‘‘(4) RECAPTURE.—For purposes of this sub-
section, rules similar to the rules under section 
179(d)(10) shall apply with respect to any qualified 
section 179 Gulf Opportunity Zone property which 
ceases to be qualified section 179 Gulf Opportunity 
Zone property. 
‘‘(f) EXPENSING
FOR CERTAIN DEMOLITION
AND 
CLEAN-UP COSTS.—
‘‘(1) IN GENERAL.—A taxpayer may elect to 
treat 50 percent of any qualified Gulf Opportunity 
Zone clean-up cost as an expense which is not 
chargeable to capital account. Any cost so treated 
shall be allowed as a deduction for the taxable year 
in which such cost is paid or incurred. 
‘‘(2) QUALIFIED
GULF
OPPORTUNITY
ZONE 
CLEAN-UP COST.—For purposes of this subsection, 
the term ‘qualified Gulf Opportunity Zone clean-up 
cost’ means any amount paid or incurred during the 
period beginning on August 28, 2005, and ending on 
December 31, 2007, for the removal of debris from, 
or the demolition of structures on, real property 
which is located in the Gulf Opportunity Zone and 
which is—
‘‘(A) held by the taxpayer for use in a 
trade or business or for the production of in-
come, or 
‘‘(B) 
property 
described 
in 
section 
1221(a)(1) in the hands of the taxpayer. 
For purposes of the preceding sentence, amounts 
paid or incurred shall be taken into account only to 
the extent that such amount would (but for para-
graph (1)) be chargeable to capital account. 
‘‘(g) EXTENSION
OF EXPENSING
FOR ENVIRON-
MENTAL REMEDIATION COSTS.—With respect to any 
qualified environmental remediation expenditure (as de-
fined in section 198(b)) paid or incurred on or after Au-
gust 28, 2005, in connection with a qualified contaminated 
site located in the Gulf Opportunity Zone, section 198 (re-
lating to expensing of environmental remediation costs) 
shall be applied—
‘‘(1) in the case of expenditures paid or in-
curred on or after August 28, 2005, and before Jan-
uary 1, 2008, by substituting ‘December 31, 2007’ 
for the date contained in section 198(h), and 
‘‘(2) except as provided in section 198(d)(2), by 
treating petroleum products (as defined in section 
4612(a)(3)) as a hazardous substance.
‘‘(h) INCREASE IN REHABILITATION CREDIT.—In the 
case of qualified rehabilitation expenditures (as defined in 
section 47(c)) paid or incurred during the period begin-
ning on August 28, 2005, and ending on December 31, 
2008, with respect to any qualified rehabilitated building 
or certified historic structure (as defined in section 47(c)) 
located in the Gulf Opportunity Zone, subsection (a) of 
section 47 (relating to rehabilitation credit) shall be ap-
plied—
‘‘(1) by substituting ‘13 percent’ for ‘10 per-
cent’ in paragraph (1) thereof, and 
‘‘(2) by substituting ‘26 percent’ for ‘20 per-
cent’ in paragraph (2) thereof. 
‘‘(i) SPECIAL RULES
FOR SMALL TIMBER PRO-
DUCERS.—
‘‘(1) INCREASED
EXPENSING
FOR
QUALIFIED 
TIMBER PROPERTY.—In the case of qualified timber 
property any portion of which is located in the Gulf 
Opportunity Zone or in that portion of the Rita GO 
Zone which is not part of the Gulf Opportunity 
Zone, the limitation under subparagraph (B) of sec-
tion 194(b)(1) shall be increased by the lesser of—
‘‘(A) the limitation which would (but for 
this subsection) apply under such subpara-
graph, or
‘‘(B) the amount of reforestation expendi-
tures (as defined in section 194(c)(3)) paid or 
incurred by the taxpayer with respect to such 
qualified timber property during the specified 
portion of the taxable year. 
‘‘(2) 5 YEAR NOL CARRYBACK OF CERTAIN TIM-
BER LOSSES.—For purposes of determining farming 
loss under section 172(i), income and deductions 
which are allocable to the specified portion of the 
taxable year and which are attributable to qualified 
timber property any portion of which is located in 
the Gulf Opportunity Zone or in that portion of the 
Rita GO Zone which is not part of the Gulf Oppor-
tunity Zone shall be treated as attributable to farm-
ing businesses. 
