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SEC. 108. SPECIAL RULE FOR DETERMINING EARNED IN-
COME. 
(a) IN GENERAL.—In the case of a qualified indi-
vidual, if the earned income of the taxpayer for the taxable 
year of such taxpayer which includes August 28, 2005, 
is less than the earned income which is attributable to the 
taxpayer for the preceding taxable year, the credits al-
lowed under sections 24(d) and 32 of the Internal Revenue 
Code of 1986 may, at the election of the taxpayer, be de-
termined by substituting— 
(1) such earned income for the preceding tax-
able year, for 
(2) such earned income for the taxable year 
which includes August 28, 2005. 
(b) QUALIFIED INDIVIDUAL.—For purposes of this 
section, the term ‘‘qualified individual’’ means any indi-
vidual who was (as of August 28, 2005) a resident of any 
area which is determined by the President to warrant indi-
vidual or individual and public assistance from the Federal 
Government under the Robert T. Stafford Disaster Relief 
and Emergency Assistance Act by reason of Hurricane 
Katrina. 
(c) EARNED INCOME.—For purposes of this section, 
the term ‘‘earned income’’ has the meaning given such 
term under section 32(c) of such Code. 
(d) SPECIAL RULES.—
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(1) APPLICATION
TO
JOINT
RETURNS.—For 
purpose of subsection (a), in the case of a joint re-
turn for a taxable year which includes August 28, 
2005, 
(A) such subsection shall apply if either 
spouse is a qualified individual, 
(B) the earned income which is attrib-
utable to the taxpayer for the preceding taxable 
year shall be the sum of the earned income 
which is attributable to each spouse for such 
preceding taxable year, and 
(C) the substitution described in such sub-
section shall apply only with respect to earned 
income which is attributable to a spouse who is 
a qualified individual. 
(2) UNIFORM
APPLICATION
OF
ELECTION.— 
Any election made under subsection (a) shall apply 
with respect to both section 24(d) and section 32 of 
such Code. 
(3) ERRORS
TREATED
AS
MATHEMATICAL 
ERROR.—For purposes of section 6213 of such 
Code, an incorrect use on a return of earned income 
pursuant to subsection (a) shall be treated as a 
mathematical or clerical error.
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(4) NO EFFECT ON DETERMINATION OF GROSS 
INCOME.—For purposes of the Internal Revenue 
Code of 1986, gross income shall be determined 
without regard to any substitution under subsection 
(a). 
SEC. 109. SECRETARIAL AUTHORITY TO MAKE ADJUST-
MENTS REGARDING TAXPAYER AND DEPEND-
ENCY STATUS. 
With respect to taxable years beginning in 2005 or 
2006, the Secretary of the Treasury, or his delegate, may 
make such adjustments in the application of the internal 
revenue laws as may be necessary to ensure that taxpayers 
do not lose dependency exemptions or child credits or ex-
perience a change of filing status by reason of temporary 
relocations after Hurricane Katrina or by reason of the 
receipt of hurricane relief. Any adjustments made under 
the preceding sentence shall ensure that an individual is 
not taken into account by more than one taxpayer with 
respect to the same tax benefit. 
SEC. 110. WORK OPPORTUNITY TAX CREDIT FOR HURRI-
CANE KATRINA EMPLOYEES. 
(a) IN GENERAL.—For purposes of section 51 of the 
Internal Revenue Code of 1986, a Hurricane Katrina em-
ployee shall be treated as a member of a targeted group.
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(b) HURRICANE KATRINA EMPLOYEE.—For pur-
poses of this section, the term ‘‘Hurricane Katrina em-
ployee’’ means any individual who, on August 28, 2005, 
had a principal place of abode in a Hurricane Katrina dis-
aster area. 
(c) SPECIAL RULES FOR DETERMINING CREDIT.— 
For purposes of applying subpart F of part IV of sub-
chapter A of chapter 1 of such Code to wages paid or in-
curred to any Hurricane Katrina employee— 
(1) section 51(c)(4) of such Code shall not 
apply, and 
(2) except in the case of an employee of the em-
ployer (within the meaning of section 51 of such 
Code) on August 28, 2005, or an employee initially 
hired after such date, section 51(i)(2) of such Code 
shall not apply. 
(d) APPLICATION OF SECTION.—This section shall 
apply only to wages (within the meaning on section 51(c) 
of such Code) paid or incurred to any individual who— 
(1) is being hired for a position the principal 
place of employment of which is located in a Hurri-
cane Katrina disaster area, and 
(2) who begins work for the employer during 
the 2-year period beginning on August 29, 2005.
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(e) HURRICANE KATRINA DISASTER AREA.—For 
purposes of this section, the term ‘‘Hurricane Katrina dis-
aster area’’ means any area which is determined by the 
President to warrant individual or individual and public 
assistance from the Federal Government under the Robert 
T. Stafford Disaster Relief and Emergency Assistance Act 
by reason of Hurricane Katrina. 
TITLE II—PENALTY FREE USE 
OF RETIREMENT FUNDS IN 
THE CASE OF NATURAL DIS-
ASTERS 
SEC. 201. PENALTY FREE WITHDRAWALS FROM RETIRE-
MENT PLANS UPON FEDERAL DECLARATION 
OF NATURAL DISASTER. 
(a) IN GENERAL.—Paragraph (2) of section 72(t) of 
the Internal Revenue Code of 1986 (relating to 10-percent 
additional tax on early distributions from qualified retire-
ment plans) is amended by adding at the end the following 
new subparagraph: 
‘‘(G) DISTRIBUTIONS FROM RETIREMENT 
PLANS UPON FEDERAL DECLARATION OF NAT-
URAL DISASTER.— 
‘‘(i) IN GENERAL.—Any qualified dis-
aster-relief distribution.