed 
$10,000,000,000. 
‘‘(2) MOVABLE PROPERTY.—No bonds shall be 
issued which are to be used for movable fixtures and 
equipment. 
‘‘(3) TREATMENT
OF
CURRENT
REFUNDING 
BONDS.—Paragraph (1) shall not apply to any bond 
(or series of bonds) issued to refund a qualified dis-
aster area recovery bond, if— 
‘‘(A) the average maturity date of the issue 
of which the refunding bond is a part is not 
later than the average maturity date of the 
bonds to be refunded by such issue, 
‘‘(B) the amount of the refunding bond 
does not exceed the outstanding amount of the 
refunded bond, and 
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‘‘(C) the net proceeds of the refunding 
bond are used to redeem the refunded bond not 
later than 90 days after the date of the 
issuance of the refunding bond. 
For purposes of subparagraph (A), average maturity 
shall be determined in accordance with section 
147(b)(2)(A). 
‘‘(d) QUALIFIED PROJECT COSTS.—For purposes of 
this section, the term ‘qualified project costs’ means the 
cost of acquisition, construction, reconstruction, and ren-
ovation of— 
‘‘(1) residential rental property (as defined in 
section 142(d)), 
‘‘(2) nonresidential real property (including 
fixed improvements associated with such property), 
‘‘(3) a facility described in paragraph (2) or (3) 
of section 142(a), or 
‘‘(4) public utility property (as defined in sec-
tion 168(i)(10)), 
which is located in a qualified disaster area and was dam-
aged or destroyed by reason of a federally declared dis-
aster. 
‘‘(e) SPECIAL RULES.—In applying this title to any 
qualified disaster area recovery bond, the following modi-
fications shall apply: 
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‘‘(1) Section 147(d) (relating to acquisition of 
existing property not permitted) shall be applied by 
substituting ‘50 percent’ for ‘15 percent’ each place 
it appears. 
‘‘(2) Section 148(f)(4)(C) (relating to exception 
from rebate for certain proceeds to be used to fi-
nance construction expenditures) shall apply to the 
available construction proceeds of bonds issued 
under this section. For purposes of the preceding 
sentence, the following spending requirements shall 
apply in lieu of the requirements in clause (ii) of 
such section: 
‘‘(A) 40 percent of such available construc-
tion proceeds are spent for the governmental 
purposes of the issue within the 2-year period 
beginning on the date the bonds are issued. 
‘‘(B) 60 percent of such proceeds are spent 
for such purposes within the 3-year period be-
ginning on such date. 
‘‘(C) 80 percent of such proceeds are spent 
for such purposes within the 4-year period be-
ginning on such date. 
‘‘(D) 100 percent of such proceeds are 
spent for such purposes within the 5-year pe-
riod beginning on such date. 
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‘‘(3) Repayments of principal on financing pro-
vided by the issue— 
‘‘(A) may not be used to provide financing, 
and 
‘‘(B) must be used not later than the close 
of the first semiannual period beginning after 
the date of the repayment to redeem bonds 
which are part of such issue. 
The requirement of subparagraph (B) shall be treat-
ed as met with respect to amounts received within 
5 years after the date of issuance of the issue (or, 
in the case of a refunding bond, the date of issuance 
of the original bond) if such amounts are used by 
the close of such 5 years to redeem bonds which are 
part of such issue. 
‘‘(4) Section 57(a)(5) shall not apply. 
‘‘(f) SEPARATE ISSUE TREATMENT OF PORTIONS OF 
AN ISSUE.—This section shall not apply to the portion of 
an issue which (if issued as a separate issue) would be 
treated as a qualified bond or as a bond that is not a 
private activity bond (determined without regard to para-
graph (1)), if the issuer elects to so treat such portion. 
‘‘(g) QUALIFIED DISASTER AREA; FEDERALLY DE-
CLARED DISASTER.— 
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‘‘(1) QUALIFIED
DISASTER
AREA.—The term 
‘qualified disaster area’ means any area determined 
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 a federally declared disaster 
occurring during the period beginning after Decem-
ber 31, 2011, and before January 1, 2016. 
