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1. Authority to postpone certain tax-related deadlines by reason of presidentially declared disaster (sec. 921 of the House bill)
Present Law
In the case of a Presidentially declared disaster, the Secretary of the Treasury has the authority to postpone some (but not all) tax-related deadlines.
House Bill
The House bill provides that, in the case of a taxpayer determined to be affected by a Presidentially declared disaster, the Secretary may specify that, for a period of up to 90 days, certain taxpayer deadlines are postponed. The deadlines that may be postponed are the same as are postponed by reason of service in a combat zone. The provision does not apply for purposes of determining interest on any overpayment or underpayment.
Effective date.--The provision is effective for any period for performing an act that has not expired before the date of enactment.
Senate Amendment
No provision.
Conference Agreement
The conference agreement follows the House bill, except that it is applicable to all deadlines (not just taxpayer deadlines).
2. Use of certain appraisals to establish amount of disaster loss (sec. 922 of the House bill)
Present Law
In order to claim a disaster loss, a taxpayer must establish the amount of the loss. This may, for example, be done through the use of an appraisal.
House Bill
The House bill provides that nothing in the Code should be construed to prohibit Treasury from issuing guidance providing that an appraisal for the purpose of obtaining a Federal loan or Federal loan guarantee as the result of a Presidentially declared disaster may be used to establish the amount of a disaster loss.
Effective date.--The provision is effective on the date of enactment.
Senate Amendment
No provision.
Conference Agreement
The conference agreement follows the House bill.
3. Treatment of livestock sold on account of weather-related conditions (sec. 923 of the House bill and sec. 721 of the Senate amendment)
Present Law
In general, cash-method taxpayers report income in the year it is actually or constructively received. However, present law contains two special rules applicable to livestock sold on account of drought conditions. Code section 451(e) provides that a cash-method taxpayer whose principal trade or business is farming who is forced to sell livestock due to drought conditions may elect to include income from the sale of the livestock in the taxable year following the taxable year of the sale. This elective deferral of income is available only if the taxpayer establishes that, under the taxpayer's usual business practices, the sale would not have occurred but for drought conditions that resulted in the area being designated as eligible for Federal assistance. This exception is generally intended to put taxpayers who receive an unusually high amount of income in one year in the position they would have been in absent the drought.
In addition, the sale of livestock (other than poultry) that is held for draft, breeding, or dairy purposes in excess of the number of livestock that would have been sold but for drought conditions is treated as an involuntary conversion under section 1033(e). Consequently, gain from the sale of such livestock could be deferred by reinvesting the proceeds of the sale in similar property within a two-year period.
House Bill
The House bill amends Code section 451(e) to provide that a cash-method taxpayer whose principal trade or business is farming and who is forced to sell livestock due not only to drought (as under present law), but also to floods or other weather-related conditions, may elect to include income from the sale of the livestock in the taxable year following the taxable year of the sale. This elective deferral of income is available only if the taxpayer establishes that, under the taxpayer's usual business practices, the sale would not have occurred but for the drought, flood or other weather-related conditions that resulted in the area being designated as eligible for Federal assistance.
In addition, the bill amends Code section 1033(e) to provide that the sale of livestock (other than poultry) that are held for draft, breeding, or dairy purposes in excess of the number of livestock that would have been sold but for drought (as under present law), flood or other weather-related conditions is treated as an involuntary conversion.
Effective date.--The provision applies to sales and exchanges after December 31, 1996.
Senate Amendment
The Senate amendment is the same as the House bill.
Conference Agreement
The conference agreement follows the House bill and the Senate amendment.
4. Mortgage bond financing for residences located in Presidentially declared disaster areas (sec. 924 of the House bill and sec. 723 of the Senate amendment)
Present Law
Qualified mortgage bonds are private activity tax-exempt bonds issued by States and local governments acting as conduits to provide mortgage loans to first-time home buyers who satisfy specified income limits and who purchase homes that cost less than statutory maximums.
Present law waives the three buyer targeting requirements for a portion of the loans made with proceeds of a qualified mortgage bond issue if the loans are made to finance homes in statutorily prescribed economically distressed areas.
House Bill
The House bill waives the first-time homebuyer requirement, the income limits, and the purchase price limits for loans to finance homes in certain Presidentially declared disaster areas. The waiver applies only during the one-year period following the date of the disaster declaration.
Effective date.--The provision applies to loans financed with bonds issued after December 31, 1996, and before January 1, 2000.
