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‘‘(2) which is— 
‘‘(A) for the abatement or control of haz-
ardous substances that were released on ac-
count of a federally declared disaster, 
‘‘(B) for the removal of debris from, or the 
demolition of structures on, real property which 
is business-related property damaged or de-
stroyed as a result of a federally declared dis-
aster, or 
‘‘(C) for the repair of business-related 
property damaged as a result of a federally de-
clared disaster, and 
‘‘(3) is otherwise chargeable to capital account. 
‘‘(c) OTHER DEFINITIONS.—For purposes of this 
section— 
‘‘(1) 
BUSINESS-RELATED
PROPERTY.—The 
term ‘business-related property’ means property— 
‘‘(A) held by the taxpayer for use in a 
trade or business or for the production of in-
come, or 
‘‘(B) described in section 1221(a)(1) in the 
hands of the taxpayer. 
‘‘(2) FEDERALLY
DECLARED
DISASTER.—The 
term ‘federally declared disaster’ has the meaning 
given such term by section 165(h)(3)(C)(i), except 
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that such term shall not include any disaster occur-
ring before January 1, 2008, or after December 31, 
2011. 
‘‘(d) DEDUCTION RECAPTURED AS ORDINARY IN-
COME
ON SALE, ETC.—Solely for purposes of section 
1245, in the case of property to which a qualified disaster 
expense would have been capitalized but for this section— 
‘‘(1) the deduction allowed by this section for 
such expense shall be treated as a deduction for de-
preciation, and 
‘‘(2) such property (if not otherwise section 
1245 property) shall be treated as section 1245 
property solely for purposes of applying section 1245 
to such deduction. 
‘‘(e) COORDINATION WITH OTHER PROVISIONS.— 
Sections 198, 280B, and 468 shall not apply to amounts 
which are treated as expenses under this section. 
‘‘(f) REGULATIONS.—The Secretary shall prescribe 
such regulations as may be necessary or appropriate to 
carry out the purposes of this section.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for part VI of subchapter B of chapter 1 is amended by 
inserting after the item relating to section 198 the fol-
lowing new item: 
‘‘Sec. 198A. Expensing of Qualified Disaster Expenses.’’. 
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(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts paid or incurred after 
December 31, 2007. 
SEC. 4. NET OPERATING LOSSES ATTRIBUTABLE TO FED-
ERALLY DECLARED DISASTERS. 
(a) IN GENERAL.—Paragraph (1) of section 172(b) 
is amended by adding at the end the following new sub-
paragraph: 
‘‘(J) CERTAIN
LOSSES
ATTRIBUTABLE 
FEDERALLY
DECLARED
DISASTERS.—In the 
case of a taxpayer who has a qualified disaster 
loss (as defined in subsection (j)), such loss 
shall be a net operating loss carryback to each 
of the 5 taxable years preceding the taxable 
year of such loss.’’. 
(b) QUALIFIED DISASTER LOSS.—Section 172 is 
amended by redesignating subsections (j) and (k) as sub-
sections (k) and (l), respectively, and by inserting after 
subsection (i) the following new subsection: 
‘‘(j) RULES RELATING
TO QUALIFIED DISASTER 
LOSSES.—For purposes of this section— 
‘‘(1) IN
GENERAL.—The term ‘qualified dis-
aster loss’ means the lesser of— 
‘‘(A) the sum of— 
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‘‘(i) the losses allowable under section 
165 for the taxable year— 
‘‘(I) attributable to a federally 
declared disaster (as defined in sec-
tion 165(h)(3)(C)(i)) occurring after 
December 31, 2007, and before Janu-
ary 1, 2012, and 
‘‘(II) occurring in a disaster area 
(as 
defined 
in 
section 
165(h)(3)(C)(ii)), and 
‘‘(ii) the deduction for the taxable 
year for qualified disaster expenses which 
is allowable under section 198A(a) or 
which would be so allowable if not other-
wise treated as an expense, or 
‘‘(B) the net operating loss for such tax-
able year. 
‘‘(2) 
COORDINATION
WITH
SUBSECTION 
(b)(2).—For purposes of applying subsection (b)(2), 
a qualified disaster loss for any taxable year shall be 
treated in a manner similar to the manner in which 
a specified liability loss is treated. 
‘‘(3) ELECTION.—Any taxpayer entitled to a 5- 
year carryback under subsection (b)(1)(J) from any 
loss year may elect to have the carryback period 
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with respect to such loss year determined without re-
gard to subsection (b)(1)(J). Such election shall be 
made in such manner as may be prescribed by the 
Secretary and shall be made by the due date (includ-
ing extensions of time) for filing the taxpayer’s re-
turn for the taxable year of the net operating loss. 
Such election, once made for any taxable year, shall 
be irrevocable for such taxable year.’’. 
(c) LOSS DEDUCTION ALLOWED IN COMPUTING AL-
TERNATIVE MINIMUM TAXABLE INCOME.—Subsection (d) 
of section 56 is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(3) NET OPERATING LOSS ATTRIBUTABLE TO 
FEDERALLY DECLARED DISASTERS.—In the case of 
a taxpayer which has a qualified disaster loss (as de-
fined by section 172(b)(1)(J)) for the taxable year, 
paragraph (1) shall be applied by increasing the 
amount determined under subparagraph (A)(ii)(I) 
thereof by the sum of the carrybacks and carryovers 
of such loss.’’. 
(d) CONFORMING AMENDMENTS.— 
(1) Clause (ii) of section 172(b)(1)(F) is 
amended by inserting ‘‘or qualified disaster loss (as 
defined in subsection (j))’’ before the period at the 
end of the last sentence. 
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