‘‘(3) RULES NOT APPLICABLE TO LARGE TIM-
BER PRODUCERS.—
‘‘(A) EXPENSING.—Paragraph (1) shall 
not apply to any taxpayer if such taxpayer 
holds more than 500 acres of qualified timber 
property at any time during the taxable year. 
‘‘(B) NOL CARRYBACK.—Paragraph (2) 
shall not apply with respect to any qualified 
timber property unless—
‘‘(i) such property was held by the 
taxpayer—
‘‘(I) on August 28, 2005, in the 
case of qualified timber property any 
portion of which is located in the Gulf 
Opportunity Zone, or 
‘‘(II) on September 23, 2005, in 
the case of qualified timber property 
(other than property described in sub-
clause (I)) any portion of which is lo-
cated in that portion of the Rita GO 
Zone which is not part of the Gulf 
Opportunity Zone, and 
‘‘(ii) such taxpayer held not more 
than 500 acres of qualified timber property 
on such date. 
‘‘(C) AGGREGATION RULE.—For purposes 
of subparagraphs (A) and (B), related persons 
shall be treated as one taxpayer. For purposes 
of the preceding sentence, the following shall be 
treated as related persons—
‘‘(i) 2 or more persons if the relation-
ship between such persons would result in 
a disallowance of losses under section 267 
or 707(b), and
‘‘(ii) 2 or more persons which are 
members of the same controlled group 
(within 
the 
meaning 
of 
section 
194(b)(2)(A)) of corporations. 
For purposes of clause (i), section 267 shall be 
applied without regard to subsection (b)(1) 
thereof. 
‘‘(4) DEFINITIONS.—For purposes of this sub-
section—
‘‘(A) 
SPECIFIED
PORTION.—The 
term 
‘specified portion’ means—
‘‘(i) in the case of qualified timber 
property any portion of which is located in 
the Gulf Opportunity Zone, that portion of 
the taxable year which is on or after Au-
gust 28, 2005, and before January 1, 
2007, and 
‘‘(ii) in the case of qualified timber 
property (other than property described in 
clause (i)) any portion of which is located 
in the Rita GO Zone, that portion of the 
taxable year which is on or after Sep-
tember 23, 2005, and before January 1, 
2007.
‘‘(B) QUALIFIED TIMBER PROPERTY.—The 
term ‘qualified timber property’ has the mean-
ing given such term in section 194(c)(1). 
‘‘(j) SPECIAL RULE FOR GULF OPPORTUNITY ZONE 
PUBLIC UTILITY CASUALTY LOSSES.—
‘‘(1) IN GENERAL.—The amount described in 
section 172(f)(1)(A) for any taxable year shall be in-
creased by the Gulf Opportunity Zone public utility 
casualty loss for such taxable year. 
‘‘(2) GULF OPPORTUNITY ZONE PUBLIC UTIL-
ITY
CASUALTY
LOSS.—For purposes of this sub-
section, the term ‘Gulf Opportunity Zone public util-
ity casualty loss’ means any casualty loss of public 
utility property (as defined in section 168(i)(10)) lo-
cated in the Gulf Opportunity Zone if—
‘‘(A) such loss is allowed as a deduction 
under section 165 for the taxable year, 
‘‘(B) such loss is by reason of Hurricane 
Katrina, and 
‘‘(C) the taxpayer elects the application of 
this subsection with respect to such loss. 
‘‘(3) REDUCTION FOR GAINS FROM INVOLUN-
TARY
CONVERSION.—The amount of Gulf Oppor-
tunity Zone public utility casualty loss which would 
(but for this paragraph) be taken into account under
paragraph (1) for any taxable year shall be reduced 
by the amount of any gain recognized by the tax-
payer for such year from the involuntary conversion 
by reason of Hurricane Katrina of public utility 
property (as so defined) located in the Gulf Oppor-
tunity Zone. 
‘‘(4) COORDINATION WITH GENERAL DISASTER 
LOSS RULES.—Section 165(i) shall not apply to any 
Gulf Opportunity Zone public utility casualty loss to 
the extent such loss is taken into account under 
paragraph (1). 