‘‘(2) FEDERALLY
DECLARED
DISASTER.—The 
term ‘federally declared disaster’ has the meaning 
given to such term under section 165(i)(5).’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for subpart A of part IV of subchapter B of chapter 1 
of such Code is amended by inserting after the item relat-
ing to section 146 the following new item: 
‘‘Sec. 146A. Qualified disaster area recovery bonds.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to obligations issued after Decem-
ber 31, 2015. 
SEC. 115. ADDITIONAL LOW-INCOME HOUSING CREDIT AL-
LOCATIONS. 
(a) IN GENERAL.—Paragraph (3) of section 42(h) of 
the Internal Revenue Code of 1986 (relating to limitation 
on aggregate credit allowable with respect to projects lo-
cated in a State) is amended by adding at the end the 
following new subparagraph: 
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‘‘(J) INCREASE IN STATE HOUSING CREDIT 
FOR
STATES
DAMAGED
BY
NATURAL
DISAS-
TERS.— 
‘‘(i) IN GENERAL.—In the case of cal-
endar year 2016, the State housing credit 
ceiling of each State any portion of which 
includes any portion of a qualifying dis-
aster area shall be increased by so much of 
the aggregate housing credit dollar amount 
as does not exceed the applicable limitation 
allocated by the State housing credit agen-
cy of such State for such calendar year to 
buildings located in qualifying disaster 
areas. 
‘‘(ii) APPLICABLE
LIMITATION.—For 
purposes of clause (i), the applicable limi-
tation is the greater of— 
‘‘(I) $8 multiplied by the popu-
lation of the qualifying disaster areas 
in such State, or 
‘‘(II) 50 percent of the State 
housing credit ceiling (determined 
without regard to this subparagraph) 
for 2015. 
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‘‘(iii) APPLICABLE
PERCENTAGE.— 
For purposes of this section, the applicable 
percentage with respect to any building to 
which amounts allocated under clause (i) 
shall be determined under subsection 
(b)(2), except that subparagraph (A) 
thereof shall be applied by substituting 
‘January 1, 2016’ for ‘January 1, 2015’. 
‘‘(iv) 
ALLOCATIONS
TREATED
AS 
MADE FIRST FROM ADDITIONAL ALLOCA-
TION AMOUNT FOR PURPOSES OF DETER-
MINING CARRYOVER.—For purposes of de-
termining the unused State housing credit 
ceiling under subparagraph (C) for any 
calendar year, any increase in the State 
housing credit ceiling under clause (i) shall 
be treated as an amount described in 
clause (ii) of such subparagraph. 
‘‘(v) QUALIFYING DISASTER AREA.— 
For purposes of this subparagraph, the 
term ‘qualifying federally declared disaster 
area’ means— 
‘‘(I) each county which is deter-
mined to warrant individual or indi-
vidual and public assistance from the 
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Federal Government under a quali-
fying natural disaster declaration de-
scribed in clause (vi)(I), and 
‘‘(II) each county not described 
in subclause (I) which is included in 
the geographical area covered by a 
qualifying natural disaster declaration 
described in subclause (II) or (III) of 
clause (vi). 
‘‘(vi) QUALIFYING NATURAL DISASTER 
DECLARATION.—For purposes of clause 
(v), the term ‘qualifying natural disaster 
declaration’ means— 
‘‘(I) a federally declared disaster 
(as defined in section 165(i)(5)) oc-
curring during the period beginning 
after December 31, 2011, and before 
January 1, 2016, 
‘‘(II) a natural disaster declared 
by the Secretary of Agriculture in 
2011 due to damaging weather and 
other conditions relating to Hurricane 
Irene or Tropical Storm Lee under 
section 321(a) of the Consolidated 
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Farm and Rural Development Act (7 
U.S.C. 1961(a)), or 
‘‘(III) a major disaster or emer-
gency designated by the President in 
2011 due to damaging weather and 
other conditions relating to Hurricane 
Irene or Tropical Storm Lee under 
the Robert T. Stafford Disaster Relief 
and Emergency Assistance Act (42 
U.S.C. 5121 et seq.).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall take effect on the date of the enactment 
of this Act. 
SEC. 116. FACILITATION OF TRANSFER OF WATER LEASING 
AND WATER BY MUTUAL DITCH OR IRRIGA-
TION COMPANIES IN DISASTER AREAS. 
