396 
‘‘(B) which is determined by the President 
before such date to warrant individual assist-
ance, or individual and public assistance, from 
the Federal Government under such Act. 
‘‘(c) CARRYBACK AND CARRYFORWARD ALLOWED.— 
‘‘(1) IN
GENERAL.—If the credit allowable 
under subsection (a) for a taxable year exceeds the 
amount of the limitation under subsection (d) for 
such taxable year (in this subsection referred to as 
the ‘unused credit year’), such excess shall be a 
credit carryback to each of the 3 taxable years pre-
ceding the unused credit year and a credit 
carryforward to each of the 20 taxable years fol-
lowing the unused credit year, except that no excess 
may be carried to a taxable year beginning before 
the date of the enactment of this section. The pre-
ceding sentence shall not apply to any credit 
carryback if such credit carryback is attributable to 
property for which a deduction for depreciation is 
not allowable. 
‘‘(2) RULES.—Rules similar to the rules of sec-
tion 39 shall apply with respect to the credit 
carryback and credit carryforward under paragraph 
(1).
397 
‘‘(d) APPLICATION WITH OTHER CREDITS.—The 
credit allowed under subsection (a) for any taxable year 
shall not exceed the excess (if any) of— 
‘‘(1) the sum of the regular tax for the taxable 
year and the tentative minimum tax for the taxable 
year, over 
‘‘(2) the sum of the credits allowable under sub-
part A and sections 27, 29, and 30.’’. 
(b) DENIAL OF DOUBLE BENEFIT.—Section 280C is 
amended by adding at the end the following new sub-
section: 
‘‘(e) 
HURRICANE
KATRINA
RELOCATION
EX-
PENSES.—No deduction shall be allowed for the portion 
of the expenses otherwise allowable as a deduction for the 
taxable year which is equal to the amount of the credit 
determined for the taxable year under section 45N(a).’’. 
(c) CONFORMING AMENDMENT.—The table of section 
for subpart B of part IV of subchapter A of chapter 1 
is amended by inserting after the item relating to section 
30C the following new item: 
‘‘Sec. 30D. Relocation expenses for victims of Hurricane Katrina.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to expenses paid or incurred after 
August 26, 2005.
398 
SEC. 745. 50-PERCENT INCOME TAX HOLIDAY. 
(a) IN GENERAL.—In the case of an individual, there 
shall be excluded from gross income for each taxable year 
beginning during the income tax holiday period an amount 
equal to the lesser of— 
(1) 50 percent of the sum of— 
(A) the eligible wages for the taxable year, 
plus 
(B) the eligible net earnings from self-em-
ployment for the taxable year, or 
(2) $35,000 ($70,000 in the case of a joint re-
turn). 
(b) INCOME TAX HOLIDAY PERIOD.—For purposes 
of this section— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the term ‘‘income tax holiday period ’’ 
means the period beginning on August 28, 2005, 
and ending on December 31, 2007. 
(2) SPECIAL
RULE
FOR
TAXABLE
YEAR
IN-
CLUDING AUGUST 28, 2005.—For purposes of sub-
section (a), any taxable year of the taxpayer which 
includes August 28, 2005, shall be treated as a tax-
able year beginning during the income tax holiday 
period, except that the eligible wages and eligible net 
earnings from self-employment of the taxpayer for 
such taxable year shall be equal to the amount of
399 
such wages or earnings determined without regard 
to this paragraph multiplied by a fraction— 
(A) the numerator of which is the number 
of days in the taxable year on and after August 
28, 2005, and 
(B) the denominator of which is the num-
ber of days in the taxable year. 
(c) ELIGIBLE WAGES.—For purposes of this section, 
the term ‘‘eligible wages’’ means wages (as defined in sec-
tion 3401(a)) received by the taxpayer during the taxable 
year for services performed by the taxpayer in the Hurri-
cane Katrina Disaster Zone. For purposes of the pre-
ceding sentence, services shall be treated as performed in 
such Zone if substantially all of such services are so per-
formed. 
(d) ELIGIBLE NET EARNINGS FROM SELF-EMPLOY-
MENT.—For purposes of this section— 
(1) IN GENERAL.—The term ‘‘eligible net earn-
ings from self-employment’’ means the net earnings 
from self-employment of the taxpayer for the taxable 
year determined under section 1402, except that— 
(A) eligible wages shall not be taken into 
account to the extent not excluded under sec-
tion 1402 (b)(1), and
400 
(B) only self-employment income (and the 
deductions attributable thereto) which are prop-
erly allocable to the active conduct of a trade or 
business within the Hurricane Katrina Disaster 
Zone shall be taken into account. 
(2) RENTAL OF PROPERTY.—For purposes of 
paragraph (1), the rental of real or personal prop-
erty shall be treated as the active conduct of a trade 
or business if— 
(A) in the case of real property, the prop-
erty is located in the Hurricane Katrina Dis-
aster Zone, and 
(B) in the case of personal property, at 
least 50 percent of the rental of the property is 
by businesses located in, or is by residents of, 
such Zone. 
The exception under section 1402(a)(1) shall not 
apply to self-employment income (and the deductions 
attributable thereto) properly allocable to a trade or 
business to which this paragraph applies. 
(e) HURRICANE KATRINA DISASTER ZONE.—The 
term ‘‘Hurricane Katrina Disaster Zone’’ has the meaning 
given such term by section 1400M(g) of the Internal Rev-
enue Code of 1986.
401 
SEC. 746. HURRICANE KATRINA DISASTER ZONE RESTORA-
TION TAX CREDIT. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 is amended by adding at the end 
the following new section: 
‘‘SEC. 45N. INVESTMENT IN HURRICANE KATRINA DIS-
ASTER ZONE PROPERTY. 
‘‘(a) ALLOWANCE OF CREDIT.—For purposes of sec-
tion 38, the Hurricane Katrina Disaster Zone restoration 
credit determined under this section shall equal the tax-
payer’s cost of Hurricane Katrina Disaster Zone property 
placed in service during the taxable year, multiplied by 
the applicable qualifying investment percentage set forth 
in subsection (b). 
