H.R. 3975 — Tax Fairness for Disaster Victims Act

This section establishes a lookback rule under new Internal Revenue Code §32(g) allowing qualified individuals affected by federally declared disasters to elect (in a manner prescribed by the Treasury Secretary) to substitute their prior taxable year's earned income or social security taxes for the current year's amounts— if lower—for purposes of calculating the Earned Income Tax Credit (EITC, i.e., a refundable tax credit for low- and moderate-income workers) and the refundable Child Tax Credit (under §24(d)). A qualified individual is one whose principal place of abode was in a disaster area (as defined in §165(i)(5)) on the applicable date (the first day of the Federal Emergency Management Agency-specified disaster period); the rule applies to joint returns if either spouse qualifies (summing each spouse's prior-year amounts) and has no effect on gross income determinations. (Thus, disaster victims with reduced income may claim larger credits based on pre-disaster earnings.) This section also treats incorrect application of the lookback rule as a mathematical or clerical error under §6213(g)(2)(W). The amendments apply to taxable years beginning after enactment.