I 117TH CONGRESS 1ST SESSION H. R. 3954 To amend the Internal Revenue Code of 1986 to provide disaster tax relief, exclude from gross income amounts received from State-based catas- trophe loss mitigation programs, and for other purposes. IN THE HOUSE OF REPRESENTATIVES JUNE 16, 2021 Mr. THOMPSON of California introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committees on Small Business, and Agriculture, for a period to be subsequently de- termined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned A BILL To amend the Internal Revenue Code of 1986 to provide disaster tax relief, exclude from gross income amounts received from State-based catastrophe loss mitigation programs, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Disaster Tax Relief 4 Act of 2021’’. 5 SEC. 2. DEFINITIONS. 6 For purposes of this Act— 7 VerDate Sep 11 2014 00:28 Jul 03, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H3954.IH H3954 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 3954 IH (1) QUALIFIED DISASTER AREA.— 1 (A) IN GENERAL.—The term ‘‘qualified 2 disaster area’’ means any area with respect to 3 which a major disaster was declared, during the 4 period beginning on December 28, 2020, and 5 ending on the date which is 60 days after the 6 date of the enactment of this Act, by the Presi- 7 dent under section 401 of the Robert T. Staf- 8 ford Disaster Relief and Emergency Assistance 9 Act if the incident period of the disaster with 10 respect to which such declaration is made be- 11 gins on or before the date of the enactment of 12 this Act. 13 (B) COVID–19 EXCEPTION.—Such term 14 shall not include any area with respect to which 15 such a major disaster has been so declared only 16 by reason of COVID–19. 17 (2) QUALIFIED DISASTER ZONE.—The term 18 ‘‘qualified disaster zone’’ means that portion of any 19 qualified disaster area which was determined by the 20 President, during the period beginning on December 21 28, 2020, and ending on the date which is 60 days 22 after the date of the enactment of this Act, to war- 23 rant individual or individual and public assistance 24 from the Federal Government under the Robert T. 25 VerDate Sep 11 2014 00:28 Jul 03, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H3954.IH H3954 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 3954 IH Stafford Disaster Relief and Emergency Assistance 1 Act by reason of the qualified disaster with respect 2 to such disaster area. 3 (3) QUALIFIED DISASTER.—The term ‘‘quali- 4 fied disaster’’ means, with respect to any qualified 5 disaster area, the disaster by reason of which a 6 major disaster was declared with respect to such 7 area. 8 (4) INCIDENT PERIOD.—The term ‘‘incident pe- 9 riod’’ means, with respect to any qualified disaster, 10 the period specified by the Federal Emergency Man- 11 agement Agency as the period during which such 12 disaster occurred (except that for purposes of this 13 Act such period shall not be treated as beginning be- 14 fore December 28, 2020, or ending after the date 15 which is 30 days after the date of the enactment of 16 this Act). 17 SEC. 3. SPECIAL DISASTER-RELATED RULES FOR USE OF 18 RETIREMENT FUNDS. 19 (a) TAX-FAVORED WITHDRAWALS FROM RETIRE- 20 MENT PLANS.— 21 (1) IN GENERAL.—Section 72(t) of the Internal 22 Revenue Code of 1986 shall not apply to any quali- 23 fied disaster distribution. 24 (2) AGGREGATE DOLLAR LIMITATION.— 25 VerDate Sep 11 2014 00:28 Jul 03, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H3954.IH H3954 kjohnson on DSK79L0C42PROD with BILLS 4 •HR 3954 IH (A) IN GENERAL.—For purposes of this 1 subsection, the aggregate amount of distribu- 2 tions received by an individual which may be 3 treated as qualified disaster distributions for 4 any taxable year shall not exceed the excess (if 5 any) of— 6 (i) $100,000, over 7 (ii) the aggregate amounts treated as 8 qualified disaster distributions received by 9 such individual for all prior taxable years. 10 (B) TREATMENT OF PLAN DISTRIBU- 11 TIONS.—If a distribution to an individual would 12 (without regard to subparagraph (A)) be a 13 qualified disaster distribution, a plan shall not 14 be treated as violating any requirement of the 15 Internal Revenue Code of 1986 merely because 16 the plan treats such distribution as a qualified 17 disaster distribution, unless the aggregate 18 amount of such distributions from all plans 19 maintained by the employer (and any member 20 of any controlled group which includes the em- 21 ployer) to such individual exceeds $100,000. 22 (C) CONTROLLED GROUP.—For purposes 23 of subparagraph (B), the term ‘‘controlled 24 group’’ means any group treated as a single 25 VerDate Sep 11 2014 00:28 Jul 03, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H3954.IH H3954 kjohnson on DSK79L0C42PROD with BILLS 5 •HR 3954 IH employer under subsection (b), (c), (m), or (o) 1 of section 414 of the Internal Revenue Code of 2 1986. 