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S. 2634 (113th): National Disaster Tax Relief Act of 2014

The text of the bill below is as of Jul 22, 2014 (Introduced).


II

113th CONGRESS

2d Session

S. 2634

IN THE SENATE OF THE UNITED STATES

July 22, 2014

(for himself, Mr. Vitter, Mr. Schumer, Mr. Menendez, Mr. Bennet, Ms. Landrieu, Mr. Udall of Colorado, Mrs. Gillibrand, Mr. Rockefeller, and Mr. Booker) introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To provide tax relief for major disaster areas declared in 2012, 2013, and 2014, and for other purposes.

1.

Short title; table of contents

(a)

Short title

This Act may be cited as the National Disaster Tax Relief Act of 2014 .

(b)

Table of contents

The table of contents for this Act is as follows:

Sec. 1. Short title; table of contents.

TITLE I—Tax relief relating to disasters in 2012, 2013, and 2014

Sec. 101. Expensing of qualified disaster expenses.

Sec. 102. Increased limitation on charitable contributions for disaster relief.

Sec. 103. Losses attributable to disasters in 2012, 2013, and 2014.

Sec. 104. Net operating losses attributable to disasters in 2012, 2013, and 2014.

Sec. 105. Waiver of certain mortgage revenue bond requirements following 2012, 2013, and 2014 disasters.

Sec. 106. Increased expensing and bonus depreciation for qualified disaster assistance property following 2012, 2013, and 2014 disasters.

Sec. 107. Increase in new markets tax credit for investments in community development entities serving 2012, 2013, and 2014 disaster areas.

Sec. 108. Special rules for use of retirement funds in connection with federally declared disasters in 2012, 2013, or 2014.

Sec. 109. Additional exemption for housing qualified disaster displaced individuals.

Sec. 110. Exclusions of certain cancellations of indebtedness by reason of 2012, 2013, or 2014 disasters.

Sec. 111. Special rule for determining earned income of individuals affected by federally declared disasters.

Sec. 112. Increase in rehabilitation credit for buildings in 2012, 2013, and 2014 disaster areas.

Sec. 113. Advanced refundings of certain tax-exempt bonds.

Sec. 114. Qualified disaster area recovery bonds.

Sec. 115. Additional low-income housing credit allocations.

Sec. 116. Facilitation of transfer of water leasing and water by mutual ditch or irrigation companies in disaster areas.

TITLE II—Other disaster tax relief provisions

Sec. 201. Exclusion for disaster mitigation payments received from State and local governments.

Sec. 202. Natural disaster funds.

I

Tax relief relating to disasters in 2012, 2013, and 2014

101.

Expensing of qualified disaster expenses

(a)

In general

Section 198A(b)(2) of the Internal Revenue Code of 1986 is amended—

(1)

by striking before January 1, 2010 in subparagraph (A) and inserting during the period beginning after December 31, 2007, and before January 1, 2010, or during the period beginning after December 31, 2011, and before January 1, 2015, and

(2)

by striking before such date each place it appears in subparagraphs (B) and (C) and inserting during any such period.

(b)

Effective date

The amendment made by this section shall apply to amounts paid or incurred after December 31, 2011, in connection with disasters declared after such date.

102.

Increased limitation on charitable contributions for disaster relief

(a)

Individuals

Paragraph (1) of section 170(b) of the Internal Revenue Code of 1986 is amended by redesignating subparagraphs (F) and (G) as subparagraphs (G) and (H), respectively, and by inserting after subparagraph (E) the following new subparagraph:

(F)

Qualified disaster contributions

(i)

In general

Any qualified disaster contribution shall be allowed to the extent that the aggregate of such contributions does not exceed the excess of 80 percent of the taxpayer's contribution base over the amount of all other charitable contributions allowable under this paragraph.

(ii)

Carryover

If the aggregate amount of contributions described in clause (i) exceeds the limitation under clause (i), such excess shall be treated (in a manner consistent with the rules of subsection (d)(1)) as a charitable contribution to which clause (i) applies in each of the 5 succeeding years in order of time.

(iii)

Coordination with other subparagraphs

For purposes of applying this subsection and subsection (d)(1), contributions described in clause (i) shall not be treated as described in subparagraph (A) and such subparagraph shall be applied without regard to such contributions.

(iv)

Qualified disaster contributions

For purposes of this subparagraph, the term qualified disaster contribution means any charitable contribution if—

(I)

such contribution is for relief efforts related to a federally declared disaster (as defined in section 165(h)(3)(C)(i)),

(II)

such contribution is made during the period beginning on the applicable disaster date with respect to the disaster described in subclause (I) and ending on December 31, 2014, and

(III)

such contribution is made in cash to an organization described in subparagraph (A) (other than an organization described in section 509(a)(3)).

Such term shall not include a contribution if the contribution is for establishment of a new, or maintenance in an existing, donor advised fund (as defined in section 4966(d)(2)).
(v)

Applicable disaster date

For purposes of clause (iv)(II), the term applicable disaster date means, with respect to any federally declared disaster described in clause (iv)(I), the date on which the disaster giving rise to the Presidential declaration described in section 165(h)(3)(C)(i) occurred.

(vi)

Substantiation requirement

This paragraph shall not apply to any qualified disaster contribution unless the taxpayer obtains from such organization to which the contribution was made a contemporaneous written acknowledgment (within the meaning of subsection (f)(8)) that such contribution was used (or is to be used) for a purpose described in clause (iv)(III).

.

(b)

Corporations

(1)

In general

Paragraph (2) of section 170(b) of the Internal Revenue Code of 1986 is amended by redesignating subparagraph (C) as subparagraph (D) and by inserting after subparagraph (B) the following new subparagraph:

(C)

Qualified disaster contributions

(i)

In general

Any qualified disaster contribution shall be allowed to the extent that the aggregate of such contributions does not exceed the excess of 20 percent of the taxpayer's taxable income over the amount of charitable contributions allowed under subparagraph (A).

(ii)

Carryover

If the aggregate amount of contributions described in clause (i) exceeds the limitation under clause (i), such excess shall be treated (in a manner consistent with the rules of subsection (d)(1)) as a charitable contribution to which clause (i) applies in each of the 5 succeeding years in order of time.