‘‘(b) APPLICABLE QUALIFYING INVESTMENT PER-
CENTAGE.—For purposes of subsection (a), the applicable 
qualifying investment percentages are: 
‘‘(1) 20 percent with respect to property placed 
in service within 12 months following the date on 
which the area in which such property is placed in 
service is declared a Hurricane Katrina Disaster 
Zone. 
‘‘(2) 15 percent with respect to property placed 
in service more than 12 months but within 24 
months following such date.
402 
‘‘(3) 10 percent with respect to property placed 
in service more than 24 months but within 36 
months following such date. 
‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section— 
‘‘(1) HURRICANE
KATRINA
DISASTER
ZONE 
PROPERTY.—The term ‘Hurricane Katrina Disaster 
Zone property’ means property of a character sub-
ject to the allowance for depreciation provided in 
section 167— 
‘‘(A) which is placed in service by the tax-
payer in a Hurricane Katrina Disaster Zone, 
and 
‘‘(B) which replaces functionally similar 
property owned by such taxpayer that was dam-
aged or destroyed as a result of the major dis-
aster declared by the President in connect with 
Hurricane Katrina, regardless of whether the 
replacement property utilizes improved or more 
advanced technologies than the property being 
replaced, and 
‘‘(C) the basis of which is not taken into 
account for any other credit under this title.
403 
‘‘(2) HURRICANE KATRINA DISASTER ZONE.— 
The term ‘Hurricane Katrina Disaster Zone’ has the 
meaning given to such term by section 1400M(g). 
‘‘(3) NO REDUCTION IN BASIS.—The provisions 
of section 50(c) shall not apply to reduce the basis 
of Hurricane Katrina Disaster Zone property.’’. 
(b) ADDITIONAL
CARRYBACK
OF
CREDIT
AL-
LOWED.—Section 39(a) is amended by adding at the end 
the following new paragraph: 
‘‘(4) 3-YEAR
CARRYBACK
FOR
HURRICANE 
KATRINA DISASTER ZONE RESTORATION CREDIT.— 
Notwithstanding subsection (d), in the case of the 
Hurricane Katrina Disaster Zone restoration credit 
under section 45N— 
‘‘(A) this section shall be applied sepa-
rately from the business credit (other than the 
Hurricane Katrina Disaster Zone restoration 
credit), and 
‘‘(B) paragraph (1) shall be applied by 
substituting ‘3 taxable years’ for ‘1 taxable 
year’ in subparagraph (A) thereof.’’. 
(c) CREDIT ALLOWED AGAINST REGULAR AND MIN-
IMUM TAX.—Section 38(c)(4)(B) is amended by striking 
the period at the end of clause (ii)(II) and inserting ‘‘, 
and’’ and by adding at the end the following new clause:
404 
‘‘(iii) the credit determined under sec-
tion 45N.’’. 
(d) CONFORMING AMENDMENTS.—Subsection (b) of 
section 38 is amended by striking ‘‘and’’ at the end of 
paragraph (25), by striking the period at the end of para-
graph (26) and inserting ‘‘, and’’ by adding at the end 
the following new paragraph: 
‘‘(27) the Hurricane Katrina Disaster Zone res-
toration credit determined under section 45N.’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts paid or incurred after 
the date of the enactment of this Act with respect to prop-
erty placed in service after such date and before January 
1, 2008. 
SEC. 747. 5-YEAR CARRYBACK OF NET OPERATING LOSSES 
AND TEMPORARY SUSPENSION OF 90 PER-
CENT AMT LIMIT FOR BUSINESSES IN HURRI-
CANE KATRINA DISASTER ZONE. 
(a) IN GENERAL.—Section 172(b)(1)(H) is amended 
by striking ‘‘during 2001 or 2002’’ and inserting ‘‘during 
2005 or 2006 arising from the trade or business of any 
taxpayer located in the Hurricane Katrina Disaster Zone 
(as defined in section 1400M(g))’’. 
(b) 
TEMPORARY
SUSPENSION.—Section 
56(d)(1)(A)(ii)(I) is amended—
405 
(1) by striking ‘‘during 2001 or 2002’’ and in-
serting ‘‘during 2005 or 2006 arising from the trade 
or business of any taxpayer located in the Hurricane 
Katrina Disaster Zone (as defined in section 
1400M(g))’’, and 
(2) by striking ‘‘during 2001 and 2002’’ and in-
serting ‘‘during 2005 and 2006 arising from the 
trade or business of any taxpayer located in the 
Hurricane Katrina Disaster Zone (as defined in sec-
tion 1400M(g))’’. 
(c) EFFECTIVE DATES.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendment made by this section shall 
apply to net operating losses for taxable years end-
ing after December 31, 2004. 
(2) TEMPORARY
SUSPENSION.—The amend-
ments made by subsection (b) shall apply to taxable 
years ending before January 1, 2007. 
SEC. 748. ALLOWANCE OF INCOME TAX CREDIT TO SMALL 
BUSINESSES WHOSE OPERATIONS WERE SIG-
NIFICANTLY INTERRUPTED BY HURRICANE 
KATRINA. 
(a) ALLOWANCE OF CREDIT.— 
(1) IN GENERAL.—In the case of an eligible 
small employer, there shall be allowed as a credit
406 
against the tax imposed by subtitle A of the Internal 
Revenue Code of 1986 for any taxable year of the 
taxpayer which includes August 28 of 2005, 2006, 
or 2007, an amount equal to the lesser of— 
(A) $1,000 multiplied by the number of el-
igible employees of the employer, or 
(B) $100,000. 
(2) TREATMENT OF CREDIT.—For purposes of 
the Internal Revenue Code of 1986, except as other-
wise provided in this section, any credit allowed 
under this section shall be treated in the same man-
ner as a credit allowed under subpart B of part IV 
of subchapter A of chapter 1 of such Code. 