Senate Amendment
The Senate amendment is the same as the House bill except for the effective date.
Effective date.--The provision applies to loans financed with bonds issued after December 31, 1996, and before January 1, 1999.
Conference Agreement
The conference agreement allows the waivers of the first-time homebuyer requirement, the income limits, and the purchase price limits for loans to finance homes in certain Presidentially declared disaster areas. The waiver applies only during the two-year period following the date of disaster declaration.
Effective date.-- The provision applies to loans financed with bonds issued after December 31, 1996 and before January 1, 1999 (i.e., is the same as the Senate amendment).
5. Rules relating to denial of earned income credit on basis of disqualified income (sec. 722 of the Senate amendment)
Present Law
For taxable years beginning after December 31, 1995, an individual is not eligible for the earned income credit if the aggregate amount of disqualified income of the taxpayer for the taxable year exceeds $2,200. This threshold is indexed for inflation. Disqualified income is the sum of:
(1) interest (taxable and tax-exempt);
(2) dividends;
(3) net rent and royalty income (if greater than zero);
(4) capital gain net income and;
(5) net passive income (if greater than zero) that is not self-employment income.
House Bill
No provision.
Senate Amendment
The Senate amendment clarifies that gain or loss from the sale of livestock (as defined under sec.1231(b)(3) of the Code) is disregarded for purposes of the calculation of capital gain net income under the disqualified income test of the earned income credit.
Effective date.--The provision is effective for taxable years beginning after December 31, 1995.
Conference Agreement
The conference agreement does not include the Senate amendment.
6. Penalty-free withdrawals from IRAs for disaster-related expenses (sec. 724 of the Senate amendment)
Present Law
Under present law, amounts held in an individual retirement arrangement (IRA) are includible in income when withdrawn (except to the extent the withdrawal is a return of nondeductible contributions). Amounts withdrawn prior to attainment of age 59-1/2 are subject to an additional 10-percent early withdrawal tax, unless the withdrawal is due to death or disability, is made in the form of certain periodic payments, is used to pay medical expenses in excess of 7.5 percent of AGI, or is used to purchase health insurance of an unemployed individual.
House Bill
No provision.
Senate Amendment
The Senate amendment provides that the 10-percent early withdrawal tax does not apply to distributions from IRAs made to a taxpayer for qualified disaster-related expenses.
The penalty-free withdrawal is available for qualified disaster-related distributions meaning distributions made to pay for the repair or replacement of tangible property which was located in a disaster area and was destroyed or substantially damaged as a result of the disaster. The term disaster area means an area determined by the President of the United States during 1997 to warrant assistance by the Federal Government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act.
The penalty-free withdrawal rule only applies to qualified disaster distributions that (1) are made within the 2-year period beginning on the date the determination is made that the area is a disaster area, (2) are used by the taxpayer within 60 days of the payment or distribution to pay for the disaster-related expenses, and (3) do on exceed $10,000 during the 2-year period.
Effective date.--The provision is effective for distributions after December 31, 1996, with respect to disasters occurring after such date.
Conference Agreement
The conference agreement does not include the Senate amendment.
7. Elimination of 10-percent floor for casualty losses resulting from Presidentially declared disaster (sec. 725 of the Senate amendment)
The conference agreement does not include the Senate amendment.
Present Law
Non-business casualty and theft losses are deductible as an itemized deduction only to the extent each loss is more than $100 and the total of all losses during the year is more than 10 percent of adjusted gross income ("AGI").
House Bill
No provision.
Senate Amendment
The Senate amendment eliminates the 10-percent of AGI floor for casualty losses resulting from a Presidentially declared disaster that occurs in 1997.
Effective date.--Disasters occurring in 1997.
Conference Agreement
The conference agreement does not include
the Senate amendment.
8. Requirement to abate interest by reason of Presidentially declared disaster (sec. 726 of the Senate amendment)
Present Law
In the case of a Presidentially declared disaster, the Secretary of the Treasury has the authority to postpone some tax-related deadlines, but there is no authority to abate interest.
House Bill
No provision.
Senate Amendment
The Senate amendment requires the IRS to abate interest for the same period of time for which the IRS has provided an extension of time to file tax returns and pay taxes for individuals located in Presidentially declared disaster areas during 1997.
Effective date.--Disasters occurring in 1997.
Conference Agreement
The conference agreement follows the Senate amendment.