(iii)

Qualified disaster contribution

The term qualified disaster contribution has the meaning given such term under paragraph (2)(F)(iv).

(iv)

Substantiation requirement

This paragraph shall not apply to any qualified disaster contribution unless the taxpayer obtains from such organization to which the contribution was made a contemporaneous written acknowledgment (within the meaning of subsection (f)(8)) that such contribution was used (or is to be used) for a purpose described in paragraph (1)(F)(iv)(III).

.

(2)

Conforming amendments

(A)

Subparagraph (A) of section 170(b)(2) of such Code is amended by striking subparagraph (B) applies and inserting subparagraphs (B) and (C) apply.

(B)

Subparagraph (B) of section 170(b)(2) of such Code is amended by striking subparagraph (A) and inserting subparagraphs (A) and (C).

(c)

Effective date

The amendments made by this section shall apply to disasters arising in taxable years ending after December 31, 2011.

103.

Losses attributable to disasters in 2012, 2013, and 2014

(a)

Waiver of adjusted gross income limitation; increase in standard deduction by disaster casualty loss

Subclause (I) of section 165(h)(3)(B)(i) of the Internal Revenue Code of 1986 is amended by striking before January 1, 2010 and inserting during the period beginning after December 31, 2007, and before January 1, 2010, or during the period beginning after December 31, 2011, and before January 1, 2015.

(b)

Loss allowed whether or not individual itemized deductions

Section 62(a) of the Internal Revenue Code of 1986 is amended by inserting after paragraph (21) the following new paragraph:

(22)

Disaster casualty losses

Any net disaster loss (as defined in section 165(h)(3)(B)).

.

(c)

Technical amendment

Clause (i) of section 165(h)(3)(C) of the Internal Revenue Code of 1986 is amended by inserting major after means any.

(d)

Effective date

The amendments made by this section shall apply to disasters declared in taxable years beginning after December 31, 2011.

(e)

Use of amended income tax returns To take into account receipt of certain casualty loss grants by disallowing previously taken casualty loss deductions

(1)

In general

Notwithstanding any other provision of the Internal Revenue Code of 1986, if a taxpayer—

(A)

claims a deduction for any taxable year with respect to a casualty loss to a principal residence (within the meaning of section 121 of such Code) resulting from any federally declared disaster (as defined in section 165(h)(3)(C) of such Code) occurring during the period beginning after December 31, 2011, and before January 1, 2015, and

(B)

in a subsequent taxable year receives a grant under any Federal or State program as reimbursement for such loss,

such taxpayer may elect to file an amended income tax return for the taxable year in which such deduction was allowed (and for any taxable year to which such deduction is carried) and reduce (but not below zero) the amount of such deduction by the amount of such reimbursement.
(2)

Time of filing amended return

Paragraph (1) shall apply with respect to any grant only if any amended income tax returns with respect to such grant are filed not later than the later of—

(A)

the due date for filing the tax return for the taxable year in which the taxpayer receives such grant, or

(B)

the date which is 1 year after the date of the enactment of this Act.

(3)

Waiver of penalties and interest

Any underpayment of tax resulting from the reduction under paragraph (1) of the amount otherwise allowable as a deduction shall not be subject to any penalty or interest under such Code if such tax is paid not later than 1 year after the filing of the amended return to which such reduction relates.

104.

Net operating losses attributable to disasters in 2012, 2013, and 2014

(a)

In general

Subclause (I) of section 172(j)(1)(A)(i) of the Internal Revenue Code of 1986 is amended by striking before January 1, 2010 and inserting during the period beginning after December 31, 2007, and before January 1, 2010, or during the period beginning after December 31, 2011, and before January 1, 2015.

(b)

Effective date

The amendments made by this section shall apply to losses arising in taxable years beginning after December 31, 2011, in connection with disasters declared after such date.

105.

Waiver of certain mortgage revenue bond requirements following 2012, 2013, and 2014 disasters

(a)

In general

Section 143(k) of the Internal Revenue Code of 1986 is amended—

(1)

by redesignating paragraph (12), as added by section 709(a) of the Tax Extenders and Alternative Minimum Tax Relief Act of 2008, as paragraph (13), and

(2)

by striking before January 1, 2010 in subparagraphs (A)(i) and (B)(i) of such paragraph and inserting during the period beginning after December 31, 2007, and before January 1, 2010, or during the period beginning after December 31, 2011, and before January 1, 2015.

(b)

Effective date

The amendments made by this section shall apply to disasters occurring after December 31, 2011.

106.

Increased expensing and bonus depreciation for qualified disaster assistance property following 2012, 2013, and 2014 disasters

(a)

In general

Subclause (I) of section 168(n)(2)(A)(ii) of the Internal Revenue Code of 1986 is amended by striking before January 1, 2010 and inserting during the period beginning after December 31, 2007, and before January 1, 2010, or during the period beginning after December 31, 2011, and before January 1, 2015.

(b)

Removal of exclusion

Section 168(n)(2)(B)(i) of such Code is amended by inserting and at the end of subclause (I), by striking , and at the end of subclause (II) and inserting a period, and by striking subclause (III).

(c)

Effective date

The amendments made by this section shall apply to property placed in service after December 31, 2011, with respect to disasters declared after such date.

107.

Increase in new markets tax credit for investments in community development entities serving 2012, 2013, and 2014 disaster areas

(a)

In general

Subsection (f) of section 45D of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

(4)

Increased special allocation for community development entities serving 2012, 2013, and 2014 disaster areas

(A)

In general

In the case of each calendar year which begins after 2012 and before 2017, the new markets tax credit limitation shall be increased by an amount equal to $500,000,000, to be allocated among qualified community development entities to make qualified low-income community investments within any 2012, 2013, or 2014 federally declared disaster area.

(B)

Allocation of increase

The amount of the increase in limitation under subparagraph (A) shall be allocated by the Secretary under paragraph (2) to qualified community development entities and shall give priority to such entities with a record of having successfully provided capital or technical assistance to businesses or communities within any 2012, 2013, or 2014 federally declared disaster area or areas for which the allocation is requested.