(a) IN GENERAL.—Paragraph (12) of section 501(c) 
of the Internal Revenue Code of 1986 is amended by add-
ing at the end the following new subparagraph: 
‘‘(I) TREATMENT OF MUTUAL DITCH OR 
IRRIGATION COMPANIES IN CERTAIN DISASTER 
AREAS.— 
‘‘(i) IN GENERAL.—In the case of a 
qualified mutual ditch or irrigation com-
pany or like organization, subparagraph 
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(A) shall be applied without taking into ac-
count any income received or accrued dur-
ing the applicable period— 
‘‘(I) from the sale, lease, or ex-
change of fee or other interests in real 
property, including interests in water, 
‘‘(II) from the sale or exchange 
of stock in a mutual ditch or irriga-
tion company or like organization or 
contract rights for the delivery or use 
of water, 
‘‘(III) from the investment of 
proceeds from sales, leases, or ex-
changes under subclauses (I) and (II), 
or 
‘‘(IV) from the United States, or 
a State or local government, resulting 
from the federally declared disaster, 
except that any income received under sub-
clause (I), (II), (III), or (IV) which is dis-
tributed or expended for expenses (other 
than for operations, maintenance, and cap-
ital improvements) of the qualified mutual 
ditch or irrigation company or like organi-
zation shall be treated as nonmember in-
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come in the year in which it is distributed 
or expended. 
‘‘(ii) QUALIFIED MUTUAL DITCH OR 
IRRIGATION COMPANY OR LIKE ORGANIZA-
TION.—For purposes of this paragraph— 
‘‘(I) IN
GENERAL.—The term 
‘qualified mutual ditch or irrigation 
company or like organization’ means 
any mutual ditch or irrigation com-
pany or like organization that di-
verted, delivered, transported, stored, 
or used its water for agricultural irri-
gation purposes on its own or through 
its shareholders in a qualified disaster 
area during any of calendar years 
2012 through 2015. 
‘‘(II) QUALIFIED
ASSET.—The 
term ‘qualified asset’ means any real 
property or tangible personal property 
used in the mutual ditch or irrigation 
company’s (or like organization’s) sys-
tem. 
‘‘(III) MULTIPLE AREAS.—Under 
regulations, if the qualified assets of 
any mutual ditch or irrigation com-
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pany or like organization are located 
in more than 1 qualified disaster area, 
all such areas shall be treated as 1 
area and if more than 1 federally de-
clared disaster is involved, the date on 
which the last of such disasters oc-
curred shall be the date used for pur-
poses of this paragraph. 
‘‘(iii) APPLICABLE PERIOD.—For pur-
poses of this paragraph, the term ‘applica-
ble period’ means the taxable year in which 
the federally declared disaster occurred 
and the 5 following taxable years. 
‘‘(iv) OTHER DEFINITIONS.— 
‘‘(I) 
QUALIFIED
DISASTER 
AREA.—The term ‘qualified disaster 
area’ means any area determined to 
warrant individual or individual and 
public assistance from the Federal 
Government under the Robert T. 
Stafford Disaster Relief and Emer-
gency Assistance Act by reason of a 
federally declared disaster occurring 
during the period beginning on Janu-
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ary 1, 2012, and ending on December 
31, 2015. 
‘‘(II) 
FEDERALLY
DECLARED 
DISASTER.—The term ‘federally de-
clared disaster’ has the meaning given 
to 
such 
term 
under 
section 
165(i)(5).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to taxable years ending after 
December 31, 2011. 
TITLE II—OTHER DISASTER TAX 
RELIEF PROVISIONS 
SEC. 201. EXCLUSION FOR DISASTER MITIGATION PAY-
MENTS RECEIVED FROM STATE AND LOCAL 
GOVERNMENTS. 
(a) IN GENERAL.—Paragraph (2) of section 139(g) 
of the Internal Revenue Code of 1986 is amended by in-
serting ‘‘, or any other amount which is paid by a State 
or local government or agency or instrumentality thereof,’’ 
after ‘‘(as in effect on such date)’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to payments received after the date 
of the enactment of this Act. 
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SEC. 202. NATURAL DISASTER FUNDS. 
(a) NATURAL DISASTER FUND.—Subpart C of part 
II of subchapter E of chapter 1 of the Internal Revenue 
Code of 1986 is amended by inserting after section 468B 
the following new section: 
‘‘SEC. 468C. SPECIAL RULES FOR NATURAL DISASTER 
FUNDS. 
