HR 5366 — Doug LaMalfa Federal Disaster Tax Relief Certainty Act

CHANGES IN EXISTING LAW MADE BY THE BILL, 
 AS REPORTED

 In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows.

 Changes in Existing Law Made by the Bill, as Reported

 In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, and existing law in which no 
change is proposed is shown in roman):

 INTERNAL REVENUE CODE OF 1986

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 Subtitle A--Income Taxes

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 CHAPTER 1--NORMAL TAXES AND SURTAXES

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 Subchapter B--COMPUTATION OF TAXABLE INCOME

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 PART I--DEFINITION OF GROSS INCOME, ADJUSTED 
 GROSS INCOME, TAXABLE INCOME, ETC.

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SEC. 63. TAXABLE INCOME DEFINED.

 (a) In general.--Except as provided in subsection (b), for 
purposes of this subtitle, the term ``taxable income'' means 
gross income minus the deductions allowed by this chapter 
(other than the standard deduction).
 (b) Individuals who do not itemize their deductions.--In the 
case of an individual who does not elect to itemize his 
deductions for the taxable year, for purposes of this subtitle, 
the term ``taxable income'' means adjusted gross income, 
minus--
 (1) the standard deduction,
 (2) the deduction for personal exemptions provided in 
 section 151,
 (3) any deduction provided in section 199A,
 (4) the deduction provided in section 170(p),
 (5) the deduction provided in section 224,
 (6) the deduction provided in section 225 [and],
 (7) so much of the deduction allowed by section 
 163(a) as is attributable to the exception under 
 section 163(h)(4)(A)[.], and
 (8) so much of the deduction allowed by section 
 165(a) as is attributable to the qualified net disaster 
 loss (as defined in section 165(h)(6)(B)).
 (c) Standard deduction.--For purposes of this subtitle--
 (1) In general.--Except as otherwise provided in this 
 subsection, the term ``standard deduction'' means the 
 sum of--
 (A) the basic standard deduction, and
 (B) the additional standard deduction.
 (2) Basic standard deduction.--For purposes of 
 paragraph (1), the basic standard deduction is--
 (A) 200 percent of the dollar amount in 
 effect under subparagraph (C) for the taxable 
 year in the case of--
 (i) a joint return, or
 (ii) a surviving spouse (as defined 
 in section 2(a)),
 (B) $4,400 in the case of a head of household 
 (as defined in section 2(b)), or
 (C) $3,000 in any other case.
 (3) Additional standard deduction for aged and 
 blind.--For purposes of paragraph (1), the additional 
 standard deduction is the sum of each additional amount 
 to which the taxpayer is entitled under subsection (f).
 (4) Adjustments for inflation.--In the case of any 
 taxable year beginning in a calendar year after 1988, 
 each dollar amount contained in paragraph (2)(B), 
 (2)(C), or (5) or subsection (f) shall be increased by 
 an amount equal to--
 (A) such dollar amount, multiplied by
 (B) the cost-of-living adjustment determined 
 under section 1(f)(3) for the calendar year in 
 which the taxable year begins, by substituting 
 for ``calendar year 2016'' in subparagraph 
 (A)(ii) thereof--
 (i) ``calendar year 1987'' in the 
 case of the dollar amounts contained in 
 paragraph (2)(B), (2)(C), or (5)(A) or 
 subsection (f), and
 (ii) ``calendar year 1997'' in the 
 case of the dollar amount contained in 
 paragraph (5)(B).
 (5) Limitation on basic standard deduction in the 
 case of certain dependents.--In the case of an 
 individual with respect to whom a deduction under 
 section 151 is allowable to another taxpayer for a 
 taxable year beginning in the calendar year in which 
 the individual's taxable year begins, the basic 
 standard deduction applicable to such individual for 
 such individual's taxable year shall not exceed the 
 greater of--
 (A) $500, or
 (B) the sum of $250 and such individual's 
 earned income.
 (6) Certain individuals, etc., not eligible for 
 standard deduction.--In the case of--
 (A) a married individual filing a separate 
 return where either spouse itemizes deductions,
 (B) a nonresident alien individual,
 (C) an individual making a return under 