(C)

Application of carryforward

Paragraph (3) shall be applied separately with respect to the amount of any increase under subparagraph (A).

(D)

2012, 2013, or 2014 federally declared disaster area

For purposes of this paragraph, the term 2012, 2013, or 2014 federally declared disaster area means any disaster area resulting from any federally declared disaster occurring after December 31, 2011, and before January 1, 2015. For purposes of the preceding sentence, the terms federally declared disaster and disaster area have the meanings given such terms in section 165(h)(3).

.

(b)

Effective date

The amendments made by this section shall apply to calendar years beginning after 2012.

108.

Special rules for use of retirement funds in connection with federally declared disasters in 2012, 2013, or 2014

(a)

Tax-Favored withdrawals from retirement plans

(1)

In general

Paragraph (2) of section 72(t) of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph:

(H)

Distributions from retirement plans in connection with federally declared disasters during 2012, 2013, and 2014

Any qualified 2012, 2013, or 2014 disaster recovery distribution.

.

(2)

Qualified disaster recovery distribution

Section 72(t) of such Code is amended by adding at the end the following new paragraph:

(11)

Qualified 2012, 2013, or 2014 disaster recovery distribution

For purposes of paragraph (2)(H)—

(A)

In general

Except as provided in subparagraph (B), the term qualified 2012, 2013, or 2014 disaster recovery distribution means, with respect to any federally declared disaster occurring during 2012, 2013, or 2014, any distribution from an eligible retirement plan made on or after the applicable disaster date and before January 1, 2016, to an individual whose principal place of abode on the applicable disaster date, is located in the disaster area and who has sustained an economic loss by reason of such federally declared disaster.

(B)

Dollar limitation

(i)

In general

For purposes of this subsection, the aggregate amount of distributions received by an individual with respect to any federally declared disaster occurring during 2012, 2013, or 2014 shall not exceed $100,000.

(ii)

Treatment of plan distributions

If a distribution to an individual would (without regard to clause (i)) be a qualified 2012, 2013, or 2014 disaster recovery distribution, a plan shall not be treated as violating any requirement of this title merely because the plan treats such distribution as a qualified 2012, 2013, or 2014 disaster recovery distribution, unless the aggregate amount of such distributions from all plans maintained by the employer (and any member of any controlled group which includes the employer) to such individual with respect to any federally declared disaster occurring during 2012, 2013, or 2014 exceeds $100,000.

(iii)

Controlled group

For purposes of clause (ii), the term controlled group means any group treated as a single employer under subsection (b), (c), (m), or (o) of section 414.

(C)

Amount distributed may be repaid

(i)

In general

Any individual who receives a qualified 2012, 2013, or 2014 disaster recovery distribution may, at any time during the 3-year period beginning on the day after the date on which such distribution was received, make one or more contributions in an aggregate amount not to exceed the amount of such distribution to an eligible retirement plan of which such individual is a beneficiary and to which a rollover contribution of such distribution could be made under section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16), as the case may be.

(ii)

Treatment of repayments of distributions from eligible retirement plans other than iras

For purposes of this title, if a contribution is made pursuant to clause (i) with respect to a qualified 2012, 2013, or 2014 disaster recovery distribution from an eligible retirement plan other than an individual retirement plan, then the taxpayer shall, to the extent of the amount of the contribution, be treated as having received the qualified 2012, 2013, or 2014 disaster recovery distribution in an eligible rollover distribution (as defined in section 402(c)(4)) and as having transferred the amount to the eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution.

(iii)

Treatment of repayments for distributions from iras

For purposes of this title, if a contribution is made pursuant to clause (i) with respect to a qualified 2012, 2013, or 2014 disaster recovery distribution from an individual retirement plan (as defined by section 7701(a)(37)), then, to the extent of the amount of the contribution, the qualified 2012, 2013, or 2014 disaster recovery distribution shall be treated as a distribution described in section 408(d)(3) and as having been transferred to the eligible retirement plan in a direct trustee to trustee transfer within 60 days of the distribution.

(D)

Income inclusion spread over 3-year period

(i)

In general

In the case of any qualified 2012, 2013, or 2014 disaster recovery distribution, unless the taxpayer elects not to have this paragraph apply for any taxable year, any amount required to be included in gross income for such taxable year shall be so included ratably over the 3-taxable-year period beginning with such taxable year.

(ii)

Special rule

For purposes of clause (i), rules similar to the rules of subparagraph (E) of section 408A(d)(3) shall apply.

(E)

Other definitions

(i)

Federally declared disaster; disaster area

The terms federally declared disaster and disaster area have the meanings given such terms under section 165(h)(3)(C).

(ii)

Applicable disaster date

The term applicable disaster date means, with respect to any federally declared disaster, the date on which such federally declared disaster occurs.

(iii)

Eligible retirement plan

The term eligible retirement plan shall have the meaning given such term by section 402(c)(8)(B).

(F)

Special rules

(i)

Exemption of distributions from trustee to trustee transfer and withholding rules

For purposes of sections 401(a)(31), 402(f), and 3405, qualified 2012 or 2013 disaster recovery distributions shall not be treated as eligible rollover distributions.

(ii)

Qualified 2012, 2013, or 2014 disaster recovery distributions treated as meeting plan distribution requirements

For purposes of this title, a qualified 2012, 2013, or 2014 disaster recovery distribution shall be treated as meeting the requirements of sections 401(k)(2)(B)(i), 403(b)(7)(A)(ii), 403(b)(11), and 457(d)(1)(A).

.

(3)

Effective date

The amendments made by this subsection shall apply to distributions with respect to disaster declared after December 31, 2011.

(b)

Loans from qualified plans

(1)

In general

Subsection (p) of section 72 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

(6)

Increase in limit on loans not treated as distributions with respect to 2012, 2013, and 2014 disasters

(A)

In general

In the case of any loan from a qualified employer plan to a qualified individual made during the applicable period—

(i)

clause (i) of paragraph (2)(A) shall be applied by substituting $100,000 for $50,000, and

(ii)

clause (ii) of such paragraph shall be applied by substituting the present value of the nonforfeitable accrued benefit of the employee under the plan for one-half of the present value of the nonforfeitable accrued benefit of the employee under the plan.