(b) LIMITATION BASED ON AMOUNT OF TAX.— 
(1) IN GENERAL.—The credit allowed by sub-
section (a) for any taxable year shall not exceed the 
sum of— 
(A) the regular tax for the taxable year re-
duced by the sum of the credits allowed under 
subparts A and B of part IV of subchapter A 
of chapter 1 of the Internal Revenue Code of 
1986, plus 
(B) the tax imposed by section 55(a) of 
such Code for the taxable year.
407 
(2) UNLIMITED CARRYFORWARD OF CREDIT.— 
If the amount of the credit allowable under sub-
section (a) for any taxable year exceeds the limita-
tion under paragraph (1), such excess shall be treat-
ed as a carryover to all succeeding taxable years 
and, subject to the limitation under paragraph (1), 
shall be added to the credits allowed by subpart B 
of part IV of subchapter A of chapter 1 of such 
Code for any such succeeding taxable year. 
(c) ELIGIBLE SMALL EMPLOYER AND EMPLOYEE 
DEFINED.—For purposes of this section— 
(1) ELIGIBLE SMALL EMPLOYER.— 
(A) IN
GENERAL.—The term ‘‘eligible 
small employer’’ means an employer which— 
(i) was engaged in the active conduct 
of a trade or business in a Hurricane 
Katrina disaster area on August 28, 2005, 
(ii) employed an average of more than 
1 but less than 300 employees on business 
days during the 1-year period ending on 
such date (or, if shorter, the period of its 
existence) whose principal place of employ-
ment was in such an area, 
(iii) meets the business interruption 
test of subparagraph (B). and
408 
(iv) has resumed in a Hurricane 
Katrina disaster area substantially all of 
the operations of the trade or business de-
scribed in paragraph (1) on or before De-
cember 31, 2006. 
(B) BUSINESS INTERRUPTION TEST.—An 
employer meets the requirements of this sub-
paragraph if— 
(i) the employer is required to sus-
pend all or part of the active conduct of a 
trade or business described in subpara-
graph (A)(i) by reason of Hurricane 
Katrina, and 
(ii) the gross receipts of such em-
ployer from the active conduct of the trade 
or business for the taxable year are at 
least 20 percent less than the gross re-
ceipts for the preceding taxable year (or if 
the business was not in existence for all or 
a portion of the preceding taxable year, at 
least 20 percent less than the gross re-
ceipts which could have been reasonably 
been expected to receive based on the gross 
receipts of the trade or business during its 
existence).
409 
(2) ELIGIBLE EMPLOYEE.—The term ‘‘eligible 
employee’’ means an employee of an employer— 
(A) who is employed in the active conduct 
of the trade or business described in paragraph 
(1)(A)(i) on the date substantially all of the op-
erations of such trade or business were re-
sumed, and 
(B) whose principal place of employment is 
in a Hurricane Katrina disaster area. 
For purposes of subsection (a)(1)(A), the number of 
eligible employees with respect to any trade or busi-
ness shall not exceed the average number of employ-
ees described in paragraph (1)(A)(ii). 
(d) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section— 
(1) HURRICANE
KATRINA
DISASTER
AREA.— 
The term ‘‘Hurricane Katrina disaster area’’ means 
an area— 
(A) with respect to which a major disaster 
has been declared by the President before Sep-
tember 14, 2005, under section 401 of the Rob-
ert T. Stafford Disaster Relief and Emergency 
Assistance Act in connection with Hurricane 
Katrina, and
410 
(B) which is determined by the President 
before such date to warrant individual assist-
ance, or individual and public assistance, from 
the Federal Government under such Act. 
(2) AGGREGATION RULE.—All employers treat-
ed as a single employer under subsections (a) or (b) 
of section 52 of the Internal Revenue Code of 1986 
shall be treated as 1 employer. 
(3) APPLICATION
OF
DOLLAR
LIMIT.—The 
$100,000 limit under subsection (a) (1)(B) shall— 
(A) in the case of employers aggregated 
under paragraph (2), be allocated in such man-
ner as such employers provide, 
(B) in the case of a partnership, S cor-
poration, trust, or other passthru entity, be ap-
plied at both the entity and the partner, share-
holder, beneficiary, or other beneficial owner 
level, and 
(C) in the case of a taxpayer operating 
more than 1 trade or business, apply on an ag-
gregate base to all such trades or businesses. 
(4) GROSS
RECEIPTS.—Rules similar to the 
rules of subparagraphs (B), (C), and (D) of section 
448(c)(3) of such Code shall apply in determining 
gross receipts for any period.
411 
(e) TREATMENT OF PERSONS NOT ABLE TO USE 
ENTIRE CREDIT.— 
(1) IN GENERAL.—A taxpayer may transfer any 
credit allowed under subsection (a) through an as-
signment to any other person . Such transfer may 
be revoked only with the consent of the Secretary of 
the Treasury. 
(2) REGULATIONS.—The Secretary of the 
Treasury shall prescribe such regulations as nec-
essary to ensure that any credit described in para-
graph (1) is claimed once and not reassigned by 
such other person. 
(3) SATISFACTION OF COMMUNITY REINVEST-
MENT ACT REQUIREMENTS.—A financial institution 
that purchases any credit under paragraph (1) shall 
be considered, for purposes of an evaluation under 
section 804 of the Community Reinvestment Act of 
1977 (12 U.S.C. 2903), to be meeting the credit 
needs of its entire community, including low- and 
moderate-income neighborhoods. 
SEC. 749. HOME PURCHASE BY VICTIMS OF HURRICANE 
KATRINA. 
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 (relating to nonrefundable personal
412 
credits) is amended by inserting after section 25D the fol-
lowing new section: 
‘‘SEC. 25E. HOME PURCHASE BY INDIVIDUALS DISPLACED 
BY HURRICANE KATRINA. 
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an eli-
gible homebuyer who purchases a principal residence in 
a Hurricane Katrina Disaster Zone, there shall be allowed 
as a credit against the tax imposed by this chapter for 
the taxable year an amount equal to so much of the pur-
chase price of the residence as does not exceed $50,000. 