‘‘(5) ELECTION.—Any election under paragraph 
(2)(C) shall be made in such manner as may be pre-
scribed by the Secretary and shall be made by the 
due date (including extensions of time) for filing the 
taxpayer’s return for the taxable year of the loss. 
Such election, once made for any taxable year, shall 
be irrevocable for such taxable year. 
‘‘(k) SPECIAL NOL CARRYBACK OF COST RECOVERY 
DEDUCTIONS FOR QUALIFIED GO ZONE PROPERTY.—
‘‘(1) IN
GENERAL.—For purposes of section 
172, the GO Zone cost recovery loss for any taxable 
year ending on or after August 28, 2005, and before 
January 1, 2009, shall be a net operating loss
carryback to each of the 5 taxable years preceding 
the taxable year of the loss. 
‘‘(2) GO ZONE
COST
RECOVERY
LOSS.—For 
purposes of this subsection, the term ‘GO Zone cost 
recovery loss’ means, with respect to any taxable 
year, the lesser of—
‘‘(A) the aggregate amount of the deduc-
tions allowed under sections 167 and 168 with 
respect to qualified Gulf Opportunity Zone 
property (as defined in subsection (d)(2), but 
without regard to subparagraph (B)(iv) thereof) 
which is placed in service during such taxable 
year, or 
‘‘(B) the excess of—
‘‘(i) the net operating loss for such 
taxable year, over 
‘‘(ii) the specified liability loss for 
such taxable year to which a 10-year 
carryback 
applies 
under 
section 
172(b)(1)(C). 
‘‘(3) COORDINATION WITH ORDERING RULE.—
For purposes of applying section 172(b)(2), a GO 
Zone cost recovery loss to which paragraph (1) ap-
plies shall be treated in a manner similar to the 
manner in which a specified liability loss is treated.
‘‘(4) ELECTION
OUT.—A rule similar to the 
rule of section 172(j) shall apply for purposes of this 
subsection. 
‘‘(l) CREDIT TO HOLDERS OF GULF TAX CREDIT 
BONDS.—
‘‘(1) ALLOWANCE OF CREDIT.—If a taxpayer 
holds a Gulf tax credit bond on one or more credit 
allowance dates of the bond occurring during any 
taxable year, there shall be allowed as a credit 
against the tax imposed by this chapter for the tax-
able year an amount equal to the sum of the credits 
determined under paragraph (2) with respect to 
such dates. 
‘‘(2) AMOUNT OF CREDIT.—
‘‘(A) IN
GENERAL.—The amount of the 
credit determined under this paragraph with re-
spect to any credit allowance date for a Gulf 
tax credit bond is 25 percent of the annual 
credit determined with respect to such bond. 
‘‘(B) ANNUAL CREDIT.—The annual credit 
determined with respect to any Gulf tax credit 
bond is the product of—
‘‘(i) the credit rate determined by the 
Secretary under subparagraph (C) for the
day on which such bond was sold, multi-
plied by 
‘‘(ii) the outstanding face amount of 
the bond. 
‘‘(C) DETERMINATION.—For purposes of 
subparagraph (B), with respect to any Gulf tax 
credit bond, the Secretary shall determine daily 
or cause to be determined daily a credit rate 
which shall apply to the first day on which 
there is a binding, written contract for the sale 
or exchange of the bond. The credit rate for 
any day is the credit rate which the Secretary 
or the Secretary’s designee estimates will per-
mit the issuance of Gulf tax credit bonds with 
a specified maturity or redemption date without 
discount and without interest cost to the issuer. 
‘‘(D) CREDIT
ALLOWANCE
DATE.—For 
purposes of this subsection, the term ‘credit al-
lowance date’ means March 15, June 15, Sep-
tember 15, and December 15. Such term also 
includes the last day on which the bond is out-
standing. 
‘‘(E) SPECIAL RULE FOR ISSUANCE AND 
REDEMPTION.—In the case of a bond which is 
issued during the 3-month period ending on a
credit allowance date, the amount of the credit 
determined under this paragraph with respect 
to such credit allowance date shall be a ratable 
portion of the credit otherwise determined 
based on the portion of the 3-month period dur-
ing which the bond is outstanding. A similar 
rule shall apply when the bond is redeemed or 
matures. 