(B)

Delay of repayment

In the case of a qualified individual with an outstanding loan on or after the applicable disaster date from a qualified employer plan—

(i)

if the due date pursuant to subparagraph (B) or (C) of paragraph (2) for any repayment with respect to such loan occurs during the period beginning on the applicable disaster date and ending on December 31, 2014, such due date shall be delayed for 1 year,

(ii)

any subsequent repayments with respect to any such loan shall be appropriately adjusted to reflect the delay in the due date under clause (i) and any interest accruing during such delay, and

(iii)

in determining the 5-year period and the term of a loan under subparagraph (B) or (C) of paragraph (2), the period described in clause (i) shall be disregarded.

(C)

Definitions

For purposes of this paragraph—

(i)

Qualified individual

The term qualified individual means, with respect to any federally declared disaster occurring during 2012, 2013, or 2014, an individual whose principal place of abode on the applicable disaster date is located in the disaster area and who has sustained an economic loss by reason of such federally declared disaster.

(ii)

Applicable period

The applicable period is the period beginning on the applicable disaster date and ending on December 31, 2014.

(iii)

Federally declared disaster; disaster area

The terms federally declared disaster and disaster area have the meanings given such terms under section 165(h)(3)(C).

(iv)

Applicable disaster date

The term applicable disaster date means, with respect to any federally declared disaster, the date on which such federally declared disaster occurs.

.

(2)

Effective date

The amendment made by this subsection shall apply to loans made with respect to disaster declared after December 31, 2011.

(c)

Provisions relating to plan amendments

(1)

In general

If this subsection applies to any amendment to any plan or annuity contract, such plan or contract shall be treated as being operated in accordance with the terms of the plan during the period described in paragraph (2)(B)(i).

(2)

Amendments to which subsection applies

(A)

In general

This subsection shall apply to any amendment to any plan or annuity contract which is made—

(i)

pursuant to any provision of, or amendment made by, this section, or pursuant to any regulation issued by the Secretary or the Secretary of Labor under any provision of, or amendment made by, this section, and

(ii)

on or before the last day of the first plan year beginning on or after January 1, 2015, or such later date as the Secretary may prescribe.

In the case of a governmental plan (as defined in section 414(d)), clause (ii) shall be applied by substituting the date which is 2 years after the date otherwise applied under clause (ii).
(B)

Conditions

This subsection shall not apply to any amendment unless—

(i)

during the period—

(I)

beginning on the date that the provisions of, and amendments made by, this section or the regulation described in subparagraph (A)(i) takes effect (or in the case of a plan or contract amendment not required by the provisions of, or amendments made by, this section or such regulation, the effective date specified by the plan), and

(II)

ending on the date described in subparagraph (A)(ii) (or, if earlier, the date the plan or contract amendment is adopted),

the plan or contract is operated as if such plan or contract amendment were in effect; and
(ii)

such plan or contract amendment applies retroactively for such period.

109.

Additional exemption for housing qualified disaster displaced individuals

(a)

In general

Section 151 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:

(g)

Additional exemption for certain disaster-Displaced individuals

(1)

In general

In the case of any taxable year beginning in 2012, 2013, or 2014, there shall be allowed an exemption of $500 for each qualified disaster-displaced individual with respect to the taxpayer for the taxable year.

(2)

Limitations

(A)

Dollar limitation

The exemption under paragraph (1) shall not exceed $2,000, reduced by the amount of the exemption under this subsection for all prior taxable years.

(B)

Individuals taken into account only once

An individual shall not be taken into account under paragraph (1) if such individual was taken into account under this subsection by the taxpayer for any prior taxable year.

(C)

Identifying information required

An individual shall not be taken into account under paragraph (1) for a taxable year unless the taxpayer identification number of such individual is included on the return of the taxpayer for such taxable year.

(3)

Qualified disaster-displaced individual

(A)

In general

For purposes of this subsection, the term qualified disaster-displaced individual means, with respect to any taxpayer for any taxable year, any qualified individual if such individual is provided housing free of charge by the taxpayer in the principal residence of the taxpayer for a period of 60 consecutive days which ends in such taxable year. Such term shall not include the spouse or any dependent of the taxpayer.

(B)

Qualified individual

The term qualified individual means any individual who—

(i)

on the date of a federally declared disaster occurring during 2012, 2013, or 2014 maintained such individual's principal place of abode in the disaster area declared with respect to such disaster, and

(ii)

was displaced from such principal place of abode by reason of the federally declared disaster.

For purposes of the preceding sentence, the terms federally declared disaster and disaster area have the meanings given such terms in section 165(h)(3).
(4)

Compensation for housing

No deduction shall be allowed under this subsection if the taxpayer receives any rent or other amount (from any source) in connection with the providing of such housing.

.

(b)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2011.

110.

Exclusions of certain cancellations of indebtedness by reason of 2012, 2013, or 2014 disasters

(a)

In general

Section 108 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:

(j)

Discharge of indebtedness for individuals affected by 2012, 2013, and 2014 disasters

(1)

In general

Except as provided in paragraph (2), gross income shall not include any amount which (but for this subsection) would be includible in gross income by reason of any discharge (in whole or in part) of indebtedness of a natural person described in paragraph (3) by an applicable entity (as defined in section 6050P(c)(1)) during the applicable period.

(2)

Exceptions for business indebtedness

Paragraph (1) shall not apply to any indebtedness incurred in connection with a trade or business.

(3)

Persons described

A natural person is described in this paragraph if the principal place of abode of such person on the applicable disaster date was located in the disaster area with respect to any federally declared disaster occurring during 2012, 2013, or 2014.

(4)

Applicable period

For purposes of this subsection, the term applicable period means the period beginning on the applicable disaster date and ending on the date which is 14 months after such date.

(5)

Other definitions

For purposes of this subsection—

(A)

Federally declared disaster; disaster area

The terms federally declared disaster and disaster area have the meanings given such terms under section 165(h)(3)(C).

(B)

Applicable disaster date

The term applicable disaster date means, with respect to any federally declared disaster, the date on which such federally declared disaster occurs.

.

(b)

Effective date

This section shall apply to discharges made on or after December 31, 2011.

111.

