2020 Disasters Tax Relief Act

II 116TH CONGRESS 2D SESSION S. 4621 To provide tax relief for persons affected by certain 2020 disasters. IN THE SENATE OF THE UNITED STATES SEPTEMBER 17, 2020 Mr. WYDEN (for himself, Mr. MERKLEY, Mrs. FEINSTEIN, Mrs. MURRAY, and Ms. HARRIS) introduced the following bill; which was read twice and re- ferred to the Committee on Finance A BILL To provide tax relief for persons affected by certain 2020 disasters. 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 ‘‘2020 Disasters Tax 4 Relief Act’’. 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, during 10 VerDate Sep 11 2014 02:29 Sep 29, 2020 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S4621.IS S4621 kjohnson on DSK79L0C42PROD with BILLS 2 •S 4621 IS the period beginning on January 1, 2020, and end- 1 ing on the date which is 60 days after the date of 2 the enactment of this Act, by the President under 3 section 401 of the Robert T. Stafford Disaster Relief 4 and Emergency Assistance Act if the incident period 5 of the disaster with respect to which such declara- 6 tion is made begins after the date of the enactment 7 of the Taxpayer Certainty and Disaster Tax Relief 8 Act of 2019 and on or before the date of the enact- 9 ment of this Act. 10 (2) QUALIFIED DISASTER ZONE.—The term 11 ‘‘qualified disaster zone’’ means that portion of any 12 qualified disaster area which was determined by the 13 President, during the period beginning on January 14 1, 2020, and ending on the date which is 60 days 15 after the date of the enactment of this Act, to war- 16 rant individual or individual and public assistance 17 from the Federal Government under the Robert T. 18 Stafford Disaster Relief and Emergency Assistance 19 Act by reason of the qualified disaster with respect 20 to such disaster area. 21 (3) QUALIFIED DISASTER.— 22 (A) IN GENERAL.—The term ‘‘qualified 23 disaster’’ means, with respect to any qualified 24 disaster area, the disaster by reason of which a 25 VerDate Sep 11 2014 02:29 Sep 29, 2020 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S4621.IS S4621 kjohnson on DSK79L0C42PROD with BILLS 3 •S 4621 IS major disaster was declared with respect to 1 such area. 2 (B) EXCEPTION.—Such term shall not in- 3 clude any major disaster declared as a result of 4 the Coronavirus Disease 2019 (COVID–19) 5 pandemic. 6 (4) INCIDENT PERIOD.—The term ‘‘incident pe- 7 riod’’ means, with respect to any qualified disaster, 8 the period specified by the Federal Emergency Man- 9 agement Agency as the period during which such 10 disaster occurred (except that for purposes of this 11 Act such period shall not be treated as beginning be- 12 fore January 1, 2020, or ending after the date which 13 is 30 days after the date of the enactment of this 14 Act). 15 SEC. 3. SPECIAL DISASTER-RELATED RULES FOR USE OF 16 RETIREMENT FUNDS. 17 (a) TAX-FAVORED WITHDRAWALS FROM RETIRE- 18 MENT PLANS.— 19 (1) IN GENERAL.—Section 72(t) of the Internal 20 Revenue Code of 1986 shall not apply to any quali- 21 fied disaster distribution. 22 (2) AGGREGATE DOLLAR LIMITATION.— 23 (A) IN GENERAL.—For purposes of this 24 subsection, the aggregate amount of distribu- 25 VerDate Sep 11 2014 02:29 Sep 29, 2020 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S4621.IS S4621 kjohnson on DSK79L0C42PROD with BILLS 4 •S 4621 IS tions received by an individual which may be 1 treated as qualified disaster distributions for 2 any taxable year shall not exceed the excess (if 3 any) of— 4 (i) $100,000, over 5 (ii) the aggregate amounts treated as 6 qualified disaster distributions received by 7 such individual for all prior taxable years. 8 (B) TREATMENT OF PLAN DISTRIBU- 9 TIONS.—If a distribution to an individual would 10 (without regard to subparagraph (A)) be a 11 qualified disaster distribution, a plan shall not 12 be treated as violating any requirement of the 13 Internal Revenue Code of 1986 merely because 14 the plan treats such distribution as a qualified 15 disaster distribution, unless the aggregate 16 amount of such distributions from all plans 17 maintained by the employer (and any member 18 of any controlled group which includes the em- 19 ployer) to such individual exceeds $100,000. 