Disaster Tax Relief Act of 2019

II 116TH CONGRESS 1ST SESSION S. 1133 To provide disaster tax relief for certain disasters occurring in 2019. IN THE SENATE OF THE UNITED STATES APRIL 10, 2019 Mrs. FISCHER (for herself, Ms. ERNST, Mr. SASSE, and Mr. GRASSLEY) intro- duced the following bill; which was read twice and referred to the Com- mittee on Finance A BILL To provide disaster tax relief for certain disasters occurring in 2019. 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 2019’’. 5 SEC. 2. DEFINITIONS. 6 For purposes of this Act— 7 (1) QUALIFIED DISASTER AREA.—The term 8 ‘‘qualified disaster area’’ means any area with re- 9 spect to which a major disaster was declared after 10 VerDate Sep 11 2014 00:05 Apr 17, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1133.IS S1133 pamtmann on DSKBFK8HB2PROD with BILLS 2 •S 1133 IS December 31, 2018, and before April 15, 2019, by 1 the President under section 401 of the Robert T. 2 Stafford Disaster Relief and Emergency Assistance 3 Act if the incident period of the disaster with respect 4 to which such declaration is made begins after De- 5 cember 31, 2018. 6 (2) QUALIFIED DISASTER ZONE.—The term 7 ‘‘qualified disaster zone’’ means that portion of any 8 qualified disaster area which was determined by the 9 President after December 31, 2018, and before April 10 15, 2019, to warrant individual or individual and 11 public assistance from the Federal Government 12 under the Robert T. Stafford Disaster Relief and 13 Emergency Assistance Act by reason of the qualified 14 disaster with respect to such disaster area. 15 (3) QUALIFIED DISASTER.—The term ‘‘quali- 16 fied disaster’’ means, with respect to any qualified 17 disaster area, the disaster by reason of which a 18 major disaster was declared with respect to such 19 area. 20 (4) INCIDENT PERIOD.—The term ‘‘incident pe- 21 riod’’ means, with respect to any qualified disaster, 22 the period specified by the Federal Emergency Man- 23 agement Agency as the period during which such 24 disaster occurred (except that for purposes of this 25 VerDate Sep 11 2014 00:05 Apr 17, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1133.IS S1133 pamtmann on DSKBFK8HB2PROD with BILLS 3 •S 1133 IS Act such period shall not be treated as beginning be- 1 fore January 1, 2019, or ending after April 15, 2 2019). 3 SEC. 3. SPECIAL DISASTER-RELATED RULES FOR USE OF 4 RETIREMENT FUNDS. 5 (a) TAX-FAVORED WITHDRAWALS FROM RETIRE- 6 MENT PLANS.— 7 (1) IN GENERAL.—Section 72(t) of the Internal 8 Revenue Code of 1986 shall not apply to any quali- 9 fied disaster distribution. 10 (2) AGGREGATE DOLLAR LIMITATION.— 11 (A) IN GENERAL.—For purposes of this 12 subsection, the aggregate amount of distribu- 13 tions received by an individual which may be 14 treated as qualified disaster distributions for 15 any taxable year shall not exceed the excess (if 16 any) of— 17 (i) $100,000, over 18 (ii) the aggregate amounts treated as 19 qualified disaster distributions received by 20 such individual for all prior taxable years. 21 (B) TREATMENT OF PLAN DISTRIBU- 22 TIONS.—If a distribution to an individual would 23 (without regard to subparagraph (A)) be a 24 qualified disaster distribution, a plan shall not 25 VerDate Sep 11 2014 00:05 Apr 17, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1133.IS S1133 pamtmann on DSKBFK8HB2PROD with BILLS 4 •S 1133 IS be treated as violating any requirement of the 1 Internal Revenue Code of 1986 merely because 2 the plan treats such distribution as a qualified 3 disaster distribution, unless the aggregate 4 amount of such distributions from all plans 5 maintained by the employer (and any member 6 of any controlled group which includes the em- 7 ployer) to such individual exceeds $100,000. 