Special rule for determining earned income of individuals affected by federally declared disasters

(a)

In general

Section 32 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:

(n)

Special rule for determining earned income of taxpayers affected by federally declared disasters

(1)

In general

In the case of a qualified individual with respect to any federally declared disaster occurring during 2012, 2013, or 2014, if the earned income of the taxpayer for the taxable year which includes the applicable disaster date is less than the earned income of the taxpayer for the preceding taxable year, the credit allowed under this section and section 24(d) may, at the election of the taxpayer, be determined by substituting—

(A)

such earned income for the preceding taxable year, for

(B)

such earned income for the taxable year which includes the applicable date.

(2)

Qualified individual

For purposes of this subsection, the term qualified individual means, with respect to any federally declared disaster occurring during 2012, 2013, or 2014, any individual whose principal place of abode on the applicable disaster date, was located—

(A)

in any portion of a disaster area determined by the President to warrant individual or individual and public assistance under the Robert T. Stafford Disaster Relief and Emergency Assistance Act by reason of the federally declared disaster, or

(B)

in any portion of the disaster area not described in subparagraph (A) and such individual was displaced from such principal place of abode by reason of the federally declared disaster.

(3)

Other definitions

For purposes of this paragraph—

(A)

Federally declared disaster; disaster area

The terms federally declared disaster and disaster area have the meanings given such terms under section 165(h)(3)(C).

(B)

Applicable disaster date

The term applicable disaster date means, with respect to any federally declared disaster, the date on which such federally declared disaster occurs.

(4)

Special rules

(A)

Application to joint returns

For purposes of paragraph (1), in the case of a joint return for a taxable year which includes the disaster date—

(i)

such paragraph shall apply if either spouse is a qualified individual, and

(ii)

the earned income of the taxpayer for the preceding taxable year shall be the sum of the earned income of each spouse for such preceding taxable year.

(B)

Uniform application of election

Any election made under paragraph (1) shall apply with respect to both sections 24(d) and this section.

(C)

Errors treated as mathematical error

For purposes of section 6213, an incorrect use on a return of earned income pursuant to paragraph (1) shall be treated as a mathematical or clerical error.

(D)

No effect on determination of gross income, etc

Except as otherwise provided in this subsection, this title shall be applied without regard to any substitution under paragraph (1).

.

(b)

Child tax credit

Section 24(d) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

(5)

Special rule for determining earned income of taxpayers affected by federally declared disasters

For election by qualified individuals with respect to certain federally declared disasters to substitute earned income from the preceding taxable year, see section 32(n).

.

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2011.

112.

Increase in rehabilitation credit for buildings in 2012, 2013, and 2014 disaster areas

(a)

In general

Section 47 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:

(e)

Special rule for expenditures made in connection with certain disasters

(1)

In general

In the case of qualified rehabilitation expenditures paid or incurred during the applicable period with respect to any qualified rehabilitated building or certified historic structure located in a disaster area with respect to any federally declared disaster occurring in 2012, 2013, or 2014, subsection (a) shall be applied—

(A)

by substituting 13 percent for 10 percent in paragraph (1) thereof, and

(B)

by substituting 26 percent for 20 percent in paragraph (2) thereof.

(2)

Definitions

For purposes of this subsection—

(A)

Federally declared disaster; disaster area

The terms federally declared disaster and disaster area have the meanings given such terms under section 165(h)(3)(C).

(B)

Applicable period

The term applicable period means the period beginning on the applicable disaster date and ending on December 31, 2015.

(C)

Applicable disaster date

The term applicable disaster date means, with respect to any federally declared disaster, the date on which such federally declared disaster occurs.

.

(b)

Effective date

The amendments made by this section shall apply to amounts paid or incurred after December 31, 2011.

113.

Advanced refundings of certain tax-exempt bonds

(a)

In general

Section 149(d) of the Internal Revenue Code of 1986 is amended by redesignating paragraph (7) as paragraph (8) and by inserting after paragraph (6) the following new paragraph:

(7)

Special rule with respect to certain natural disasters

(A)

In general

With respect to a bond described in subparagraph (C), one additional advance refunding after the date of the enactment of this paragraph and before January 1, 2018, shall be allowed under the rules of this subsection if—

(i)

the Governor of the State designates the advance refunding bond for purposes of this subsection, and

(ii)

the requirements of subparagraph (E) are met.

(B)

Certain private activity bonds

With respect to a bond described in subparagraph (C) which is an exempt facility bond described in paragraph (1) or (2) of section 142(a), one advance refunding after the date of the enactment of this paragraph and before January 1, 2018, shall be allowed under the applicable rules of this subsection (notwithstanding paragraph (2) thereof) if the requirements of clauses (i) and (ii) of subparagraph (A) are met.

(C)

Bonds described

A bond is described in this paragraph if, with respect to any federally declared disaster, such bond—

(i)

was outstanding on the applicable disaster date, and

(ii)

is issued by an applicable State or a political subdivision thereof.

(D)

Aggregate limit

The maximum aggregate face amount of bonds which may be designated under this subsection by the Governor of a State shall not exceed $4,500,000,000.

(E)

Additional requirements

The requirements of this subparagraph are met with respect to any advance refunding of a bond described in subparagraph (C) if—

(i)

no advance refundings of such bond would be allowed under this title on or after the applicable disaster date,

(ii)

the advance refunding bond is the only other outstanding bond with respect to the refunded bond, and

(iii)

the requirements of section 148 are met with respect to all bonds issued under this paragraph.

(F)

Definitions

For purposes of this subsection—

(i)

Federally declared disaster; disaster area

The terms federally declared disaster and disaster area have the meanings given such terms under section 165(h)(3)(C).

(ii)

Applicable disaster date

The term applicable disaster date means, with respect to any federally declared disaster, the date on which such federally declared disaster occurs.

(iii)

Applicable State

The term applicable State means, with respect to any federally declared disaster, any State in which a portion of the disaster area is located.

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114.

Qualified disaster area recovery bonds

(a)

In general

Subpart A of part IV of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 146 the following new section:

146A.

Qualified disaster area recovery bonds

(a)

In general

For purposes of this title, any qualified disaster area recovery bond shall—

(1)

be treated as an exempt facility bond, and

(2)

not be subject to section 146.