‘‘(b) LIMITATION BASED ON MODIFIED ADJUSTED 
GROSS INCOME.— 
‘‘(1) IN GENERAL.—The amount allowable as a 
credit under subsection (a) (determined without re-
gard to this subsection and subsection (d)) for the 
taxable year shall be reduced (but not below zero) by 
the amount which bears the same ratio to the credit 
so allowable as— 
‘‘(A) the excess (if any) of— 
‘‘(i) the taxpayer’s modified adjusted 
gross income for such taxable year, over 
‘‘(ii) $70,000 ($110,000 in the case of 
a joint return), bears to 
‘‘(B) $20,000.
413 
‘‘(2) MODIFIED
ADJUSTED
GROSS
INCOME.— 
For purposes of paragraph (1), the term ‘modified 
adjusted gross income’ means the adjusted gross in-
come of the taxpayer for the taxable year increased 
by any amount excluded from gross income under 
section 911, 931, or 933. 
‘‘(c) ELIGIBLE HOMEBUYER.—For purposes of this 
section— 
‘‘(1) IN GENERAL.—The term ‘eligible home-
buyer’ means any individual if— 
‘‘(A) on August 29, 2005, the principal 
place of abode of such individual (and if mar-
ried, such individual’s spouse) was located in a 
Hurricane Katrina Disaster Zone, and such 
principal place of abode was rendered uninhab-
itable by Hurricane Katrina, and 
‘‘(B) the principal residence for which the 
credit is allowed under subsection (a) is located 
in the same State as such principal place of 
abode. 
‘‘(2) ONE-TIME ONLY.—If an individual is al-
lowed a credit under this section with respect to any 
principal residence, such individual may not be al-
lowed a credit under this section with respect to any 
other principal residence.
414 
‘‘(3) PRINCIPAL RESIDENCE.—The term ‘prin-
cipal residence’ has the same meaning as when used 
in section 121. 
‘‘(d) APPLICATION WITH OTHER CREDITS.—The 
credit allowed under subsection (a) for any taxable year 
shall not exceed the excess (if any) of— 
‘‘(1) the sum of the regular tax for the taxable 
year and the tentative minimum tax for the taxable 
year, over 
‘‘(2) the sum of the credits allowable under this 
subpart and sections 27, 29, and 30. 
‘‘(e) CARRYOVER OF CREDIT.—If the credit allowable 
under subsection (a) exceeds the limitation imposed by 
section 26(a) for such taxable year reduced by the sum 
of the credits allowable under this subpart (other than this 
section and sections 23, 24, 25B, and 1400C) such excess 
shall be carried to the succeeding taxable year and added 
to the credit allowable under subsection (a) for such tax-
able year. 
‘‘(f) OTHER DEFINITIONS AND SPECIAL RULES.— 
For purposes of this section— 
‘‘(1) HURRICANE KATRINA DISASTER ZONE.— 
The term ‘Hurricane Katrina Disaster Zone’ has the 
meaning given to such term by section 1400M(g). 
‘‘(2) ALLOCATION OF DOLLAR LIMITATION.—
415 
‘‘(A) MARRIED INDIVIDUALS FILING SEPA-
RATELY.—In the case of a married individual 
filing a separate return, subsection (a) shall be 
applied by substituting ‘$25,000’ for ‘$50,000’. 
‘‘(B) OTHER TAXPAYERS.—If 2 or more 
individuals who are not married purchase a 
principal residence, the amount of the credit al-
lowed under subsection (a) shall be allocated 
among such individuals in such manner as the 
Secretary may prescribe, except that the total 
amount of the credits allowed to all such indi-
viduals shall not exceed $50,000. 
‘‘(3) PURCHASE.— 
‘‘(A) IN GENERAL.—The term ‘purchase’ 
means any acquisition, but only if— 
‘‘(i) the property is not acquired from 
a person whose relationship to the person 
acquiring it would result in the disallow-
ance of losses under section 267 or 707(b) 
(but, in applying section 267(b) and (c) for 
purposes of this section, paragraph (4) of 
section 267(c) shall be treated as providing 
that the family of an individual shall in-
clude only his spouse, ancestors, and lineal 
descendants), and
416 
‘‘(ii) the basis of the property in the 
hands of the person acquiring it is not de-
termined— 
‘‘(I) in whole or in part by ref-
erence to the adjusted basis of such 
property in the hands of the person 
from whom acquired, or 
‘‘(II) under section 1014(a) (re-
lating to property acquired from a de-
cedent). 
‘‘(B) CONSTRUCTION.—A residence which 
is constructed by the taxpayer shall be treated 
as purchased by the taxpayer on the date the 
taxpayer first occupies such residence. 
‘‘(4) PURCHASE
PRICE.—The term ‘purchase 
price’ means the adjusted basis of the principal resi-
dence on the date such residence is purchased. 
‘‘(g) REPORTING.—If the Secretary requires informa-
tion reporting under section 6045 by a person described 
in subsection (e)(2) thereof to verify the eligibility of tax-
payers for the credit allowable by this section, the excep-
tion provided by section 6045(e)(5) shall not apply. 
‘‘(h) BASIS ADJUSTMENT.—For purposes of this sub-
title, if a credit is allowed under this section with respect 
to the purchase of any residence, the basis of such resi-
417 
dence shall be reduced by the amount of the credit so al-
lowed. 
‘‘(i) TREATMENT OF PERSONS NOT ABLE TO USE 
ENTIRE CREDIT.— 
‘‘(1) IN GENERAL.—A taxpayer may transfer 
any credit allowed under subsection (a) through an 
assignment to any other person . Such transfer may 
be revoked only with the consent of the Secretary of 
the Treasury. 
‘‘(2) REGULATIONS.—The Secretary of the 
Treasury shall prescribe such regulations as nec-
essary to ensure that any credit described in para-
graph (1) is claimed once and not reassigned by 
such other person. 