8 (C) CONTROLLED GROUP.—For purposes 9 of subparagraph (B), the term ‘‘controlled 10 group’’ means any group treated as a single 11 employer under subsection (b), (c), (m), or (o) 12 of section 414 of the Internal Revenue Code of 13 1986. 14 (D) SPECIAL RULE FOR INDIVIDUALS AF- 15 FECTED BY MORE THAN ONE DISASTER.—The 16 limitation of subparagraph (A) shall be applied 17 separately with respect to distributions made 18 with respect to each qualified disaster. 19 (3) AMOUNT DISTRIBUTED MAY BE REPAID.— 20 (A) IN GENERAL.—Any individual who re- 21 ceives a qualified disaster distribution may, at 22 any time during the 3-year period beginning on 23 the day after the date on which such distribu- 24 tion was received, make one or more contribu- 25 VerDate Sep 11 2014 00:05 Apr 17, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1133.IS S1133 pamtmann on DSKBFK8HB2PROD with BILLS 5 •S 1133 IS tions in an aggregate amount not to exceed the 1 amount of such distribution to an eligible retire- 2 ment plan of which such individual is a bene- 3 ficiary and to which a rollover contribution of 4 such distribution could be made under section 5 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 6 457(e)(16), of the Internal Revenue Code of 7 1986, as the case may be. 8 (B) TREATMENT OF REPAYMENTS OF DIS- 9 TRIBUTIONS FROM ELIGIBLE RETIREMENT 10 PLANS OTHER THAN IRAS.—For purposes of 11 the Internal Revenue Code of 1986, if a con- 12 tribution is made pursuant to subparagraph (A) 13 with respect to a qualified disaster distribution 14 from an eligible retirement plan other than an 15 individual retirement plan, then the taxpayer 16 shall, to the extent of the amount of the con- 17 tribution, be treated as having received the 18 qualified disaster distribution in an eligible roll- 19 over distribution (as defined in section 20 402(c)(4) of such Code) and as having trans- 21 ferred the amount to the eligible retirement 22 plan in a direct trustee to trustee transfer with- 23 in 60 days of the distribution. 24 VerDate Sep 11 2014 00:05 Apr 17, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1133.IS S1133 pamtmann on DSKBFK8HB2PROD with BILLS 6 •S 1133 IS (C) TREATMENT OF REPAYMENTS OF DIS- 1 TRIBUTIONS FROM IRAS.—For purposes of the 2 Internal Revenue Code of 1986, if a contribu- 3 tion is made pursuant to subparagraph (A) 4 with respect to a qualified disaster distribution 5 from an individual retirement plan (as defined 6 by section 7701(a)(37) of such Code), then, to 7 the extent of the amount of the contribution, 8 the qualified disaster distribution shall be treat- 9 ed as a distribution described in section 10 408(d)(3) of such Code and as having been 11 transferred to the eligible retirement plan in a 12 direct trustee to trustee transfer within 60 days 13 of the distribution. 14 (4) DEFINITIONS.—For purposes of this sub- 15 section— 16 (A) QUALIFIED DISASTER DISTRIBU- 17 TION.—Except as provided in paragraph (2), 18 the term ‘‘qualified disaster distribution’’ means 19 any distribution from an eligible retirement 20 plan made— 21 (i) on or after the first day of the in- 22 cident period of a qualified disaster and 23 before the date which is 180 days after the 24 date of the enactment of this Act, and 25 VerDate Sep 11 2014 00:05 Apr 17, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1133.IS S1133 pamtmann on DSKBFK8HB2PROD with BILLS 7 •S 1133 IS (ii) to an individual whose principal 1 place of abode at any time during the inci- 2 dent period of such qualified disaster is lo- 3 cated in the qualified disaster area with re- 4 spect to such qualified disaster and who 5 has sustained an economic loss by reason 6 of such qualified disaster. 