‘‘(3) LIMITATION
BASED
ON
AMOUNT
OF 
TAX.—The credit allowed under paragraph (1) for 
any taxable year shall not exceed the excess of—
‘‘(A) the sum of the regular tax liability 
(as defined in section 26(b)) plus the tax im-
posed by section 55, over 
‘‘(B) the sum of the credits allowable 
under part IV of subchapter A (other than sub-
part C and this subsection). 
‘‘(4) GULF TAX CREDIT BOND.—For purposes 
of this subsection—
‘‘(A) IN
GENERAL.—The term ‘Gulf tax 
credit bond’ means any bond issued as part of 
an issue if—
‘‘(i) the bond is issued by the State of 
Alabama, Louisiana, or Mississippi,
‘‘(ii) 95 percent or more of the pro-
ceeds of such issue are to be used to—
‘‘(I) pay principal, interest, or 
premiums on qualified bonds issued 
by such State or any political subdivi-
sion of such State, or 
‘‘(II) make a loan to any political 
subdivision of such State to pay prin-
cipal, interest, or premiums on quali-
fied bonds issued by such political 
subdivision, 
‘‘(iii) the Governor of such State des-
ignates such bond for purposes of this sub-
section, 
‘‘(iv) the bond is a general obligation 
of such State and is in registered form 
(within the meaning of section 149(a)), 
‘‘(v) the maturity of such bond does 
not exceed 2 years, and 
‘‘(vi) the bond is issued after Decem-
ber 31, 2005, and before January 1, 2007. 
‘‘(B) STATE MATCHING REQUIREMENT.—A 
bond shall not be treated as a Gulf tax credit 
bond unless—
‘‘(i) the issuer of such bond pledges as 
of the date of the issuance of the issue an 
amount equal to the face amount of such 
bond to be used for payments described in 
subclause (I) of subparagraph (A)(ii), or 
loans described in subclause (II) of such 
subparagraph, as the case may be, with re-
spect to the issue of which such bond is a 
part, and 
‘‘(ii) any such payment or loan is 
made in equal amounts from the proceeds 
of such issue and from the amount pledged 
under clause (i). 
The requirement of clause (ii) shall be treated 
as met with respect to any such payment or 
loan made during the 1-year period beginning 
on the date of the issuance (or any successor 1-
year period) if such requirement is met when 
applied with respect to the aggregate amount of 
such payments and loans made during such pe-
riod. 
‘‘(C) AGGREGATE
LIMIT
ON
BOND
DES-
IGNATIONS.—The maximum aggregate face 
amount of bonds which may be designated
under this subsection by the Governor of a 
State shall not exceed—
‘‘(i) $200,000,000 in the case of the 
State of Louisiana, 
‘‘(ii) $100,000,000 in the case of the 
State of Mississippi, and 
‘‘(iii) $50,000,000 in the case of the 
State of Alabama. 
‘‘(D) SPECIAL RULES RELATING TO ARBI-
TRAGE.—A bond which is part of an issue shall 
not be treated as a Gulf tax credit bond unless, 
with respect to the issue of which the bond is 
a part, the issuer satisfies the arbitrage require-
ments of section 148 with respect to proceeds 
of the issue and any loans made with such pro-
ceeds. 
‘‘(5) QUALIFIED BOND.—For purposes of this 
subsection—
‘‘(A) IN
GENERAL.—The term ‘qualified 
bond’ means any obligation of a State or polit-
ical subdivision thereof which was outstanding 
on August 28, 2005. 
‘‘(B) EXCEPTION FOR PRIVATE ACTIVITY 
BONDS.—Such term shall not include any pri-
vate activity bond.
‘‘(C) 
EXCEPTION
FOR
ADVANCE 
REFUNDINGS.—Such term shall not include any 
bond with respect to which there is any out-
standing refunded or refunding bond during the 
period in which a Gulf tax credit bond is out-
standing with respect to such bond. 
‘‘(6) CREDIT INCLUDED IN GROSS INCOME.—
Gross income includes the amount of the credit al-
lowed to the taxpayer under this subsection (deter-
mined without regard to paragraph (3)) and the 
amount so included shall be treated as interest in-
come. 
‘‘(7) 
OTHER
DEFINITIONS
AND
SPECIAL 
RULES.—For purposes of this subsection—
‘‘(A) BOND.—The term ‘bond’ includes 
any obligation. 