‘‘(a) IN GENERAL.—If a qualified taxpayer elects the 
application of this section, there shall be allowed as a de-
duction for any taxable year the amount of payments 
made by the taxpayer to a natural disaster fund during 
such taxable year. 
‘‘(b) NATURAL DISASTER FUND.—The term ‘natural 
disaster fund’ means a fund meeting the following require-
ments: 
‘‘(1) 
DESIGNATION.—The 
taxpayer 
des-
ignates— 
‘‘(A) the fund as a natural disaster fund in 
the manner prescribed by the Secretary, and 
‘‘(B) the line or lines of business to which 
the fund applies. 
‘‘(2) SEGREGATION.—The assets of the fund 
are segregated from other assets of the taxpayer. 
‘‘(3) INVESTMENTS.— 
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‘‘(A) The assets of the fund are main-
tained in one or more qualified accounts and 
are invested only in— 
‘‘(i) deposits with banks whose depos-
its are insured subject to applicable limits 
by the Federal Deposit Insurance Corpora-
tion, or 
‘‘(ii) in stock or other securities in 
which the fund would be permitted to in-
vest if it were a capital construction fund 
subject to the investment limitations of 
paragraphs 
(2) 
and 
(3) 
of 
section 
7518(b)(2). 
‘‘(B) All investment earnings (including 
gains and losses) from investments of the fund 
become part of the fund. 
‘‘(4) CONTRIBUTIONS
TO
THE
FUND.—The 
fund does not accept any deposits (or other 
amounts) other than cash payments with respect to 
which a deduction is allowable under subsection (a) 
and earnings (including gains and losses) from fund 
investments. 
‘‘(5) PURPOSE.—The fund is established and 
maintained for the purposes of covering costs, ex-
penses, and losses (including business interruption 
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losses) resulting from a Federally declared natural 
disaster to the extent such costs are not covered by 
insurance. 
‘‘(6) MAXIMUM BALANCE.—The balance of the 
fund does not exceed the lesser of— 
‘‘(A) the sum of— 
‘‘(i) 150 percent of the maximum de-
ductible, and 
‘‘(ii) 100 percent of the maximum co- 
insurance (to the extent not taken into ac-
count in clause (i)), 
that, in the case of a Federally declared natural 
disaster resulting in losses, the taxpayer could 
be expected to pay with respect to property and 
business interruption insurance maintained by 
the taxpayer for the line of business to which 
the fund applies and that would cover losses re-
sulting from a Federally declared natural dis-
aster, and 
‘‘(B) the maximum loss under any insur-
ance coverage that the taxpayer could reason-
ably expect to occur for the line of business in 
the case of a severe natural disaster. 
‘‘(7) FINANCIAL
STATEMENTS.—The fund or 
the balance of the fund is recorded in the taxpayer’s 
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financial statements in accordance with generally ac-
cepted accounting principles and not as a current 
asset and the footnotes to the taxpayer’s financial 
statements include a short description of the fund 
and its purposes. 
‘‘(8) INSURANCE.—The taxpayer property in-
surance maintained by the qualified taxpayer applies 
to 75 percent or more of the property used— 
‘‘(A) in the qualified taxpayer’s line of 
business to which the fund relates, and 
‘‘(B) in the United States. 
‘‘(c) QUALIFIED TAXPAYER.—For purposes of this 
section, the term ‘qualified taxpayer’ means any taxpayer 
that— 
‘‘(1) actively conducts a trade or business, and 
‘‘(2) maintains property insurance with respect 
to such trade or business that insures against losses 
in natural disasters. 
‘‘(d) FAILURE TO MEET REQUIREMENTS.—If a fund 
that was a natural disaster fund ceases to meet any of 
the requirements of subsection (b) or a taxpayer who has 
a natural disaster fund ceases to meet the requirement 
of subsection (c), the entire balance of the fund shall be 
deemed distributed in a nonqualified distribution at the 
time the fund ceases to meet such requirements. 
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‘‘(e) TAXATION OF FUND.— 
‘‘(1) IN
GENERAL.—The earnings (including 
gains and losses) from the investment and reinvest-
ment of amounts held in the fund shall not be taken 
into account in determining the gross income of the 
taxpayer that owns the fund. 
