H.R. 6999 — Tax Relief for Fraud Victims Act

This section repeals the limitation under IRC §165(h)(5) requiring personal casualty loss deductions (i.e., losses to personal-use property from fire, storm, shipwreck, or other casualty) to be attributable to a federally declared disaster. (Thus, such losses again become generally deductible subject to the existing 10% of AGI floor and $100 per-casualty threshold, as prior to the 2017 tax reform.) It further modifies rules for theft losses involving fraud, deceit, or misrepresentation (as defined by Treasury) by (1) allowing an election to treat the loss as sustained in the year it occurs rather than the year discovered; (2) extending the statute of limitations for related refund claims under IRC §6511(a) to at least one year after discovery, with no application of the IRC §6511(b)(2) limit on refund amounts; and (3) exempting qualified retirement plan or IRA distributions used for such losses from the 10% early withdrawal penalty under IRC §72(t), with a one-year repayment period from discovery and the same extended claim periods. The changes apply to losses sustained in taxable years beginning after December 31, 2025, and to distributions made after that date.