‘‘(3) SATISFACTION OF COMMUNITY REINVEST-
MENT ACT REQUIREMENTS.—A financial institution 
that purchases any credit under paragraph (1) shall 
be considered, for purposes of an evaluation under 
section 804 of the Community Reinvestment Act of 
1977 (12 U.S.C. 2903), to be meeting the credit 
needs of its entire community, including low- and 
moderate-income neighborhoods. 
‘‘(j) APPLICATION OF SECTION.—This section shall 
apply to property purchased after August 28, 2005, and 
before January 1, 2007.’’.
418 
(b) CONFORMING AMENDMENT.—Section 1016(a) of 
such Code is amended by striking ‘‘and’’ at the end of 
paragraph (36), by striking the period at the end of para-
graph (37) and inserting ‘‘, and’’, and by adding at the 
end the following new paragraph: 
‘‘(38) to the extent provided in section 
25E(h).’’. 
(c) CLERICAL AMENDMENT.—The table of sections 
for subpart A of part IV of subchapter A of chapter 1 
of such Code is amended by inserting after the item relat-
ing to section 25D the following new item: 
‘‘Sec. 25E. Home purchase by individuals displaced by Hurricane 
Katrina.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years ending after the 
date of the enactment of this Act. 
SEC. 750. EXPEDITED REFUND CLAIMS. 
The Commissioner of Internal Revenue shall establish 
a special office to expedite any refund claims resulting 
from the provisions of, and amendments made by, this 
Act.
419 
SEC. 751. APPLICATION OF NEW MARKET TAX CREDIT TO 
INVESTMENTS 
IN 
COMMUNITY 
DEVELOP-
MENT ENTITIES SERVING AREAS AFFECTED 
BY HURRICANE KATRINA. 
(a) IN GENERAL.—Subsection (e) of section 45D is 
amended by adding at the end the following new para-
graph: 
‘‘(6) 
AREAS
AFFECTED
BY
HURRICANE 
KATRINA.—The term ‘low-income community’ shall 
include any Hurricane Katrina Disaster Zone (as 
defined in section 1400M(g)).’’. 
(b) INCREASE
IN NATIONAL LIMITATION.—Para-
graph (1) of section 45D(f) is amended by striking sub-
paragraphs (C) and (D) and inserting after subparagraph 
(B) the following new subparagraphs: 
‘‘(C) $6,000,000,000 for 2005, of which 
$4,000,000,000 is allocated among qualified 
community development entities to make quali-
fied low-income community investments within 
a low-income community described in subsection 
(e)(6), and 
‘‘(D) $6,500,000,000 for 2006 and 2007, 
of which $3,000,000,000 for each year is allo-
cated among qualified community development 
entities to make qualified low-income commu-
420 
nity investments within a low-income commu-
nity described in subsection (e)(6).’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to investments made after August 
29, 2005. 
SEC. 
752. 
MODIFICATIONS 
TO 
LOW-INCOME 
HOUSING 
CREDIT. 
(a) MODIFICATION OF CREDIT ALLOCATION.—In the 
case of the State of Louisiana— 
(1) section 42(h)(2)(C)(ii)(I) of the Internal 
Revenue Code of 1986 (relating to State housing 
credit ceiling) shall be applied by substituting 
‘‘$3.70’’ for ‘‘$1.75’’ for calendar years 2006 and 
2007, and 
(2) section 42(h)(2)(D)(i) of such Code (relat-
ing to unused housing credit carryovers allocated 
among certain States) shall not apply to the State’s 
unused housing credit carryover for calendar year 
2006. 
(b) MODIFICATION
OF
QUALIFIED
LOW-INCOME 
HOUSING PROJECT.— 
(1) IN
GENERAL.—In determining if any 
project for residential rental property located in any 
Hurricane Katrina disaster area (as defined in sec-
tion 700A) in the State of Louisiana and placed in
421 
service after the date of the enactment of this Act 
in any taxable year beginning in 2005, 2006, or 
2007, is a qualified low-income housing property 
under section 42(g)(1) of the Internal Revenue Code 
of 1986, such section shall be applied by allowing 
the taxpayer to elect to meet the requirements of 
paragraph (2). 
(2) 60-80 TEST.—A project described in para-
graph (1) meets the requirements of this paragraph 
if 60 percent or more of the residential units in such 
project are both rent-restricted and occupied by indi-
viduals whose income is 80 percent or less of area 
median income. 
(c) MODIFICATION OF HIGH COST AREA DETER-
MINATION.—In the case of any building located in any 
Hurricane Katrina disaster area (as defined in section 
700A) in the State of Louisiana and placed in service after 
the date of the enactment of this Act in any taxable year 
beginning in 2005, 2006, or 2007, section 42(d)(5)(C) 
shall apply by substituting ‘‘not less than 130 percent nor 
more than 200 percent (as determined under section 
42(m)(2) by the housing credit agency)’’ for ‘‘130 per-
cent’’. 
(d) AUTHORIZATION OF REGULATIONS FOR LIHTC 
PROPERTIES FINANCED WITH BONDS.—Section 142(d)
422 
(relating to qualified residential rental project) is amended 
by adding at the end the following new paragraph: 
‘‘(8) REGULATIONS.—The Secretary shall pre-
scribe such regulations as may be necessary or ap-
propriate to carry out the purposes of this sub-
section, including regulations— 
‘‘(A) dealing with— 
‘‘(i) projects which include more than 
1 building or only a portion of a building, 
‘‘(ii) buildings which are placed in 
service in portions, 
‘‘(B) providing for the application of this 
subsection to short taxable years, 
‘‘(C) preventing the avoidance of the rules 
of this subsection, and 
‘‘(D) providing the opportunity for housing 
credit agencies to correct administrative errors 
and omissions with respect to allocations and 
record keeping within a reasonable period after 
their discovery, taking into account the avail-
ability of regulations and other administrative 
guidance from the Secretary.’’.
423 
SEC. 753. ESTATE TAX RELIEF FOR HURRICANE KATRINA 
VICITMS. 
