To amend the Internal Revenue Code of 1986 to provide tax relief to victims of Hurricane Katrina.

September 14, 2005

Mrs. JONES of Ohio (for herself, Mr. JEFFERSON, Mr. LEWIS of Georgia, Mr. EMANUEL, Mr. DOGGETT, and Mr. NEAL of Massachusetts) introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to provide tax relief to victims of Hurricane Katrina.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Katrina Assistance Tax Relief Incentives for Necessities Act of 2005' or the `KATRINA Act of 2005'.

SEC. 2. HURRICANE KATRINA DISASTER VICTIMS MADE MEMBERS OF TARGETED GROUPS UNDER WORK OPPORTUNITY TAX CREDIT.

(a) In General- Paragraph (1) of section 51(d) of the Internal Revenue Code of 1986 (defining generally members of targeted group) is amended by striking `or' at the end of subparagraph (G), by striking the period at the end of subparagraph (H) and inserting `, or', and by inserting after subparagraph (H) the following new subparagraph:

`(I) a Hurricane Katrina disaster victim.'.

(b) Qualified Disaster Victim- Subsection (d) of section 51 of such Code (relating to members of targeted groups) is amended by redesignating paragraphs (10), (11), and (12) as paragraphs (11), (12), and (13), respectively, and by inserting after paragraph (9) the following new paragraph:

`(10) HURRICANE KATRINA DISASTER VICTIM- The term `Hurricane Katrina disaster victim' means an individual who is certified by the designated local agency as being a eligible to receive assistance from the Federal Government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act by reason of Hurricane Katrina.'.

(c) Termination- Subparagraph (B) of section 51(c)(4) of such Code is amended by inserting `(2006 in the case of a Hurricane Katrina disaster victim)' before the period.

(d) Effective Date- The amendments made by this section shall apply to individuals who begin work for the employer after August 28, 2005.

SEC. 3. HURRICANE KATRINA DISPLACED RESIDENT CREDIT.

(a) In General- Subpart A of of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to nonrefundable personal credits) is amended by inserting after section 25D the following new section:

`SEC. 25E. HURRICANE KATRINA DISPLACED RESIDENT CREDIT.

`(a) Allowance of Credit-

`(1) IN GENERAL- There shall be allowed as a credit against the tax imposed by this chapter for the taxable year with respect to all qualified displaced persons residing without charge with the taxpayer in the principal residence of the taxpayer an amount equal to the applicable percentage of $1,000.

`(2) APPLICABLE PERCENTAGE- For purposes of paragraph (1), the applicable percentage is the ratio (expressed as a percentage) which--

`(A) the number of days the qualified displace persons reside without charge with the taxpayer in the principal residence of the taxpayer during the taxable year, bears to

`(B) 360.

`(b) Limitations-

`(1) LIMITATION BASED ON ADJUSTED GROSS INCOME- The amount of the credit allowable under subsection (a) shall be reduced (but not below zero) by $50 for each $1,000 (or fraction thereof) by which the taxpayer's modified adjusted gross income exceeds the threshold amount. For purposes of the preceding sentence, the term `modified adjusted gross income' means adjusted gross income increased by any amount excluded from gross income under section 911, 931, or 933.

`(2) THRESHOLD AMOUNT- For purposes of paragraph (1), the term `threshold amount' means--

`(A) $110,000 in the case of a joint return,

`(B) $75,000 in the case of an individual who is not married, and

`(C) $55,000 in the case of a married individual filing a separate return.

For purposes of this paragraph, marital status shall be determined under section 7703.

`(3) LIMITATION BASED ON AMOUNT OF TAX-

`(A) the sum of the regular tax liability (as defined in section 26(b)) plus the tax imposed by section 55, over

`(B) the sum of the credits allowable under this subpart (other than this section and sections 23 and 25B) and section 27 for the taxable year.

`(c) Qualified Displaced Person- For purposes of this section, the term `qualified displaced person' means, with respect to any taxpayer for any taxable year, any individual--

`(1) who is displaced by reason of Hurricane Katrina, and

`(2) who, after such displacement, resides with the taxpayer without charge for not less than 90 days.

Such term shall not include the spouse or any dependent of the taxpayer.

`(d) Identification Requirement- No credit shall be allowed under this section to a taxpayer with respect to any qualified displaced person unless the taxpayer includes the name and taxpayer identification number of such qualified displaced person on the return of tax for the taxable year.

`(e) Taxable Year Must Be Full Taxable Year- Except in the case of a taxable year closed by reason of the death of the taxpayer, no credit shall be allowable under this section in the case of a taxable year covering a period of less than 12 months.

`(f) Termination- This section shall not apply to taxable years beginning after December 31, 2006.'.

(b) Clerical Amendment- The table of sections for subpart A of of part IV of subchapter A of chapter 1 of such Code is amended by adding at the end the following new item:

`Sec. 25E. Hurricane Katrina displaced resident credit.'.

SEC. 4. HOME PURCHASE BY VICTIMS OF HURRICANE KATRINA.

(a) In General- Subpart A of of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to nonrefundable personal credits) is amended by inserting after section 25E the following new section:

`SEC. 25F. HOME PURCHASE BY INDIVIDUALS DISPLACED BY HURRICANE KATRINA.

`(a) Allowance of Credit- In the case of an eligible homebuyer who purchases a principal residence in the Hurricane Katrina disaster area, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to so much of the purchase price of the residence as does not exceed $5,000.