‘‘(2) NOT A SEPARATE TAXPAYER.—A natural 
disaster fund shall not be considered a separate tax-
payer for purposes of this subtitle. 
‘‘(f) TAXATION
OF
DISTRIBUTIONS
FROM
THE 
FUND.— 
‘‘(1) QUALIFIED
DISTRIBUTIONS.—For pur-
poses of this chapter, qualified distributions shall be 
treated in the same manner as proceeds from prop-
erty or business interruption insurance. 
‘‘(2) NONQUALIFIED DISTRIBUTIONS.— 
‘‘(A) IN
GENERAL.—In the case of any 
taxable year for which there is a nonqualified 
distribution— 
‘‘(i) such nonqualified distributions 
shall be excluded from the gross income of 
the taxpayer, and 
‘‘(ii) the tax imposed by this chapter 
(determined without regard to this sub-
section) shall be increased by the product 
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of the amount of such nonqualified dis-
tribution and the highest rate of tax speci-
fied in section 1 (section 11 in the case of 
a corporation). 
‘‘(B) TAX BENEFIT RULE; COORDINATION 
WITH
DEDUCTION
FOR
NET
OPERATING 
LOSSES.—Rules similar to the rules of subpara-
graphs (B) and (C) of section 7518(g)(6) shall 
apply for purposes of this paragraph. 
‘‘(3) ADDITIONAL TAX.—The tax imposed by 
this chapter for any taxable year on any taxpayer 
that a owns natural disaster fund shall be increased 
by the greater of— 
‘‘(A) 20 percent of the amount of any non- 
qualified distributions from the fund in the tax-
able year, and 
‘‘(B) an amount equal to interest, at the 
underpayment rate established under section 
6621, on the nonqualified distribution from the 
time the amount is added to the fund to the 
time the amount is distributed. 
‘‘(4) INTEREST
CALCULATION.—For purposes 
of calculating interest under paragraph (3)(B)— 
‘‘(A) all investment earnings (including 
gains or losses) in taxable year shall be treated 
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as added to the fund on the last day of the tax-
able year, and 
‘‘(B) amounts distributed from the fund 
shall be treated as distributed on a first-in, 
first-out basis. 
‘‘(g) DEFINITIONS.—For purposes of this section— 
‘‘(1) FEDERALLY
DECLARED
NATURAL
DIS-
ASTER.—The term ‘Federally declared natural dis-
aster’ means a natural disaster that is determined 
by Presidential declaration under the Robert T. 
Stafford Disaster Relief and Emergency Assistance 
Act to warrant individual or individual and public 
assistance under such Act. 
‘‘(2) NONQUALIFIED DISTRIBUTION.—The term 
‘nonqualified distribution’ means a distribution from 
a natural disaster fund other than a qualified dis-
tribution. 
‘‘(3) QUALIFIED ACCOUNT.—The term ‘quali-
fied account’ means an account with a bank (as de-
fined in section 581) or a brokerage account but 
only if the investments of such accounts are limited 
to those permitted by subsection (b)(3) and no in-
vestments are made in a related person (as defined 
in section 465(b)(3)(C)) to the taxpayer. 
‘‘(4) QUALIFIED DISTRIBUTION.— 
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‘‘(A) IN
GENERAL.—The term ‘qualified 
distribution’ means with respect to natural dis-
aster fund an amount equal to the excess of— 
‘‘(i) costs, expenses, and losses (in-
cluding losses of a type reimbursable by 
proceeds of business interruption insur-
ance) incurred by the taxpayer as a result 
of the Federally declared natural disaster 
with respect to the line or lines of business 
for which the fund was designated, over 
‘‘(ii) the proceeds of property and 
business interruption insurance paid for 
the benefit of the taxpayer with respect to 
costs, expenses, and losses described in 
clause (i). 
‘‘(B) LIMITATION.—A distribution from a 
natural disaster fund shall not be treated as a 
qualified distribution if such distribution is allo-
cated to a Federally declared natural disaster 
occurring more than 3 years before the date of 
such distribution. 
‘‘(h) SPECIAL RULES.—For purposes of this sec-
tion— 
‘‘(1) NO DOUBLE COUNTING.—Any portion of 
any deductible or coinsurance taken into account 
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under subsection (b)(6) in determining the max-
imum balance for a natural disaster fund shall not 
be taken into account in determining the maximum 
balance for another natural disaster fund. 