(a) IN GENERAL.—Subsection (b) of section 2201 is 
amended by striking ‘‘and’’ at the end of paragraph (2), 
by striking the period at the end of paragraph (3) and 
inserting ‘‘, and’’, and by adding at the end the following 
new paragraph:: 
‘‘(4) any specified Hurricane Katrina victim.’’. 
(b) SPECIFIED HURRICANE KATRINA VICTIM.—Sec-
tion 2201 is amended by adding at the end the following 
new subsection: 
‘‘(e) SPECIFIED HURRICANE KATRINA VICTIM.—For 
purposes of this section, the term ‘specified Hurricane 
Katrina victim’ means any decedent who dies in a Hurri-
cane Katrina Disaster Zone (as defined in section 
1400M(g)) as a result of wounds, injury, or illness, or the 
inability to obtain treatment for an existing illness by rea-
son of Hurricane Katrina.’’. 
(c) CLERICAL AMENDMENTS.— 
(1) The heading of section 2201 is amended by 
striking ‘‘AND DEATHS OF VICTIMS OF CERTAIN 
TERRORIST
ATTACKS’’ and inserting ‘‘DEATHS 
OF VICTIMS OF CERTAIN TERRORIST ATTACKS, 
AND
DEATHS
OF
VICTIMS
OF
HURRICANE 
KATRINA’’.
424 
(2) The item relating to section 2201 in the 
table of sections for subchapter C of chapter 11 is 
amended by striking ‘‘and deaths of victims of cer-
tain terrorist attacks’’ and inserting ‘‘deaths of vic-
tims of certain terrorist attacks, and deaths of vic-
tims of Hurricane Katrina’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to estates of decedents dying on 
or after August 29, 2005. 
SEC. 754. ISSUANCE OF GULF OPPORTUNITY BONDS. 
Section 3105 of title 31, United States Code, is 
amended by adding at the end the following new sub-
section: 
‘‘(f) The Secretary may designate one or more series 
of bonds or certificates (or any portion thereof) under this 
section as ‘Gulf Opportunity Bonds’ in response to the 
devastation of Hurricane Katrina on August 28, 2005.’’. 
TITLE VIII—LAW ENFORCEMENT 
IMPROVEMENTS 
SEC. 801. DEFINITION OF UNITS OF LOCAL GOVERNMENT. 
For the purposes of eligibility for grant programs ad-
ministered by the Department of Justice and Department 
of Homeland Security in the State of Louisiana, parish 
Sheriffs or District Attorneys are to be considered the unit 
of local government.
425 
SEC. 802. SPECIAL INSPECTOR GENERAL FOR RELIEF AND 
RECONSTRUCTION. 
(a) SHORT TITLE.—This section may be cited as the 
‘‘Special Inspector General for Relief and Reconstruction 
Act of 2005’’. 
(b) REDESIGNATION.—(1) Section 3001 of the Emer-
gency Supplemental Appropriations Act for Defense and 
for the Reconstruction of Iraq and Afghanistan, 2004 
(Public Law 108–106; 117 Stat. 1234; 5 U.S.C. App. 3 
section 8G note) is amended— 
(A) in subsection (b), by striking ‘‘Office of the 
Special Inspector General for Iraq Reconstruction’’ 
and inserting ‘‘Office of the Special Inspector Gen-
eral for Relief and Reconstruction’’; and 
(B) in subsection (c)(1), by striking all after 
‘‘The head of the Office of the Special Inspector 
General’’ and inserting ‘‘for Relief and Reconstruc-
tion is the Special Inspector General for Relief and 
Reconstruction (in this section referred to as the ‘In-
spector General’). If a vacancy occurs after the serv-
ice of the individual as provided under subsection (b) 
of the Special Inspector General for Relief and Re-
construction Act of 2005, the Inspector General 
shall be appointed by the Director of the Office of 
Management and Budget.’’.
426 
(2)(A) The heading of such section is amended to 
read as follows: 
‘‘SEC. 3001. SPECIAL INSPECTOR GENERAL FOR RELIEF 
AND RECONSTRUCTION.’’. 
(B) The heading of title III of such Act is amended 
to read as follows: 
‘‘TITLE III—SPECIAL INSPECTOR 
GENERAL FOR RELIEF AND 
RECONSTRUCTION’’. 
(c) CONTINUATION IN OFFICE.—The individual serv-
ing as the Special Inspector General for Iraq Reconstruc-
tion as of the date of the enactment of this Act may con-
tinue to serve as the Special Inspector General for Relief 
and Reconstruction (with all additional duties and respon-
sibilities as provided under this section) after that date 
without reappointment under paragraph (1) of section 
3001(c) of the Emergency Supplemental Appropriations 
Act for Defense and for the Reconstruction of Iraq and 
Afghanistan, 2004, but remaining subject to removal as 
specified in paragraph (4) of that section. 
(d) PURPOSES.—Subsection (a) of such section is 
amended— 
(1) in paragraph (1), by inserting ‘‘and for 
Hurricane Katrina recovery activities’’ after ‘‘Iraq 
Relief and Reconstruction Fund’’;
427 
(2) in paragraph (3), by striking ‘‘the Secretary 
of State and the Secretary of Defense’’ and inserting 
‘‘the Secretary of State, the Secretary of Homeland 
Security, the Secretary of Defense, and the heads of 
other Federal agencies, as appropriate,’’. 
(e) RESPONSIBILITIES
OF ASSISTANT INSPECTOR 
GENERAL FOR AUDITING.—Subsection (d) of such section 
is amended to read as follows: 
‘‘(d) ASSISTANT INSPECTORS GENERAL.—(1) The 
Inspector General shall, in accordance with applicable laws 
and regulations governing the civil service— 
‘‘(A) appoint 1 or more Assistant Inspectors 
General for Auditing who shall have the responsi-
bility for supervising the performance of auditing ac-
tivities relating to— 
‘‘(i) programs and operations supported by 
the Iraq Relief and Reconstruction Fund; and 
‘‘(ii) programs and operations relating to 
Hurricane Katrina recovery activities; and 
‘‘(B) appoint 1 or more Assistant Inspectors 
General for Investigations who shall have the re-
sponsibility for supervising the performance of inves-
tigative activities relating to such programs and op-
erations.’’.