`(b) Limitation Based on Modified Adjusted Gross Income-

`(1) IN GENERAL- The amount allowable as a credit under subsection (a) (determined without regard to this subsection and subsection (d)) for the taxable year shall be reduced (but not below zero) by the amount which bears the same ratio to the credit so allowable as--

`(A) the excess (if any) of--

`(i) the taxpayer's modified adjusted gross income for such taxable year, over

`(ii) $70,000 ($110,000 in the case of a joint return), bears to

`(B) $20,000.

`(2) MODIFIED ADJUSTED GROSS INCOME- For purposes of paragraph (1), the term `modified adjusted gross income' means the adjusted gross income of the taxpayer for the taxable year increased by any amount excluded from gross income under section 911, 931, or 933.

`(c) Eligible Homebuyer- For purposes of this section--

`(1) IN GENERAL- The term `eligible homebuyer' means any individual if--

`(A) on August 29, 2005, the principal place of abode of such individual (and if married, such individual's spouse) was located in the Hurricane Katrina disaster area, and such principal place of abode was rendered uninhabitable by Hurricane Katrina, and

`(B) the principal residence for which the credit is allowed under subsection (a) is located in the same State as such principal place of abode.

`(2) ONE-TIME ONLY- If an individual is allowed a credit under this section with respect to any principal residence, such individual may not be allowed a credit under this section with respect to any other principal residence.

`(3) PRINCIPAL RESIDENCE- The term `principal residence' has the same meaning as when used in section 121.

`(d) Carryover of Credit- If the credit allowable under subsection (a) exceeds the limitation imposed by section 26(a) for such taxable year reduced by the sum of the credits allowable under this subpart (other than this section and sections 23, 24, 25B, and 1400C) such excess shall be carried to the succeeding taxable year and added to the credit allowable under subsection (a) for such taxable year.

`(e) Other Definitions and Special Rules- For purposes of this section--

`(1) HURRICANE KATRINA DISASTER AREA- The term `Hurricane Katrina disaster area' means an area determined by the President to warrant assistance from the Federal Government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act by reason of Hurricane Katrina.

`(2) ALLOCATION OF DOLLAR LIMITATION-

`(A) MARRIED INDIVIDUALS FILING SEPARATELY- In the case of a married individual filing a separate return, subsection (a) shall be applied by substituting `$2,500' for `$5,000'.

`(B) OTHER TAXPAYERS- If 2 or more individuals who are not married purchase a principal residence, the amount of the credit allowed under subsection (a) shall be allocated among such individuals in such manner as the Secretary may prescribe, except that the total amount of the credits allowed to all such individuals shall not exceed $5,000.

`(3) PURCHASE-

`(A) IN GENERAL- The term `purchase' means any acquisition, but only if--

`(i) the property is not acquired from a person whose relationship to the person acquiring it would result in the disallowance of losses under section 267 or 707(b) (but, in applying section 267(b) and (c) for purposes of this section, paragraph (4) of section 267(c) shall be treated as providing that the family of an individual shall include only his spouse, ancestors, and lineal descendants), and

`(ii) the basis of the property in the hands of the person acquiring it is not determined--

`(I) in whole or in part by reference to the adjusted basis of such property in the hands of the person from whom acquired, or

`(II) under section 1014(a) (relating to property acquired from a decedent).

`(B) CONSTRUCTION- A residence which is constructed by the taxpayer shall be treated as purchased by the taxpayer on the date the taxpayer first occupies such residence.

`(4) PURCHASE PRICE- The term `purchase price' means the adjusted basis of the principal residence on the date such residence is purchased.

`(f) Reporting- If the Secretary requires information reporting under section 6045 by a person described in subsection (e)(2) thereof to verify the eligibility of taxpayers for the credit allowable by this section, the exception provided by section 6045(e)(5) shall not apply.

`(g) Basis Adjustment- For purposes of this subtitle, if a credit is allowed under this section with respect to the purchase of any residence, the basis of such residence shall be reduced by the amount of the credit so allowed.

`(h) Application of Section- This section shall apply to property purchased after August 28, 2005, and before January 1, 2007.'.

(b) Conforming Amendment- Section 1016(a) of such Code is amended by striking `and' at the end of paragraph (36), by striking the period at the end of paragraph (37) and inserting `, and', and by adding at the end the following new paragraph:

`(38) to the extent provided in section 25F(g).'.

(c) Clerical Amendment- The table of sections for subpart A of of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 25E the following new item:

`Sec. 25F. Home purchase by individuals displaced by Hurricane Katrina.'.

(d) Effective Date- The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act.

SEC. 5. RELIEF THROUGH LOW-INCOME HOUSING CREDIT RELATING TO HURRICANE KATRINA.

(a) Increase in Housing Credit Dollar Amount- For purposes of determining the State housing credit ceiling of the States of Alabama, Louisiana, and Mississippi for 2006 and 2007, section 42(h)(3)(C)(ii)(I) of the Internal Revenue Code of 1986 shall be applied by substituting `$3.70' for `$1.75'.

(b) Authority to Waive Percentage Limitation to Treat Hurricane Katrina Disaster Areas as Difficult Development Areas- In the case of taxable years beginning in 2005, 2006, and 2007, any area in the State of Alabama, Florida, Louisiana, or Mississippi located within the area determined by the President to warrant assistance from the Federal Government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act by reason of Hurricane Katrina shall be treated as a difficult development area for purposes of section 42(d)(5)(C) of the Internal Revenue Code of 1986, notwithstanding the percentage limitation in clause (iii)(II) of such section.

(c) Waiver of Full Subscription Requirement- In the case of the States of Alabama, Florida, Louisiana, and Mississippi for 2005, 2006, and 2007, section 42(h)(3)(D) of such Code shall be applied without regard to clause (iv)(I) of such section.

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