‘‘(2) EXCESS BALANCE.— 
‘‘(A) IN GENERAL.—If the balance of a 
natural disaster fund exceeds the maximum bal-
ance permitted by subsection (b)(6) by reason 
of investment earnings or a reduction in the 
maximum balance, the account shall not cease 
to be a natural disaster fund as the result of 
exceeding such limit if the excess is distributed 
within 120 days of the date that such excess 
first occurred. 
‘‘(B) TREATMENT OF DISTRIBUTIONS OF 
EXCESS BALANCE.—In the case of any distribu-
tion of the excess balance of a natural disaster 
fund within 120 days of the date that such ex-
cess first occurred— 
‘‘(i) paragraphs (2) and (3) of sub-
section (f) shall not apply to the distribu-
tion of such excess if distributed within 
such period, and 
‘‘(ii) the amount of such distribution 
shall be included in the gross income of the 
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taxpayer in the year such distribution was 
made. 
‘‘(C) ANTI-ABUSE
RULE.—Subparagraph 
(B) shall not apply in the case of any reduction 
in the maximum balance resulting from any ac-
tion of the taxpayer the primary purpose of 
which was to reduce the maximum balance to 
enable a distribution that would not be subject 
to the maximum tax rate calculation or the ad-
ditional tax. 
‘‘(3) 
CERTAIN
ASSET
ACQUISITIONS.—The 
transfer of a natural disaster fund (or the portion of 
a natural disaster fund) from one person to another 
person shall not constitute a nonqualified distribu-
tion if— 
‘‘(A) such transfer is part of a trans-
action— 
‘‘(i) to which section 381 applies, 
‘‘(ii) the transferee acquires substan-
tially all of the assets of the transferor 
used in the line or lines of business for 
which the fund was designated, 
‘‘(iii) the transferee acquires substan-
tially all of the assets of the transferor 
used in one, but not all, of the lines of 
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business for which the fund was des-
ignated, or 
‘‘(iv) the transferee acquires substan-
tially all of the transferor’s assets located 
in a geographical area and used in a line 
of business for which the fund was des-
ignated, and 
‘‘(B) the transferee elects to treat the ac-
quired natural disaster fund (or portion there-
of) as a natural disaster fund for the line of 
business for which the transferor had previously 
designated the fund and as a continuation of 
the fund (or pro rata portion thereof) for pur-
poses of determining the additional tax imposed 
by subsection (f)(4). 
‘‘(i) REGULATIONS.—The Secretary shall prescribe 
such regulations as may be necessary or appropriate to 
carry out the provisions of this section.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for subpart C of part II of subchapter E of chapter 1 of 
the Internal Revenue Code of 1986 is amended by insert-
ing after the item relating to section 468B the following 
new item: 
‘‘Sec. 468C. Special rules for natural disaster funds.’’. 
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(c) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2014. 
TITLE 
III—PERMANENT 
DIS-
ASTER TAX RELIEF PROVI-
SIONS 
SEC. 301. INCREASE PROPERTY REPLACEMENT PERIOD TO 
5 YEARS. 
(a) IN GENERAL.—Section 1033(a)(2) of the Internal 
Revenue Code of 1986 is amended by adding at the end 
the following: 
‘‘(F) FEDERALLY DECLARED DISASTER.— 
‘‘(i) IN GENERAL.—In the case of con-
verted property that is located in the dis-
aster area of a federally declared disaster 
occurring during a calendar year beginning 
after 2011 and that is damaged or de-
stroyed by the federally declared disaster, 
subparagraph (B)(i) shall be applied by 
substituting ‘5 years’ for ‘2 years’. 
‘‘(ii) FEDERALLY
DECLARED
DIS-
ASTER
AND
DISASTER
AREA.—For pur-
poses of clause (i), the terms ‘federally de-
clared disaster’ and ‘disaster area’ have 
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the meanings given such terms under sec-
tion 165(i)(5).’’. 
(b) 
CONFORMING
AMENDMENT.—Section 
1033(h)(1)(B) of the Internal Revenue Code of 1986 is 
amended by striking ‘‘4 years’’ and inserting ‘‘5 years’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to disasters declared after Decem-
ber 31, 2015. 