428 
(f) SUPERVISION.—Such section is further amend-
ed— 
(1) in subsection (e)— 
(A) in paragraph (1), by striking ‘‘the Sec-
retary of State and the Secretary of Defense’’ 
and inserting ‘‘the Director of the Office of 
Management and Budget, the Secretary of 
State, and the Secretary of Defense’’; and 
(B) in paragraph (2)— 
(i) by striking ‘‘Department of De-
fense, the Department of State, or the 
United States Agency for International 
Development’’ and inserting ‘‘Federal Gov-
ernment’’; and 
(ii) by inserting ‘‘and Hurricane 
Katrina recovery activities’’ after ‘‘Iraq 
Relief and Reconstruction Fund’’; 
(2) in subsection (f)— 
(A) in paragraph (1)— 
(i) by inserting ‘‘(A)’’ after ‘‘(1)’’; 
(ii) by redesignating subparagraphs 
(A) through (E) as clauses (i) through (v), 
respectively; and 
(iii) by adding at the end the fol-
lowing:
429 
‘‘(B) It shall be the duty of the Inspector 
General to conduct and coordinate audits and 
investigations of the treatment, handling, and 
expenditure of amounts appropriated or other-
wise made available for Hurricane Katrina re-
covery by the Federal Government, and of the 
programs, operations, and contracts carried out 
utilizing such funds, including— 
‘‘(i) the oversight and accounting of 
the obligation and expenditure of such 
funds; 
‘‘(ii) the monitoring and review of re-
construction activities funded by such 
funds; 
‘‘(iii) the monitoring and review of 
contracts funded by such funds; 
‘‘(iv) the monitoring and review of the 
transfer of such funds and associated in-
formation between and among depart-
ments, agencies, and entities of the United 
States, State and local governments, and 
private and nongovernmental entities; 
‘‘(v) the maintenance of records on 
the use of such funds to facilitate future
430 
audits and investigations of the use of such 
funds; and 
‘‘(vi) the monitoring of Federal grants 
and benefit programs.’’; and 
(B) in paragraph (4)— 
(i) by inserting ‘‘(A)’’ after ‘‘(4)’’; 
(ii) by striking all after ‘‘cooperation 
of’’ and inserting ‘‘the inspectors general 
and auditing entities of all other Federal 
departments and agencies, and State and 
local government entities.’’; and 
(iii) by adding at the end the fol-
lowing: 
‘‘(B)(i) The Inspector General shall en-
sure, to the greatest extent possible, that the 
activities of the Inspector General do not dupli-
cate audits and investigations of inspectors gen-
eral and other auditors of Federal departments 
and agencies, and State and local government 
entities. 
‘‘(ii) The Inspector General shall notify the 
inspector general of the relevant agency or de-
partment before initiating an audit or investiga-
tion relating to Hurricane Katrina activities.
431 
‘‘(iii) Nothing in this section shall be con-
strued to limit the statutory authority of inspec-
tors general to conduct audits or investigations 
relating to Hurricane Katrina activities.’’; 
(3) in subsection (h)(4)(B), by striking ‘‘Sec-
retary of State or Secretary of Defense’’ and insert-
ing ‘‘Director of the Office of Management and 
Budget and heads of relevant agencies’’; and 
(4) in subsection (h)(5)— 
(A) by inserting ‘‘(A)’’ after ‘‘(5)’’; 
(B) by inserting ‘‘for activities relating to 
Iraq’’ after ‘‘operation of such offices’’; and 
(C) by adding at the end the following: 
‘‘(B) The Secretary of Homeland Security 
shall provide the Inspector General with appro-
priate and adequate office space, together with 
such equipment, office supplies, and commu-
nications facilities and services as may be nec-
essary for the operations of such offices for ac-
tivities relating to Hurricane Katrina, and shall 
provide necessary maintenance services for such 
offices and equipment and facilities located 
therein.’’.
432 
(g) REPORTS RELATING TO THE IRAQI RELIEF AND 
RECONSTRUCTION.—Subsection (i) of such section is 
amended by adding at the end the following: 
‘‘(7)(A) The Inspector General shall also submit 
each report under this subsection to the Secretary of 
State and the Secretary of Defense. 
‘‘(B)(i) Not later than 30 days after receipt of 
a report under subparagraph (A), the Secretary of 
State and the Secretary of Defense may submit to 
the appropriate committees of Congress any com-
ments on the matters covered by the report as the 
Secretary of State or the Secretary of Defense, as 
the case may be, considers appropriate. 
‘‘(ii) A report under this subparagraph may in-
clude a classified annex if the Secretary of State or 
the Secretary of Defense, as the case may be, con-
siders it necessary.’’. 
(h) REPORTS RELATING TO HURRICANE KATRINA 
RELIEF AND RECONSTRUCTION.—Subsection (j) of such 
section is amended to read as follows: 
‘‘(j) REPORTS RELATING TO HURRICANE KATRINA 
RELIEF AND RECONSTRUCTION.—(1)(A) At the end of 
each calendar quarter, beginning with the first full quarter 
after the date of enactment of the Special Inspector Gen-
eral for Relief and Reconstruction Act of 2005, the Inspec-
433 
tor General shall submit to the appropriate committees of 
Congress a report summarizing for the period of that 
quarter the activities of the Inspector General and of the 
Hurricane Katrina recovery activities of the Federal Gov-
ernment. Each report shall include, for the period covered 
by such report, a detailed statement of all obligations, ex-
penditures, and revenues associated with recovery activi-
ties for Hurricane Katrina, including the following: 
‘‘(i) Obligations and expenditures of appro-
priated funds. 
‘‘(ii) Accounting of the costs incurred to date 
for Hurricane Katrina recovery, together with the 
estimate of the Federal Government’s costs to com-
plete each project and each program. 