‘‘(B) PARTNERSHIP; S CORPORATION; AND 
OTHER PASS-THRU ENTITIES.—
‘‘(i) IN GENERAL.—Under regulations 
prescribed by the Secretary, in the case of 
a partnership, trust, S corporation, or 
other pass-thru entity, rules similar to the 
rules of section 41(g) shall apply with re-
spect to the credit allowable under para-
graph (1).
‘‘(ii) NO BASIS ADJUSTMENT.—In the 
case of a bond held by a partnership or an 
S corporation, rules similar to the rules 
under section 1397E(i) shall apply. 
‘‘(C) BONDS
HELD
BY
REGULATED
IN-
VESTMENT COMPANIES.—If any Gulf tax credit 
bond is held by a regulated investment com-
pany, the credit determined under paragraph 
(1) shall be allowed to shareholders of such 
company under procedures prescribed by the 
Secretary. 
‘‘(D) REPORTING.—Issuers of Gulf tax 
credit bonds shall submit reports similar to the 
reports required under section 149(e). 
‘‘(E) CREDIT
TREATED
AS
NONREFUND-
ABLE BONDHOLDER CREDIT.—For purposes of 
this title, the credit allowed by this subsection 
shall be treated as a credit allowable under sub-
part H of part IV of subchapter A of this chap-
ter. 
‘‘(m) TAX BENEFITS NOT AVAILABLE WITH RE-
SPECT TO FACILITIES FOR GAMBLING, ETC.—
‘‘(1) TAX-EXEMPT
BOND
FINANCING.—Sub-
section (a) shall not apply to any bond issued as 
part of an issue if any portion of the proceeds of
such issue is to be used to provide any property de-
scribed in section 144(c)(6)(B). 
‘‘(2) 
ADVANCE
REFUNDING
BONDS.—Sub-
section (b) shall not apply to any advance refunding 
of a bond which is issued as part of an issue if any 
portion of the proceeds of such issue (or any prior 
issue) was (or is to be) used to provide any property 
described in section 144(c)(6)(B). 
‘‘(3) LOW-INCOME HOUSING CREDIT.—For pur-
poses of subsection (c), property shall not be treated 
as located or placed in service in the Gulf Oppor-
tunity Zone if such property is described in section 
144(c)(6)(B). 
‘‘(4) SPECIAL ALLOWANCE FOR CERTAIN PROP-
ERTY; SECTION
179
EXPENSING; CARRYBACK
OF 
COST
RECOVERY
DEDUCTIONS.—For purposes of 
subsections (d), (e), and (k), the term ‘qualified Gulf 
Opportunity Zone property’ shall not include any 
property described in section 144(c)(6)(B). 
‘‘(5) DEMOLITION AND CLEAN-UP COSTS; RE-
MEDIATION; 
REHABILITATION
EXPENSES.—Sub-
sections (f), (g), and (h) shall not apply with respect 
to any amount paid or incurred with respect to any 
property described in section 144(c)(6)(B).
‘‘(6) TIMBER
PRODUCERS.—For purposes of 
subsection (i), qualified timber property shall not in-
clude 
any 
property 
described 
in 
section 
144(c)(6)(B). 
‘‘(7) PUBLIC UTILITY CASUALTY LOSSES.—For 
purposes of subsection (j), public utility property 
shall not include any property described in section 
144(c)(6)(B). 
‘‘(8) GULF TAX CREDIT BONDS.—Subsection (l) 
shall not apply to any bond issued as part of an 
issue if any portion of the proceeds of such issue is 
to be used to provide any property described in sec-
tion 144(c)(6)(B).’’. 
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (2) of section 54(c) is amended 
by inserting ‘‘, section 1400N(l),’’ after ‘‘subpart 
C’’. 
(2) Subparagraph (A) of section 6049(d)(8) is 
amended—
(A) by inserting ‘‘or 1400N(l)(6)’’ after 
‘‘section 54(g)’’, and 
(B) by inserting ‘‘or 1400N(l)(2)(D), as 
the case may be’’ after ‘‘section 54(b)(4)’’.