(b)

Qualified disaster area recovery bond

For purposes of this section, the term qualified disaster area recovery bond means any bond issued as part of an issue if—

(1)

95 percent or more of the net proceeds of such issue are to be used for qualified project costs,

(2)

such bond is issued by a State or any political subdivision thereof any part of which is in a qualified disaster area,

(3)

the Governor of the issuing State designates such bond for purposes of this section, and

(4)

such bond is issued after the date of the enactment of this section and before January 1, 2017.

(c)

Limitation on amount of bonds

(1)

In general

The maximum aggregate face amount of bonds which may be designated under this section by any State shall not exceed $10,000,000,000.

(2)

Movable property

No bonds shall be issued which are to be used for movable fixtures and equipment.

(3)

Treatment of current refunding bonds

Paragraph (1) shall not apply to any bond (or series of bonds) issued to refund a qualified disaster area recovery bond, if—

(A)

the average maturity date of the issue of which the refunding bond is a part is not later than the average maturity date of the bonds to be refunded by such issue,

(B)

the amount of the refunding bond does not exceed the outstanding amount of the refunded bond, and

(C)

the net proceeds of the refunding bond are used to redeem the refunded bond not later than 90 days after the date of the issuance of the refunding bond.

For purposes of subparagraph (A), average maturity shall be determined in accordance with section 147(b)(2)(A).
(d)

Qualified project costs

For purposes of this section, the term qualified project costs means the cost of acquisition, construction, reconstruction, and renovation of—

(1)

residential rental property (as defined in section 142(d)),

(2)

nonresidential real property (including fixed improvements associated with such property),

(3)

a facility described in paragraph (2) or (3) of section 142(a), or

(4)

public utility property (as defined in section 168(i)(10)),

which is located in a qualified disaster area and was damaged or destroyed by reason of a federally declared disaster.
(e)

Special rules

In applying this title to any qualified disaster area recovery bond, the following modifications shall apply:

(1)

Section 147(d) (relating to acquisition of existing property not permitted) shall be applied by substituting 50 percent for 15 percent each place it appears.

(2)

Section 148(f)(4)(C) (relating to exception from rebate for certain proceeds to be used to finance construction expenditures) shall apply to the available construction proceeds of bonds issued under this section. For purposes of the preceding sentence, the following spending requirements shall apply in lieu of the requirements in clause (ii) of such section:

(A)

40 percent of such available construction proceeds are spent for the governmental purposes of the issue within the 2-year period beginning on the date the bonds are issued,

(B)

60 percent of such proceeds are spent for such purposes within the 3-year period beginning on such date,

(C)

80 percent of such proceeds are spent for such purposes within the 4-year period beginning on such date, and

(D)

100 percent of such proceeds are spent for such purposes within the 5-year period beginning on such date.

(3)

Repayments of principal on financing provided by the issue—

(A)

may not be used to provide financing, and

(B)

must be used not later than the close of the 1st semiannual period beginning after the date of the repayment to redeem bonds which are part of such issue.

The requirement of subparagraph (B) shall be treated as met with respect to amounts received within 5 years after the date of issuance of the issue (or, in the case of a refunding bond, the date of issuance of the original bond) if such amounts are used by the close of such 5 years to redeem bonds which are part of such issue.
(4)

Section 57(a)(5) shall not apply.

(f)

Separate issue treatment of portions of an issue

This section shall not apply to the portion of an issue which (if issued as a separate issue) would be treated as a qualified bond or as a bond that is not a private activity bond (determined without regard to paragraph (1)), if the issuer elects to so treat such portion.

(g)

Qualified disaster area; federally declared disaster

(1)

Qualified disaster area

The term qualified disaster area means any area determined 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 a federally declared disaster occurring during the period beginning after December 31, 2011, and before January 1, 2015.

(2)

Federally declared disaster

The term federally declared disaster has the meaning given to such term under section 165(h)(3)(C).

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(b)

Clerical amendment

The table of sections for subpart A of part IV of subchapter B of chapter 1 of such Code is amended by inserting after the item relating to section 146 the following new item:

Sec. 146A. Qualified disaster area recovery bonds.

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(c)

Effective date

The amendments made by this section shall apply to obligations issued after the date of the enactment of this Act.

115.

Additional low-income housing credit allocations

(a)

In general

Paragraph (3) of section 42(h) of the Internal Revenue Code of 1986 (relating to limitation on aggregate credit allowable with respect to projects located in a State) is amended by adding at the end the following new subparagraph:

(J)

Increase in State housing credit for States damaged by natural disasters

(i)

In general

In the case of calendar year 2015, the State housing credit ceiling of each State any portion of which includes any portion of a qualifying disaster area shall be increased by so much of the aggregate housing credit dollar amount as does not exceed the applicable limitation allocated by the State housing credit agency of such State for such calendar year to buildings located in qualifying disaster areas.

(ii)

Applicable limitation

For purposes of clause (i), the applicable limitation is the greater of—

(I)

$8 multiplied by the population of the qualifying disaster areas in such State, or

(II)

50 percent of the State housing credit ceiling (determined without regard to this subparagraph) for 2014.

(iii)

Applicable percentage

For purposes of this section, the applicable percentage with respect to any building to which amounts allocated under clause (i) shall be determined under subsection (b)(2), except that subparagraph (A) thereof shall be applied by substituting January 1, 2015 for January 1, 2014.

(iv)

Allocations treated as made first from additional allocation amount for purposes of determining carryover

For purposes of determining the unused State housing credit ceiling under subparagraph (C) for any calendar year, any increase in the State housing credit ceiling under clause (i) shall be treated as an amount described in clause (ii) of such subparagraph.

(v)

Qualifying disaster area

For purposes of this subparagraph, the term qualifying federally declared disaster area means—

(I)

each county which is determined to warrant individual or individual and public assistance from the Federal Government under a qualifying natural disaster declaration described in clause (vi)(I), and

(II)

each county not described in subclause (I) which is included in the geographical area covered by a qualifying natural disaster declaration described in subclause (II) or (III) of clause (vi).