20 (C) CONTROLLED GROUP.—For purposes 21 of subparagraph (B), the term ‘‘controlled 22 group’’ means any group treated as a single 23 employer under subsection (b), (c), (m), or (o) 24 VerDate Sep 11 2014 02:29 Sep 29, 2020 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S4621.IS S4621 kjohnson on DSK79L0C42PROD with BILLS 5 •S 4621 IS of section 414 of the Internal Revenue Code of 1 1986. 2 (D) SPECIAL RULE FOR INDIVIDUALS AF- 3 FECTED BY MORE THAN ONE DISASTER.—The 4 limitation of subparagraph (A) shall be applied 5 separately with respect to distributions made 6 with respect to each qualified disaster. 7 (3) AMOUNT DISTRIBUTED MAY BE REPAID.— 8 (A) IN GENERAL.—Any individual who re- 9 ceives a qualified disaster distribution may, at 10 any time during the 3-year period beginning on 11 the day after the date on which such distribu- 12 tion was received, make 1 or more contributions 13 in an aggregate amount not to exceed the 14 amount of such distribution to an eligible retire- 15 ment plan of which such individual is a bene- 16 ficiary and to which a rollover contribution of 17 such distribution could be made under section 18 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 19 457(e)(16), of the Internal Revenue Code of 20 1986, as the case may be. 21 (B) TREATMENT OF REPAYMENTS OF DIS- 22 TRIBUTIONS FROM ELIGIBLE RETIREMENT 23 PLANS OTHER THAN IRAS.—For purposes of 24 the Internal Revenue Code of 1986, if a con- 25 VerDate Sep 11 2014 02:29 Sep 29, 2020 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S4621.IS S4621 kjohnson on DSK79L0C42PROD with BILLS 6 •S 4621 IS tribution is made pursuant to subparagraph (A) 1 with respect to a qualified disaster distribution 2 from an eligible retirement plan other than an 3 individual retirement plan, then the taxpayer 4 shall, to the extent of the amount of the con- 5 tribution, be treated as having received the 6 qualified disaster distribution in an eligible roll- 7 over distribution (as defined in section 8 402(c)(4) of such Code) and as having trans- 9 ferred the amount to the eligible retirement 10 plan in a direct trustee to trustee transfer with- 11 in 60 days of the distribution. 12 (C) TREATMENT OF REPAYMENTS OF DIS- 13 TRIBUTIONS FROM IRAS.—For purposes of the 14 Internal Revenue Code of 1986, if a contribu- 15 tion is made pursuant to subparagraph (A) 16 with respect to a qualified disaster distribution 17 from an individual retirement plan (as defined 18 by section 7701(a)(37) of such Code), then, to 19 the extent of the amount of the contribution, 20 the qualified disaster distribution shall be treat- 21 ed as a distribution described in section 22 408(d)(3) of such Code and as having been 23 transferred to the eligible retirement plan in a 24 VerDate Sep 11 2014 02:29 Sep 29, 2020 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S4621.IS S4621 kjohnson on DSK79L0C42PROD with BILLS 7 •S 4621 IS 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 02:29 Sep 29, 2020 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S4621.IS S4621 kjohnson on DSK79L0C42PROD with BILLS 8 •S 4621 IS (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 02:29 Sep 29, 2020 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S4621.IS S4621 kjohnson on DSK79L0C42PROD with BILLS 9 •S 4621 IS tribution shall be treated as meeting the re- 1 quirements of sections 401(k)(2)(B)(i), 2 403(b)(7)(A)(i), 403(b)(11), and 457(d)(1)(A) 3 of such Code and section 8433(h)(1) of title 5, 4 United States Code, and, in the case of a 5 money purchase pension plan, a qualified dis- 6 aster distribution which is an in-service with- 7 drawal shall be treated as meeting the distribu- 8 tion rules of section 401(a) of such Code. 9 (b) RECONTRIBUTIONS OF WITHDRAWALS FOR 10 HOME PURCHASES.— 11 (1) RECONTRIBUTIONS.— 12 (A) IN GENERAL.