(3) So much of subchapter Y of chapter 1 as 
precedes section 1400L is amended to read as fol-
lows: 
‘‘Subchapter Y—Short-term Regional Benefits
‘‘PART I—TAX BENEFITS FOR NEW YORK LIBERTY ZONE 
‘‘PART II—TAX BENEFITS FOR GULF OPPORTUNITY ZONE
‘‘PART I—TAX BENEFITS FOR NEW YORK LIBERTY 
ZONE
‘‘Sec. 1400L. Tax benefits for New York Liberty Zone.’’.
(4) The item relating to subchapter Y in the 
table of subchapters for chapter 1 is amended to 
read as follows:
‘‘SUBCHAPTER Y—SHORT-TERM REGIONAL BENEFITS’’.
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
shall apply to taxable years ending on or after Au-
gust 28, 2005. 
(2) CARRYBACKS.—Subsections (i)(2), (j), and 
(k) of section 1400N of the Internal Revenue Code 
of 1986 (as added by this section) shall apply to 
losses arising in such taxable years. 
SEC. 102. FEDERAL GUARANTEE OF CERTAIN STATE 
BONDS. 
(a) STATE BONDS DESCRIBED.—
(1) IN GENERAL.—This section shall apply to a 
bond issued as part of an issue if—
(A) the issue of which such bond is part is 
an issue of the State of Alabama, Louisiana, or 
Mississippi, 
(B) the bond is a general obligation of the 
issuing State and is in registered form, 
(C) the proceeds of the bond are distrib-
uted to one or more political subdivisions of the 
issuing State, 
(D) the maturity of such bond does not ex-
ceed 5 years, 
(E) the bond is issued after the date of the 
enactment of this Act and before January 1, 
2008, and 
(F) the bond is designated by the Sec-
retary of the Treasury for purposes of this sec-
tion. 
(2) FACILITIES FOR GAMBLING, ETC.—The Sec-
retary of the Treasury may not designate any bond 
for purposes of this section if such bond is issued as 
part of an issue any portion of the proceeds of which 
is to be used to provide any property described in 
section 144(c)(6)(B). 
(b) APPLICATION.—
(1) IN GENERAL.—The Secretary of the Treas-
ury may only designate a bond for purposes of this 
section pursuant to an application submitted to the 
Secretary by the State which demonstrates the need 
for such designation on the basis of the criteria 
specified in paragraph (2). 
(2) CRITERIA.—For purposes of paragraph (1), 
the criteria specified in this paragraph are—
(A) the loss of revenue base of one or more 
political subdivisions of the State by reason of 
Hurricane Katrina, 
(B) the need for resources to fund infra-
structure within, or operating expenses of, any 
such political subdivision, 
(C) the lack of access of such political sub-
division to capital, and 
(D) any other criteria as may be deter-
mined by the Secretary. 
(3) GUIDANCE FOR SUBMISSION AND CONSID-
ERATION OF APPLICATIONS.—The Secretary of the 
Treasury shall prescribe regulations or other guid-
ance which provide for the time and manner for the 
submission and consideration of applications under 
this subsection.
(c) FEDERAL GUARANTEE.—A bond described in 
subsection (a) is guaranteed by the United States in an 
amount equal to 50 percent of the outstanding principal 
with respect to such bond. 
(d) AGGREGATE LIMIT ON BOND DESIGNATIONS.—
The maximum aggregate face amount of bonds which may 
be 
issued 
under 
this 
section 
shall 
not 
exceed 
$3,000,000,000. 
TITLE 
II—TAX 
BENEFITS 
RE-
LATED TO HURRICANES RITA 
AND WILMA 
SEC. 201. EXTENSION OF CERTAIN EMERGENCY TAX RE-
LIEF FOR HURRICANE KATRINA TO HURRI-
CANES RITA AND WILMA. 
(a) IN GENERAL.—Part II of subchapter Y of chap-
ter 1 (as added by this Act) is amended by adding at the 
end the following new sections: 
‘‘SEC. 1400O. SPECIAL RULES FOR USE OF RETIREMENT 
FUNDS. 
‘‘(a) TAX-FAVORED WITHDRAWALS FROM RETIRE-
MENT PLANS.—
‘‘(1) IN
GENERAL.—Section 72(t) shall not 
apply to any qualified hurricane distribution. 
‘‘(2) AGGREGATE DOLLAR LIMITATION.—