SEC. 302. WAGE CREDIT FOR SPECIFIED DISASTER-DAM-
AGED BUSINESSES. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by adding at the end the following new 
section: 
‘‘SEC. 45S. WAGE CREDIT FOR SPECIFIED DISASTER-DAM-
AGED BUSINESSES. 
‘‘(a) GENERAL RULE.—For purposes of section 38, 
in the case of an eligible employer, the specified disaster- 
damaged business wage credit for any taxable year is an 
amount equal to 40 percent of the qualified wages for such 
year. 
‘‘(b) QUALIFIED WAGES DEFINED.—For purposes of 
this section— 
‘‘(1) IN GENERAL.—The term ‘qualified wages’ 
means, with respect to any covered employee, wages 
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paid or incurred by the eligible employer to the em-
ployee who is not able to work at the disaster-dam-
aged business of the employer during an inoper-
ability period because of a federally declared dis-
aster. Such term shall not include amounts paid or 
incurred for overtime compensation. 
‘‘(2) LIMITATIONS.— 
‘‘(A) LIMITATION ON WAGES TAKEN INTO 
ACCOUNT.—The amount of the qualified wages 
with respect to any individual which may be 
taken into account with respect to a federally 
declared disaster shall not exceed $6,000. 
‘‘(B) INOPERABILITY PERIOD.—The inop-
erability period with respect to a federally de-
clared disaster is the period beginning with the 
first day the trade or business is rendered inop-
erable due to damage from the federally de-
clared disaster and ending on the earlier of— 
‘‘(i) the last day on which the trade or 
business is inoperable, or 
‘‘(ii) 16 weeks after the first day of 
such disaster. 
‘‘(c) DEFINITIONS.—For purposes of this section— 
‘‘(1) ELIGIBLE EMPLOYER.— 
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‘‘(B) who has been employed by the em-
ployer for more than 30 days before the first 
day of the federally declared disaster. 
‘‘(3) FEDERALLY
DECLARED
DISASTER
AND 
DISASTER AREA.—For purposes of clause (i), the 
terms ‘federally declared disaster’ and ‘disaster area’ 
have the meanings given such terms under section 
165(i)(5).’’. 
(b) ALLOWANCE AS GENERAL BUSINESS CREDIT.— 
Section 38(b) of the Internal Revenue Code of 1986 is 
amended by striking ‘‘plus’’ at the end of paragraph (35), 
by striking the period at the end of paragraph (36) and 
inserting ‘‘, plus’’, and by adding at the end the following: 
‘‘(37) the specified disaster-damaged business 
wage credit determined under section 45S(a).’’. 
(c) DENIAL OF DOUBLE BENEFIT.—Subsection (a) 
of section 280C of the Internal Revenue Code of 1986 is 
amended by inserting ‘‘45S(a),’’ after ‘‘45P(a)’’. 
(d) CLERICAL AMENDMENT.—The table of contents 
for subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by add-
ing at the end the following new item: 
‘‘Sec. 45S. Wage credit for specified disaster-damaged businesses.’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2015. 
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SEC. 303. DISASTER-RELATED MEDICAL EXPENSES. 
(a) IN GENERAL.—Section 213 of the Internal Rev-
enue Code of 1986 is amended by adding at the end the 
following new subsection: 
‘‘(g) DISASTER-RELATED MEDICAL EXPENSES.— 
‘‘(1) IN GENERAL.—In the case of expenses di-
rectly related to an injury caused by a federally de-
clared disaster occurring during the taxable year or 
the preceding taxable year, there shall be allowed a 
separate deduction under this section, which shall be 
determined under this section (without regard to 
this subsection), except that— 
‘‘(A) subsection (a) shall be applied by 
substituting ‘zero percent’ for ‘10 percent’, and 
‘‘(B) subsection (f) shall be applied by sub-
stituting ‘zero percent’ for ‘7.5 percent’. 
‘‘(2) COORDINATION.—Any expense taken into 
account under paragraph (1) shall not be treated as 
an expense taken into account under this section 
(without regard to this section). 
‘‘(3) FEDERALLY
DECLARED
DISASTER.—For 
purposes of this subsection, the term ‘federally de-
clared disaster’ shall have the meaning given such 
term under section 165(i)(5).’’. 
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(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply with respect to disasters occur-
ring after the date of the enactment of this Act. 
SEC. 304. EXPENSING OF QUALIFIED DISASTER EXPENSES. 