‘‘(iii) Operating expenses of any Federal de-
partments, agencies, or entities receiving appro-
priated funds for Hurricane Katrina recovery activi-
ties. 
‘‘(iv) In the case of any contract described in 
paragraph (2)— 
‘‘(I) the amount of the contract or other 
agreement; 
‘‘(II) a brief discussion of the scope of the 
contract or other agreement;
434 
‘‘(III) a discussion of how the contracting 
department or agency identified, and solicited 
offers from, potential contractors to perform 
the contract, together with a list of the poten-
tial contractors that were issued solicitations 
for the offers; and 
‘‘(IV) the justification and approval docu-
ments on which was based the determination to 
use procedures other than procedures that pro-
vide for full and open competition. 
‘‘(B) The first quarterly report required to be sub-
mitted under subparagraph (A) shall also summarize ac-
tivities for Hurricane Katrina recovery undertaken before 
that quarter. 
‘‘(2) A contract described in this paragraph is any 
major contract or other agreement that is entered into by 
any department or agency of the United States Govern-
ment that involves the use of amounts appropriated or 
otherwise made available for Hurricane Katrina recovery 
with any public or private sector entity. 
‘‘(3) Not later than 45 days after the date of enact-
ment of the Special Inspector General for Relief and Re-
construction Act of 2005, the Inspector General shall sub-
mit to the appropriate committees of Congress an interim 
report on the status of Hurricane Katrina recovery activi-
435 
ties of the Federal Government. The interim report shall 
include the following: 
‘‘(A) The operational activities of the Office of 
the Special Inspector General for Relief and Recon-
struction. 
‘‘(B) The status of auditors and investigators 
deployed to the Gulf of Mexico region of the United 
States. 
‘‘(C) A strategic plan for oversight, including 
audits of no bid contracts. 
‘‘(D) Vulnerabilities identified and immediate 
actions to address such vulnerabilities. 
‘‘(E) Measures taken to coordinate interagency 
oversight elements. 
‘‘(4) Not later than March 31, 2006, and semiannu-
ally thereafter, the Inspector General shall submit to the 
appropriate committees of Congress a report meeting the 
requirements of section 5 of the Inspector General Act of 
1978 (5 U.S.C. App.). 
‘‘(5) The Inspector General shall publish each report 
under this subsection on an accessible Federal Govern-
ment Internet Web site. 
‘‘(6) Nothing in this subsection shall be construed to 
authorize the public disclosure of information that is—
436 
‘‘(A) specifically prohibited from disclosure by 
any other provision of law; 
‘‘(B) specifically required by Executive order to 
be protected from disclosure in the interest of na-
tional defense or national security or in the conduct 
of foreign affairs; or 
‘‘(C) a part of an ongoing criminal investiga-
tion. 
‘‘(7)(A) The Inspector General shall also submit each 
report under this subsection to the Director of the Office 
of Management and Budget, Secretary of Defense, or 
heads of other appropriate agencies. 
‘‘(B) Not later than 30 days after receipt of a 
report under paragraph (1), the Director of the Of-
fice of Management and Budget and the heads of 
other appropriate agencies may submit to the appro-
priate committees of Congress any comments on the 
matters covered by the report as the Director of the 
Office of Management and Budget and heads of rel-
evant agencies consider appropriate. 
‘‘(8) The Inspector General shall respond to any rea-
sonable summons to appear and testify before any duly 
constituted committee of Congress.’’. 
(i) TRANSPARENCY.—Subsection (k) of such section 
is amended—
437 
(1) in paragraph (1), by striking ‘‘subsection 
(i), the Secretary of State and the Secretary of De-
fense shall jointly’’ and inserting ‘‘subsection (i) or 
(j), the Director of the Office of Management and 
Budget and the heads of the relevant departments 
shall’’; and 
(2) in paragraph (2), by striking ‘‘subsection 
(j)(2) of comments on a report under subsection (i), 
the Secretary of State and the Secretary of Defense 
shall jointly’’ and inserting ‘‘subsection (i)(7)(B) or 
(j)(7)(B) of comments on a report under subsection 
(i) or (j), the Director of the Office of Management 
and Budget and the heads of relevant departments 
shall’’. 
(j) WAIVER.—Subsection (l) of such section is 
amended— 
(1) in paragraph (1), by inserting ‘‘or para-
graph (1) or (3) of subsection (j)’’ after ‘‘subsection 
(i)’’; and 
(2) in paragraph (2), by inserting ‘‘or para-
graph (1) or (3) of subsection (j)’’ after ‘‘subsection 
(i)’’. 
(k) APPROPRIATE COMMITTEES
OF CONGRESS.— 
Subsection (m) of such section is amended—
438 
(1) in paragraph (1), by striking ‘‘and Foreign 
Relations’’ and inserting ‘‘Foreign Relations, and 
Homeland Security and Governmental Affairs’’; and 
(2) in paragraph (2), by striking ‘‘and Inter-
national Relations’’ and inserting ‘‘International Re-
lations, and Homeland Security’’. 
(l) FUNDING.—Subsection (n) of such section is 
amended by adding at the end the following: 
‘‘(3) There are authorized to be appropriated to 
the Office of the Special Inspector General for Relief 
and Reconstruction to carry out the responsibilities 
of the Special Inspector General relating to Hurri-
cane Katrina recovery $80,000,000 for fiscal year 
2006.’’. 
(m) TERMINATION.—Subsection (o) of such section 
is amended to read as follows: 
‘‘(o) TERMINATION.—(1)(A) The responsibilities of 
the Office of the Special Inspector General for Relief and 
Reconstruction with respect to the Iraq Relief and Recon-
struction Fund shall terminate on the date that is 10 
months after the date, as determined by the Secretary of 
State and Secretary of Defense, on which 80 percent of 
the amounts appropriated or otherwise made available to 
the Iraq Relief and Reconstruction Fund by chapter 2 of 
title II of this Act have been obligated.