—Any individual who re- 13 ceived a qualified distribution may, during the 14 applicable period, make 1 or more contributions 15 in an aggregate amount not to exceed the 16 amount of such qualified distribution to an eli- 17 gible retirement plan (as defined in section 18 402(c)(8)(B) of the Internal Revenue Code of 19 1986) of which such individual is a beneficiary 20 and to which a rollover contribution of such dis- 21 tribution could be made under section 402(c), 22 403(a)(4), 403(b)(8), or 408(d)(3), of such 23 Code, as the case may be. 24 VerDate Sep 11 2014 02:29 Sep 29, 2020 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S4621.IS S4621 kjohnson on DSK79L0C42PROD with BILLS 10 •S 4621 IS (B) TREATMENT OF REPAYMENTS.—Rules 1 similar to the rules of subparagraphs (B) and 2 (C) of subsection (a)(3) shall apply for purposes 3 of this subsection. 4 (2) QUALIFIED DISTRIBUTION.—For purposes 5 of this subsection, the term ‘‘qualified distribution’’ 6 means any distribution— 7 (A) described in section 8 401(k)(2)(B)(i)(IV), 403(b)(7)(A)(i) (but only 9 to the extent such distribution relates to finan- 10 cial hardship), 403(b)(11)(B), or 72(t)(2)(F), 11 of the Internal Revenue Code of 1986, 12 (B) which was to be used to purchase or 13 construct a principal residence in a qualified 14 disaster area, but which was not so used on ac- 15 count of the qualified disaster with respect to 16 such area, and 17 (C) which was received during the period 18 beginning on the date which is 180 days before 19 the first day of the incident period of such 20 qualified disaster and ending on the date which 21 is 30 days after the last day of such incident 22 period. 23 (3) APPLICABLE PERIOD.—For purposes of this 24 subsection, the term ‘‘applicable period’’ means, in 25 VerDate Sep 11 2014 02:29 Sep 29, 2020 Jkt 099200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S4621.IS S4621 kjohnson on DSK79L0C42PROD with BILLS 11 •S 4621 IS the case of a principal residence in a qualified dis- 1 aster area with respect to any qualified disaster, the 2 period beginning on the first day of the incident pe- 3 riod of such qualified disaster and ending on the 4 date which is 180 days after the date of the enact- 5 ment of this Act. 6 (c) LOANS FROM QUALIFIED PLANS.— 7 (1) INCREASE IN LIMIT ON LOANS NOT TREAT- 8 ED AS DISTRIBUTIONS.—In the case of any loan 9 from a qualified employer plan (as defined under 10 section 72(p)(4) of the Internal Revenue Code of 11 1986) to a qualified individual made during the 180- 12 day period beginning on the date of the enactment 13 of this Act— 14 (A) clause (i) of section 72(p)(2)(A) of 15 such Code shall be applied by substituting 16 ‘‘$100,000’’ for ‘‘$50,000’’, and 17 (B) clause (ii) of such section shall be ap- 18 plied by substituting ‘‘the present value of the 19 nonforfeitable accrued benefit of the employee 20 under the plan’’ for ‘‘one-half of the present 21 value of the nonforfeitable accrued benefit of 22 the employee under the plan’’. 23 (2) DELAY OF REPAYMENT.—In the case of a 24 qualified individual (with respect to any qualified 25 VerDate Sep 11 2014 02:29 Sep 29, 2020 Jkt 099200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S4621.IS S4621 kjohnson on DSK79L0C42PROD with BILLS 12 •S 4621 IS disaster) with an outstanding loan (on or after the 1 first day of the incident period of such qualified dis- 2 aster) from a qualified employer plan (as defined in 3 section 72(p)(4) of the Internal Revenue Code of 4 1986)— 5 (A) if the due date pursuant to subpara- 6 graph (B) or (C) of section 72(p)(2) of such 7 Code for any repayment with respect to such 8 loan occurs during the period beginning on the 9 first day of the incident period of such qualified 10 disaster and ending on the date which is 180 11 days after the last day of such incident period, 12 such due date shall be delayed for 1 year (or, 13 if later, until the date which is 180 days after 14 the date of the enactment of this Act), 15 (B) any subsequent repayments with re- 16 spect to any such loan shall be appropriately 17 adjusted to reflect the delay in the due date 18 under subparagraph (A) and any interest accru- 19 ing during such delay, and 20 (C) in determining the 5-year period and 21 the term of a loan under subparagraph (B) or 22 (C) of section 72(p)(2) of such Code, the period 23 described in subparagraph (A) of this para- 24 graph shall be disregard [Text truncated for display. 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