(a) IN GENERAL.—Section 198A(b)(2)(A)(ii) of the 
Internal Revenue Code of 1986, as added by section 101 
of this Act, is amended by striking ‘‘and before January 
1, 2016,’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to amounts paid or incurred after 
December 31, 2015. 
SEC. 305. LOSSES ATTRIBUTABLE TO DISASTERS. 
(a) IN GENERAL.—Section 165(h)(3)(B)(i)(I) of the 
Internal Revenue Code of 1986, as amended by section 
103 of this Act, is amended by striking ‘‘the period begin-
ning after December 31, 2011, and before January 1, 
2016,’’ and inserting ‘‘any period beginning after Decem-
ber 31, 2011,’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to disasters declared in taxable 
years beginning after December 31, 2015. 
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SEC. 306. NET OPERATING LOSSES ATTRIBUTABLE TO DIS-
ASTERS. 
(a) IN GENERAL.—Section 172(i)(1)(A)(i)(I) of the 
Internal Revenue Code of 1986 is amended by striking 
‘‘and before January 1, 2016,’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to disasters declared in taxable 
years beginning after December 31, 2015. 
SEC. 307. SPECIAL RULES FOR USE OF RETIREMENT FUNDS 
IN 
CONNECTION 
WITH 
FEDERALLY 
DE-
CLARED DISASTERS. 
(a) WITHDRAWALS.—Section 72(t)(11)(A) of the In-
ternal Revenue Code of 1986, as amended by section 108 
of this Act, is amended by striking ‘‘2011 and before Jan-
uary 1, 2016,’’ and inserting ‘‘2011,’’. 
(b) LOANS.—Section 72(p)(6)(C)(ii) of such Code is 
amended by striking ‘‘and ending on December 31, 2016’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to distributions with respect to dis-
aster declared after December 31, 2015. 
SEC. 308. ADDITIONAL EXEMPTION FOR HOUSING QUALI-
FIED DISASTER DISPLACED INDIVIDUALS. 
(a) IN GENERAL.—Section 151(f)(3)(B)(i) of the In-
ternal Revenue Code of 1986, as amended by section 109 
of this Act, is amended by striking ‘‘and before 2016’’. 
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(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2015. 
SEC. 309. EXCLUSIONS OF CERTAIN CANCELLATIONS OF IN-
DEBTEDNESS BY REASON OF DISASTERS. 
(a) IN GENERAL.—Section 108(j)(3) of the Internal 
Revenue Code of 1986, as amended by section 110 of this 
Act, is amended by striking ‘‘and before 2016’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to discharges made on or after De-
cember 31, 2015. 
SEC. 310. SPECIAL RULE FOR DETERMINING EARNED IN-
COME OF INDIVIDUALS AFFECTED BY FEDER-
ALLY DECLARED DISASTERS. 
(a) IN GENERAL.—Section 32(n)(2) of the Internal 
Revenue Code of 1986, as amended by section 111 of this 
Act, is amended by striking ‘‘and before 2016’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2015. 
SEC. 311. QUALIFIED DISASTER AREA RECOVERY BONDS. 
(a) IN GENERAL.—Section 146A(b)(4) of the Inter-
nal Revenue Code of 1986, as amended by section 114 
of this Act, is further amended by striking ‘‘and before 
January 1, 2017’’. 
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(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to obligations issued after Decem-
ber 31, 2015. 
SEC. 312. ADDITIONAL LOW-INCOME HOUSING CREDIT AL-
LOCATIONS. 
(a) IN GENERAL.—Section 42(h)(3)(J) of the Inter-
nal Revenue Code of 1986, as amended by section 115 
of this Act, is amended— 
(1) in clause (i) by striking ‘‘In the case of cal-
endar year 2016,’’ and inserting ‘‘In the case of a 
calendar year beginning after 2015,’’, 
(2) in clause (ii)(II) by striking ‘‘2015’’ and in-
serting ‘‘the preceding calendar year’’, and 
(3) in clause (iii) by striking ‘‘substituting ‘Jan-
uary 1 of the calendar year in which the taxable 
year ends’ for ‘January 1, 2015’ ’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall take effect on the date of the enactment 
of this Act. 
Æ 
VerDate Sep 11 2014 
21:36 Sep 06, 2017
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