(vi)

Qualifying natural disaster declaration

For purposes of clause (v), the term qualifying natural disaster declaration means—

(I)

a federally declared disaster (as defined in section 165(h)(3)(C)) occurring during the period beginning after December 31, 2011, and before January 1, 2015,

(II)

a natural disaster declared by the Secretary of Agriculture in 2011 due to damaging weather and other conditions relating to Hurricane Irene or Tropical Storm Lee under section 321(a) of the Consolidated Farm and Rural Development Act (7 U.S.C. 1961(a)), or

(III)

a major disaster or emergency designated by the President in 2011 due to damaging weather and other conditions relating to Hurricane Irene or Tropical Storm Lee under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5121 et seq.).

.

(b)

Effective date

The amendment made by this section shall take effect on the date of the enactment of this Act.

116.

Facilitation of transfer of water leasing and water by mutual ditch or irrigation companies in disaster areas

(a)

In general

Paragraph (12) of section 501(c) of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph:

(I)

Treatment of mutual ditch or irrigation companies in certain disaster areas

(i)

In general

In the case of a qualified mutual ditch or irrigation company or like organization, subparagraph (A) shall be applied without taking into account any income received or accrued during the applicable period—

(I)

from the sale, lease, or exchange of fee or other interests in real property, including interests in water,

(II)

from the sale or exchange of stock in a mutual ditch or irrigation company or like organization or contract rights for the delivery or use of water,

(III)

from the investment of proceeds from sales, leases, or exchanges under subclauses (I) and (II), or

(IV)

from the United States, or a State or local government, resulting from the federally declared disaster,

except that any income received under subclause (I), (II), (III), or (IV) which is distributed or expended for expenses (other than for operations, maintenance, and capital improvements) of the qualified mutual ditch or irrigation company or like organization shall be treated as nonmember income in the year in which it is distributed or expended.
(ii)

Qualified mutual ditch or irrigation company or like organization

For purposes of this paragraph—

(I)

In general

The term qualified mutual ditch or irrigation company or like organization means any mutual ditch or irrigation company or like organization to a mutual ditch or irrigation company that diverted, delivered, transported, stored, or used its water for agricultural irrigation purposes on its own or through its shareholders in a qualified disaster area during 2012, 2013, or 2014.

(II)

Qualified asset

The term qualified asset means any real property or tangible personal property used in the mutual ditch or irrigation company's (or like organization's) system.

(III)

Multiple areas

Under regulations, if the qualified assets of any mutual ditch or irrigation company or like organization are located in more than 1 qualified disaster area, all such areas shall be treated as 1 area and if more than 1 federally declared disaster is involved, the date on which the last of such disasters occurred shall be the date used for purposes of this paragraph.

(iii)

Applicable period

For purposes of this paragraph, the term applicable period means the taxable year in which the federally declared disaster occurred and the 5 following taxable years.

(iv)

Other definitions

(I)

Qualified disaster area

The term qualified disaster area means any area determined 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 a federally declared disaster occurring during the period beginning on January 1, 2012, and ending on December 31, 2014.

(II)

Federally declared disaster

The term federally declared disaster has the meaning given to such term under section 165(h)(3)(C).

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(b)

Effective date

The amendment made by subsection (a) shall apply to taxable years ending after December 31, 2011.

II

Other disaster tax relief provisions

201.

Exclusion for disaster mitigation payments received from State and local governments

(a)

In general

Paragraph (2) of section 139(g) of the Internal Revenue Code of 1986 is amended by inserting , or any other amount which is paid by a State or local government or agency or instrumentality thereof, after (as in effect on such date).

(b)

Effective date

The amendment made by this section shall apply to payments received after the date of the enactment of this Act.

202.

Natural disaster funds

(a)

Natural disaster fund

Subpart C of part II of subchapter E of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 468B the following new section:

468C.

Special rules for natural disaster funds

(a)

In general

If a qualified taxpayer elects the application of this section, there shall be allowed as a deduction for any taxable year the amount of payments made by the taxpayer to a natural disaster fund during such taxable year.

(b)

Natural disaster fund

The term natural disaster fund means a fund meeting the following requirements:

(1)

Designation

The taxpayer designates—

(A)

the fund as a natural disaster fund in the manner prescribed by the Secretary, and

(B)

the line or lines of business to which the fund applies.

(2)

Segregation

The assets of the fund are segregated from other assets of the taxpayer.

(3)

Investments

(A)

The assets of the fund are maintained in one or more qualified accounts and are invested only in—

(i)

deposits with banks whose deposits are insured subject to applicable limits by the Federal Deposit Insurance Corporation, or

(ii)

in stock or other securities in which the fund would be permitted to invest if it were a capital construction fund subject to the investment limitations of paragraphs (2) and (3) of section 7518(b)(2).

(B)

All investment earnings (including gains and losses) from investments of the fund become part of the fund.

(4)

Contributions to the fund

The fund does not accept any deposits (or other amounts) other than cash payments with respect to which a deduction is allowable under subsection (a) and earnings (including gains and losses) from fund investments.

(5)

Purpose

The fund is established and maintained for the purposes of covering costs, expenses, and losses (including business interruption losses) resulting from a Federally declared natural disaster to the extent such costs are not covered by insurance.

(6)

Maximum balance

The balance of the fund does not exceed the lesser of—

(A)

the sum of—

(i)

150 percent of the maximum deductible, and

(ii)

100 percent of the maximum co-insurance (to the extent not taken into account in clause (i)),

that, in the case of a Federally declared natural disaster resulting in losses, the taxpayer could be expected to pay with respect to property and business interruption insurance maintained by the taxpayer for the line of business to which the fund applies and that would cover losses resulting from a Federally declared natural disaster, and
(B)

the maximum loss under any insurance coverage that the taxpayer could reasonably expect to occur for the line of business in the case of a severe natural disaster.

(7)

Financial statements

The fund or the balance of the fund is recorded in the taxpayer’s financial statements in accordance with generally accepted accounting principles and not as a current asset and the footnotes to the taxpayer’s financial statements include a short description of the fund and its purposes.

(8)

Insurance

The taxpayer property insurance maintained by the qualified taxpayer applies to 75 percent or more of the property used—

(A)

in the qualified taxpayer’s line of business to which the fund relates, and

(B)

in the United States.