3 (D) SPECIAL RULE FOR INDIVIDUALS AF- 4 FECTED BY MORE THAN ONE DISASTER.—The 5 limitation of subparagraph (A) shall be applied 6 separately with respect to distributions made 7 with respect to each qualified disaster. 8 (3) AMOUNT DISTRIBUTED MAY BE REPAID.— 9 (A) IN GENERAL.—Any individual who re- 10 ceives a qualified disaster distribution may, at 11 any time during the 3-year period beginning on 12 the day after the date on which such distribu- 13 tion was received, make 1 or more contributions 14 in an aggregate amount not to exceed the 15 amount of such distribution to an eligible retire- 16 ment plan of which such individual is a bene- 17 ficiary and to which a rollover contribution of 18 such distribution could be made under section 19 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 20 457(e)(16), of the Internal Revenue Code of 21 1986, as the case may be. 22 (B) TREATMENT OF REPAYMENTS OF DIS- 23 TRIBUTIONS FROM ELIGIBLE RETIREMENT 24 PLANS OTHER THAN IRAS.—For purposes of 25 VerDate Sep 11 2014 00:28 Jul 03, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H3954.IH H3954 kjohnson on DSK79L0C42PROD with BILLS 6 •HR 3954 IH the Internal Revenue Code of 1986, if a con- 1 tribution is made pursuant to subparagraph (A) 2 with respect to a qualified disaster distribution 3 from an eligible retirement plan other than an 4 individual retirement plan, then the taxpayer 5 shall, to the extent of the amount of the con- 6 tribution, be treated as having received the 7 qualified disaster distribution in an eligible roll- 8 over distribution (as defined in section 9 402(c)(4) of such Code) and as having trans- 10 ferred the amount to the eligible retirement 11 plan in a direct trustee to trustee transfer with- 12 in 60 days of the distribution. 13 (C) TREATMENT OF REPAYMENTS OF DIS- 14 TRIBUTIONS FROM IRAS.—For purposes of the 15 Internal Revenue Code of 1986, if a contribu- 16 tion is made pursuant to subparagraph (A) 17 with respect to a qualified disaster distribution 18 from an individual retirement plan (as defined 19 by section 7701(a)(37) of such Code), then, to 20 the extent of the amount of the contribution, 21 the qualified disaster distribution shall be treat- 22 ed as a distribution described in section 23 408(d)(3) of such Code and as having been 24 transferred to the eligible retirement plan in a 25 VerDate Sep 11 2014 00:28 Jul 03, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H3954.IH H3954 kjohnson on DSK79L0C42PROD with BILLS 7 •HR 3954 IH direct trustee to trustee transfer within 60 days 1 of the distribution. 2 (4) DEFINITIONS.—For purposes of this sub- 3 section— 4 (A) QUALIFIED DISASTER DISTRIBU- 5 TION.—Except as provided in paragraph (2), 6 the term ‘‘qualified disaster distribution’’ means 7 any distribution from an eligible retirement 8 plan made— 9 (i) on or after the first day of the in- 10 cident period of a qualified disaster and 11 before the date which is 180 days after the 12 date of the enactment of this Act, and 13 (ii) to an individual whose principal 14 place of abode at any time during the inci- 15 dent period of such qualified disaster is lo- 16 cated in the qualified disaster area with re- 17 spect to such qualified disaster and who 18 has sustained an economic loss by reason 19 of such qualified disaster. 20 (B) ELIGIBLE RETIREMENT PLAN.—The 21 term ‘‘eligible retirement plan’’ shall have the 22 meaning given such term by section 23 402(c)(8)(B) of the Internal Revenue Code of 24 1986. 25 VerDate Sep 11 2014 00:28 Jul 03, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H3954.IH H3954 kjohnson on DSK79L0C42PROD with BILLS 8 •HR 3954 IH (5) INCOME INCLUSION SPREAD OVER 3-YEAR 1 PERIOD.— 2 (A) IN GENERAL.—In the case of any 3 qualified disaster distribution, unless the tax- 4 payer elects not to have this paragraph apply 5 for any taxable year, any amount required to be 6 included in gross income for such taxable year 7 shall be so included ratably over the 3-taxable- 8 year period beginning with such taxable year. 9 (B) SPECIAL RULE.—For purposes of sub- 10 paragraph (A), rules similar to the rules of sub- 11 paragraph (E) of section 408A(d)(3) of the In- 12 ternal Revenue Code of 1986 shall apply. 13 (6) SPECIAL RULES.— 14 (A) EXEMPTION OF DISTRIBUTIONS FROM 15 TRUSTEE TO TRUSTEE TRANSFER AND WITH- 16 HOLDING RULES.—For purposes of sections 17 401(a)(31), 402(f), and 3405 of the Internal 18 Revenue Code of 1986, qualified disaster dis- 19 tributions shall not be treated as eligible roll- 20 over distributions. 21 (B) QUALIFIED DISASTER DISTRIBUTIONS 22 TREATED AS MEETING PLAN DISTRIBUTION RE- 23 QUIREMENTS.