7 (B) ELIGIBLE RETIREMENT PLAN.—The 8 term ‘‘eligible retirement plan’’ shall have the 9 meaning given such term by section 10 402(c)(8)(B) of the Internal Revenue Code of 11 1986. 12 (5) INCOME INCLUSION SPREAD OVER 3-YEAR 13 PERIOD.— 14 (A) IN GENERAL.—In the case of any 15 qualified disaster distribution, unless the tax- 16 payer elects not to have this paragraph apply 17 for any taxable year, any amount required to be 18 included in gross income for such taxable year 19 shall be so included ratably over the 3-taxable- 20 year period beginning with such taxable year. 21 (B) SPECIAL RULE.—For purposes of sub- 22 paragraph (A), rules similar to the rules of sub- 23 paragraph (E) of section 408A(d)(3) of the In- 24 ternal Revenue Code of 1986 shall apply. 25 VerDate Sep 11 2014 00:05 Apr 17, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1133.IS S1133 pamtmann on DSKBFK8HB2PROD with BILLS 8 •S 1133 IS (6) SPECIAL RULES.— 1 (A) EXEMPTION OF DISTRIBUTIONS FROM 2 TRUSTEE TO TRUSTEE TRANSFER AND WITH- 3 HOLDING RULES.—For purposes of sections 4 401(a)(31), 402(f), and 3405 of the Internal 5 Revenue Code of 1986, qualified disaster dis- 6 tributions shall not be treated as eligible roll- 7 over distributions. 8 (B) QUALIFIED DISASTER DISTRIBUTIONS 9 TREATED AS MEETING PLAN DISTRIBUTION RE- 10 QUIREMENTS.—For purposes the Internal Rev- 11 enue Code of 1986, a qualified disaster dis- 12 tribution shall be treated as meeting the re- 13 quirements of sections 401(k)(2)(B)(i), 14 403(b)(7)(A)(ii), 403(b)(11), and 457(d)(1)(A) 15 of such Code. 16 (b) RECONTRIBUTIONS OF WITHDRAWALS FOR 17 HOME PURCHASES.— 18 (1) RECONTRIBUTIONS.— 19 (A) IN GENERAL.—Any individual who re- 20 ceived a qualified distribution may, during the 21 applicable period, make one or more contribu- 22 tions in an aggregate amount not to exceed the 23 amount of such qualified distribution to an eli- 24 gible retirement plan (as defined in section 25 VerDate Sep 11 2014 00:05 Apr 17, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1133.IS S1133 pamtmann on DSKBFK8HB2PROD with BILLS 9 •S 1133 IS 402(c)(8)(B) of the Internal Revenue Code of 1 1986) of which such individual is a beneficiary 2 and to which a rollover contribution of such dis- 3 tribution could be made under section 402(c), 4 403(a)(4), 403(b)(8), or 408(d)(3), of such 5 Code, as the case may be. 6 (B) TREATMENT OF REPAYMENTS.—Rules 7 similar to the rules of subparagraphs (B) and 8 (C) of subsection (a)(3) shall apply for purposes 9 of this subsection. 10 (2) QUALIFIED DISTRIBUTION.—For purposes 11 of this subsection, the term ‘‘qualified distribution’’ 12 means any distribution— 13 (A) described in section 14 401(k)(2)(B)(i)(IV), 403(b)(7)(A)(ii) (but only 15 to the extent such distribution relates to finan- 16 cial hardship), 403(b)(11)(B), or 72(t)(2)(F), 17 of the Internal Revenue Code of 1986, 18 (B) which was to be used to purchase or 19 construct a principal residence in a qualified 20 disaster area, but which was not so used on ac- 21 count of the qualified disaster with respect to 22 such area, and 23 (C) which was received during the period 24 beginning on the date which is 180 days before 25 VerDate Sep 11 2014 00:05 Apr 17, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1133.IS S1133 pamtmann on DSKBFK8HB2PROD with BILLS 10 •S 1133 IS the first day of the incident period of such 1 qualified disaster and ending on the date which 2 is 30 days after the last day of such incident 3 period. 