(c)

Qualified taxpayer

For purposes of this section, the term qualified taxpayer means any taxpayer that—

(1)

actively conducts a trade or business, and

(2)

maintains property insurance with respect to such trade or business that insures against losses in natural disasters.

(d)

Failure To meet requirements

If a fund that was a natural disaster fund ceases to meet any of the requirements of subsection (b) or a taxpayer who has a natural disaster fund ceases to meet the requirement of subsection (c), the entire balance of the fund shall be deemed distributed in a nonqualified distribution at the time the fund ceases to meet such requirements.

(e)

Taxation of fund

(1)

In general

The earnings (including gains and losses) from the investment and reinvestment of amounts held in the fund shall not be taken into account in determining the gross income of the taxpayer that owns the fund.

(2)

Not a separate taxpayer

A natural disaster fund shall not be considered a separate taxpayer for purposes of this subtitle.

(f)

Taxation of distributions from the fund

(1)

Qualified distributions

For purposes of this chapter, qualified distributions shall be treated in the same manner as proceeds from property or business interruption insurance.

(2)

Nonqualified distributions

(A)

In general

In the case of any taxable year for which there is a nonqualified distribution—

(i)

such nonqualified distributions shall be excluded from the gross income of the taxpayer, and

(ii)

the tax imposed by this chapter (determined without regard to this subsection) shall be increased by the product of the amount of such nonqualified distribution and the highest rate of tax specified in section 1 (section 11 in the case of a corporation).

(B)

Tax benefit rule; coordination with deduction for net operating losses

Rules similar to the rules of subparagraphs (B) and (C) of section 7518(g)(6) shall apply for purposes of this paragraph.

(3)

Additional tax

The tax imposed by this chapter for any taxable year on any taxpayer that a owns natural disaster fund shall be increased by the greater of—

(A)

20 percent of the amount of any non-qualified distributions from the fund in the taxable year, and

(B)

an amount equal to interest, at the underpayment rate established under section 6621, on the nonqualified distribution from the time the amount is added to the fund to the time the amount is distributed.

(4)

Interest calculation

For purposes of calculating interest under paragraph (3)(B)—

(A)

all investment earnings (including gains or losses) in taxable year shall be treated as added to the fund on the last day of the taxable year, and

(B)

amounts distributed from the fund shall be treated as distributed on a first-in, first-out basis.

(g)

Definitions

For purposes of this section—

(1)

Federally declared natural disaster

The term Federally declared natural disaster means a natural disaster that is determined by Presidential declaration under the Robert T. Stafford Disaster Relief and Emergency Assistance Act to warrant individual or individual and public assistance under such Act.

(2)

Nonqualified distribution

The term nonqualified distribution means a distribution from a natural disaster fund other than a qualified distribution.

(3)

Qualified account

The term qualified account means an account with a bank (as defined in section 581) or a brokerage account but only if the investments of such accounts are limited to those permitted by subsection (b)(3) and no investments are made in a related person (as defined in section 465(b)(3)(C)) to the taxpayer.

(4)

Qualified distribution

(A)

In general

The term qualified distribution means with respect to natural disaster fund an amount equal to the excess of—

(i)

costs, expenses, and losses (including losses of a type reimbursable by proceeds of business interruption insurance) incurred by the taxpayer as a result of the Federally declared natural disaster with respect to the line or lines of business for which the fund was designated, over

(ii)

the proceeds of property and business interruption insurance paid for the benefit of the taxpayer with respect to costs, expenses, and losses described in clause (i).

(B)

Limitation

A distribution from a natural disaster fund shall not be treated as a qualified distribution if such distribution is allocated to a Federally declared natural disaster occurring more than 3 years before the date of such distribution.

(h)

Special rules

For purposes of this section—

(1)

No double counting

Any portion of any deductible or coinsurance taken into account under subsection (b)(6) in determining the maximum balance for a natural disaster fund shall not be taken into account in determining the maximum balance for another natural disaster fund.

(2)

Excess balance

(A)

In general

If the balance of a natural disaster fund exceeds the maximum balance permitted by subsection (b)(6) by reason of investment earnings or a reduction in the maximum balance, the account shall not cease to be a natural disaster fund as the result of exceeding such limit if the excess is distributed within 120 days of the date that such excess first occurred.

(B)

Treatment of distributions of excess balance

In the case of any distribution of the excess balance of a natural disaster fund within 120 days of the date that such excess first occurred—

(i)

paragraphs (2) and (3) of subsection (f) shall not apply to the distribution of such excess if distributed within such period, and

(ii)

the amount of such distribution shall be included in the gross income of the taxpayer in the year such distribution was made.

(C)

Anti-abuse rule

Subparagraph (B) shall not apply in the case of any reduction in the maximum balance resulting from any action of the taxpayer the primary purpose of which was to reduce the maximum balance to enable a distribution that would not be subject to the maximum tax rate calculation or the additional tax.

(3)

Certain asset acquisitions

The transfer of a natural disaster fund (or the portion of a natural disaster fund) from one person to another person shall not constitute a nonqualified distribution if—

(A)

such transfer is part of a transaction—

(i)

to which section 381 applies,

(ii)

the transferee acquires substantially all of the assets of the transferor used in the line or lines of business for which the fund was designated,

(iii)

the transferee acquires substantially all of the assets of the transferor used in one, but not all, of the lines of business for which the fund was designated, or

(iv)

the transferee acquires substantially all of the transferor’s assets located in a geographical area and used in a line of business for which the fund was designated, and

(B)

the transferee elects to treat the acquired natural disaster fund (or portion thereof) as a natural disaster fund for the line of business for which the transferor had previously designated the fund and as a continuation of the fund (or pro rata portion thereof) for purposes of determining the additional tax imposed by subsection (f)(4).

(i)

Regulations

The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the provisions of this section.

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(b)

Clerical amendment

The table of sections for subpart C of part II of subchapter E of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after the item relating to section 468B the following new item:

Sec. 468C. Special rules for natural disaster funds.

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(c)

Effective date

The amendment made by this section shall apply to taxable years beginning after December 31, 2013.