—For purposes the Internal Rev- 24 enue Code of 1986, a qualified disaster dis- 25 VerDate Sep 11 2014 00:28 Jul 03, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H3954.IH H3954 kjohnson on DSK79L0C42PROD with BILLS 9 •HR 3954 IH tribution shall be treated as meeting the re- 1 quirements of sections 401(k)(2)(B)(i), 2 403(b)(7)(A)(ii), 403(b)(11), and 457(d)(1)(A) 3 of such Code. 4 (b) RECONTRIBUTIONS OF WITHDRAWALS FOR 5 HOME PURCHASES.— 6 (1) RECONTRIBUTIONS.— 7 (A) IN GENERAL.—Any individual who re- 8 ceived a qualified distribution may, during the 9 applicable period, make 1 or more contributions 10 in an aggregate amount not to exceed the 11 amount of such qualified distribution to an eli- 12 gible retirement plan (as defined in section 13 402(c)(8)(B) of the Internal Revenue Code of 14 1986) of which such individual is a beneficiary 15 and to which a rollover contribution of such dis- 16 tribution could be made under section 402(c), 17 403(a)(4), 403(b)(8), or 408(d)(3), of such 18 Code, as the case may be. 19 (B) TREATMENT OF REPAYMENTS.—Rules 20 similar to the rules of subparagraphs (B) and 21 (C) of subsection (a)(3) shall apply for purposes 22 of this subsection. 23 VerDate Sep 11 2014 00:28 Jul 03, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H3954.IH H3954 kjohnson on DSK79L0C42PROD with BILLS 10 •HR 3954 IH (2) QUALIFIED DISTRIBUTION.—For purposes 1 of this subsection, the term ‘‘qualified distribution’’ 2 means any distribution— 3 (A) described in section 4 401(k)(2)(B)(i)(IV), 403(b)(7)(A)(ii) (but only 5 to the extent such distribution relates to finan- 6 cial hardship), 403(b)(11)(B), or 72(t)(2)(F), 7 of the Internal Revenue Code of 1986, 8 (B) which was to be used to purchase or 9 construct a principal residence in a qualified 10 disaster area, but which was not so used on ac- 11 count of the qualified disaster with respect to 12 such area, and 13 (C) which was received during the period 14 beginning on the date which is 180 days before 15 the first day of the incident period of such 16 qualified disaster and ending on the date which 17 is 30 days after the last day of such incident 18 period. 19 (3) APPLICABLE PERIOD.—For purposes of this 20 subsection, the term ‘‘applicable period’’ means, in 21 the case of a principal residence in a qualified dis- 22 aster area with respect to any qualified disaster, the 23 period beginning on the first day of the incident pe- 24 riod of such qualified disaster and ending on the 25 VerDate Sep 11 2014 00:28 Jul 03, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H3954.IH H3954 kjohnson on DSK79L0C42PROD with BILLS 11 •HR 3954 IH date which is 180 days after the date of the enact- 1 ment of this Act. 2 (c) LOANS FROM QUALIFIED PLANS.— 3 (1) INCREASE IN LIMIT ON LOANS NOT TREAT- 4 ED AS DISTRIBUTIONS.—In the case of any loan 5 from a qualified employer plan (as defined under 6 section 72(p)(4) of the Internal Revenue Code of 7 1986) to a qualified individual made during the 180- 8 day period beginning on the date of the enactment 9 of this Act— 10 (A) clause (i) of section 72(p)(2)(A) of 11 such Code shall be applied by substituting 12 ‘‘$100,000’’ for ‘‘$50,000’’, and 13 (B) clause (ii) of such section shall be ap- 14 plied by substituting ‘‘the present value of the 15 nonforfeitable accrued benefit of the employee 16 under the plan’’ for ‘‘one-half of the present 17 value of the nonforfeitable accrued benefit of 18 the employee under the plan’’. 19 (2) DELAY OF REPAYMENT.—In the case of a 20 qualified individual (with respect to any qualified 21 disaster) with an outstanding loan (on or after the 22 first day of the incident period of such qualified dis- 23 aster) from a qualified employer plan (as defined in 24 VerDate Sep 11 2014 00:28 Jul 03, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H3954.IH H3954 kjohnson on DSK79L0C42PROD with BILLS 12 •HR 3954 IH section 72(p)(4) of the Internal Revenue Code of 1 1986)— 2 (A) if the due date pursuant to subpara- 3 graph (B) or (C) of section 72(p)(2) of such 4 Code for any repayment with respect to such 5 loan occurs during the period beginning on the 6 first day of the incident period of such qualified 7 disaster and ending on the date which is 180 8 days after the last day of such incident period, 9 such due date shall be delayed for 1 year (or, 10 if later, until the date which is 180 days after 11 the date of the enactment of this Act), 12 (B) any subsequent repayments with re- 13 spect to any such loan shall be appropriately 14 adjusted to reflect the delay in the due date 15 under subparagraph (A) and any interest accru- 16 ing during such delay, and 17 (C) in determining the 5-year period and 18 the term of a loan under subparagraph (B) or 19 (C) of section 72(p)(2) of such Co [Text truncated for display. 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