4 (3) APPLICABLE PERIOD.—For purposes of this 5 subsection, the term ‘‘applicable period’’ means, in 6 the case of a principal residence in a qualified dis- 7 aster area with respect to any qualified disaster, the 8 period beginning on the first day of the incident pe- 9 riod of such qualified disaster and ending on the 10 date which is 180 days after the date of the enact- 11 ment of this Act. 12 (c) LOANS FROM QUALIFIED PLANS.— 13 (1) INCREASE IN LIMIT ON LOANS NOT TREAT- 14 ED AS DISTRIBUTIONS.—In the case of any loan 15 from a qualified employer plan (as defined under 16 section 72(p)(4) of the Internal Revenue Code of 17 1986) to a qualified individual made during the 180- 18 day period beginning on the date of the enactment 19 of this Act— 20 (A) clause (i) of section 72(p)(2)(A) of 21 such Code shall be applied by substituting 22 ‘‘$100,000’’ for ‘‘$50,000’’, and 23 (B) clause (ii) of such section shall be ap- 24 plied by substituting ‘‘the present value of the 25 VerDate Sep 11 2014 00:05 Apr 17, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S1133.IS S1133 pamtmann on DSKBFK8HB2PROD with BILLS 11 •S 1133 IS nonforfeitable accrued benefit of the employee 1 under the plan’’ for ‘‘one-half of the present 2 value of the nonforfeitable accrued benefit of 3 the employee under the plan’’. 4 (2) DELAY OF REPAYMENT.—In the case of a 5 qualified individual (with respect to any qualified 6 disaster) with an outstanding loan (on or after the 7 first day of the incident period of such qualified dis- 8 aster) from a qualified employer plan (as defined in 9 section 72(p)(4) of the Internal Revenue Code of 10 1986)— 11 (A) if the due date pursuant to subpara- 12 graph (B) or (C) of section 72(p)(2) of such 13 Code for any repayment with respect to such 14 loan occurs during the period beginning on the 15 first day of the incident period of such qualified 16 disaster and ending on the date which is 180 17 days after the last day of such incident period, 18 such due date shall be delayed for 1 year (or, 19 if later, until the date which is 180 days after 20 the date of the enactment of this Act), 21 (B) any subsequent repayments with re- 22 spect to any such loan shall be appropriately 23 adjusted to reflect the delay in the due date 24 VerDate Sep 11 2014 00:05 Apr 17, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S1133.IS S1133 pamtmann on DSKBFK8HB2PROD with BILLS 12 •S 1133 IS under subparagraph (A) and any interest accru- 1 ing during such delay, and 2 (C) in determining the 5-year period and 3 the term of a loan under subparagraph (B) or 4 (C) of section 72(p)(2) of such Code, the period 5 described in subparagraph (A) of this para- 6 graph shall be disregarded. 7 (3) QUALIFIED INDIVIDUAL.—For purposes of 8 this subsection, the term ‘‘qualified individual’’ 9 means any individual— 10 (A) whose principal place of abode at any 11 time during the incident period of any qualified 12 disaster is located in the qualified disaster area 13 with respect to such qualified disaster, and 14 (B) who has sustained an economic loss by 15 reason of such qualified disaster. 16 (d) PROVISIONS RELATING TO PLAN AMEND- 17 MENTS.— 18 (1) IN GENERAL.—If this subsection applies to 19 any amendment to any plan or annuity contract, 20 such plan or contract shall be treated as being oper- 21 ated in accordance with the terms of the plan during 22 the period described in paragraph (2)(B)(i). 23 (2) AMENDMENTS TO WHICH SUBSECTION AP- 24 PLIES.— 25 VerDate Sep 11 2014 00:05 Apr 17, [Text truncated for display. 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