“To provide tax relief with respect to certain Federal disasters, and for other purposes.”
No CRS summary available for this bill.
This section establishes a temporary rule for taxable years beginning in 2025 allowing qualified individuals to elect to substitute their prior taxable year's earned income for 2025 earned income when determining the refundable child tax credit (under IRC §24(d)) and earned income tax credit (under IRC §32). A qualified individual is one whose principal place of abode was located in a qualified disaster zone, or in a qualified disaster area outside such zone with displacement from the abode, during the incident period of the disaster. (Thus, disaster victims with reduced 2025 earned income may claim larger credits using prior-year income.) For joint returns, the rule applies if either spouse qualifies, using the sum of both spouses' prior-year earned income; errors in applying the substitution are treated as mathematical or clerical errors; and the substitution does not affect other gross income determinations.
This section temporarily suspends limitations under IRC §170(b) and (d) on qualified disaster relief cash contributions made from January 1, 2025, through 60 days after enactment to public charities (i.e., §170(b)(1)(A) organizations) for relief efforts in qualified disaster areas, subject to taxpayer election and contemporaneous written acknowledgment. (Thus, individuals may deduct such contributions up to their contribution base—generally 100% of AGI minus other charitable contributions allowed under §170(b)(1)—and corporations up to 100% of taxable income minus other contributions, with carryover of any excess; excludes contributions to supporting organizations (§509(a)(3)) or donor-advised funds.) Separately, this section increases the safe-harbor percentages for the enhanced deduction on food inventory contributions in 2025 from 15% to 25% of basis (or fair market value if lower). The modifications apply to contributions made on or after January 1, 2025.
This section provides tax relief for individuals affected by qualified disasters (i.e., federally declared disasters) by exempting qualified disaster distributions from eligible retirement plans—such as 401(k) plans, 403(b) plans, and individual retirement accounts—from the 10% early withdrawal penalty under IRC §72(t). It limits such distributions to $100,000 aggregate per individual per disaster (separate limits for multiple disasters); allows repayment to an eligible retirement plan within three years, treated as a rollover; and permits ratable inclusion of the amount in gross income over three taxable years unless the taxpayer elects otherwise. Qualified disaster distributions are those made on or after the first day of a qualified disaster's incident period and before 180 days after enactment of this Act to an individual whose principal place of abode is in the qualified disaster area and who sustained an economic loss due to the disaster. (Thus, plans are not treated as violating IRC requirements for such distributions, and the distributions are exempt from mandatory withholding and certain plan distribution limits.) This section further allows recontributions, during the applicable period, of qualified distributions for home purchases to eligible retirement plans.
This section establishes special income tax rules for individuals with a net disaster loss (i.e., qualified disaster-related personal casualty losses exceeding personal casualty gains), where qualified disaster-related personal casualty losses are personal casualty losses under IRC §165(c)(3) (i.e., losses of property from fire, storm, etc.) that arise in a qualified disaster area during the disaster's incident period and are attributable to the disaster. The rules (1) waive the 10% adjusted gross income (AGI) floor under IRC §165(h)(2)(A) for the net disaster loss, (2) increase the per-casualty floor under IRC §165(h)(1) to $500 (from $100 for taxable years after 2009), (3) increase the standard deduction under IRC §63(c) by the net disaster loss, and (4) exempt that standard deduction increase from the alternative minimum tax adjustment under IRC §56(b)(1)(E). (Thus, these changes provide enhanced deductibility of disaster losses, including for standard deduction filers, while slightly raising the per-loss threshold.)
This section increases the state housing credit ceiling under the low-income housing tax credit program (i.e., IRC §42) for calendar years 2026 and 2027 by the aggregate amount of credits allocated by state housing credit agencies to buildings in qualified disaster zones, up to $8.25 multiplied by the state's population (as determined for calendar year 2025). The 2027 increase is further limited to the 2025 per capita amount reduced by any 2026 increase. This section extends the placed-in-service deadline under IRC §42(h)(1)(E) for designated credit amounts allocated in 2026 or 2027 to disaster-zone buildings by substituting "third calendar year" for "second calendar year" and "2 years" for "1 year," with aggregate designations not to exceed the applicable ceiling increase. This section provides that additional ceiling amounts under this provision are treated as allocated first for purposes of determining unused housing credit ceilings available for carryover under IRC §42(h)(3)(C).
This section defines four terms for purposes of the Act: (1) qualified disaster area, as any area for which the President declares a major disaster under section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act during the period beginning January 1, 2025, and ending 60 days after enactment, where the incident period begins on or after December 28, 2024, and on or before enactment; (2) qualified disaster zone, as the portion of a qualified disaster area determined by the President during that same period to warrant individual or individual and public assistance under the Stafford Act; (3) qualified disaster, as the disaster triggering the major disaster declaration for a qualified disaster area; and (4) incident period, as the period specified by the Federal Emergency Management Agency for a qualified disaster, extended for purposes of the Act through 30 days after enactment.