 section 443(a)(1) for a period of less than 12 
 months on account of a change in his annual 
 accounting period, or
 (D) an estate or trust, common trust fund, or 
 partnership,
 the standard deduction shall be zero.
 (7) Special rules for taxable years beginning after 
 2017.--In the case of a taxable year beginning after 
 December 31, 2017--
 (A) Increase in standard deduction.--
 Paragraph (2) shall be applied--
 (i) by substituting ``$23,625'' for 
 ``$4,400'' in subparagraph (B), and
 (ii) by substituting ``$15,750'' for 
 ``$3,000'' in subparagraph (C).
 (B) Adjustment for inflation.--
 (i) In general.--Paragraph (4) shall 
 not apply to the dollar amounts 
 contained in paragraphs (2)(B) and 
 (2)(C).
 (ii) Adjustment of increased 
 amounts.--In the case of a taxable year 
 beginning after 2025, the $23,625 and 
 $15,750 amounts in subparagraph (A) 
 shall each be increased by an amount 
 equal to--
 (I) such dollar amount, 
 multiplied by
 (II) the cost-of-living 
 adjustment determined under 
 section 1(f)(3) for the 
 calendar year in which the 
 taxable year begins, determined 
 by substituting ``2024'' for 
 ``2016'' in subparagraph 
 (A)(ii) thereof.
 If any increase under this clause is not a 
 multiple of $50, such increase shall be rounded 
 to the next lowest multiple of $50.
 (d) Itemized deductions.--For purposes of this subtitle, the 
term ``itemized deductions'' means the deductions allowable 
under this chapter other than--
 (1) the deductions allowable in arriving at adjusted 
 gross income, and
 (2) any deduction referred to in any paragraph of 
 subsection (b).
 (e) Election to itemize.--
 (1) In general.--Unless an individual makes an 
 election under this subsection for the taxable year, no 
 itemized deduction shall be allowed for the taxable 
 year. For purposes of this subtitle, the determination 
 of whether a deduction is allowable under this chapter 
 shall be made without regard to the preceding sentence.
 (2) Time and manner of election.--Any election under 
 this subsection shall be made on the taxpayer's return, 
 and the Secretary shall prescribe the manner of 
 signifying such election on the return.
 (3) Change of election.--Under regulations prescribed 
 by the Secretary, a change of election with respect to 
 itemized deductions for any taxable year may be made 
 after the filing of the return for such year. If the 
 spouse of the taxpayer filed a separate return for any 
 taxable year corresponding to the taxable year of the 
 taxpayer, the change shall not be allowed unless, in 
 accordance with such regulations--
 (A) the spouse makes a change of election 
 with respect to itemized deductions, for the 
 taxable year covered in such separate return, 
 consistent with the change of treatment sought 
 by the taxpayer, and
 (B) the taxpayer and his spouse consent in 
 writing to the assessment (within such period 
 as may be agreed on with the Secretary) of any 
 deficiency, to the extent attributable to such 
 change of election, even though at the time of 
 the filing of such consent the assessment of 
 such deficiency would otherwise be prevented by 
 the operation of any law or rule of law.
 This paragraph shall not apply if the tax liability of 
 the taxpayer's spouse for the taxable year 
 corresponding to the taxable year of the taxpayer has 
 been compromised under section 7122.
 (f) Aged or blind additional amounts.--
 (1) Additional amounts for the aged.--The taxpayer 
 shall be entitled to an additional amount of $600--
 (A) for himself if he has attained age 65 
 before the close of his taxable year, and
 (B) for the spouse of the taxpayer if the 
 spouse has attained age 65 before the close of 
 the taxable year and an additional exemption is 
 allowable to the taxpayer for such spouse under 
 section 151(b).
 (2) Additional amount for blind.--The taxpayer shall 
 be entitled to an additional amount of $600--
 (A) for himself if he is blind at the close 
 of the taxable year, and
 (B) for the spouse of the taxpayer if the 
 spouse is blind as of the close of the taxable 
 year and an additional exemption is allowable 
 to the taxpayer for such spouse under section 
 151(b).
 For purposes of subparagraph (B), if the spouse dies 
 during the taxable year the determination of whether 
 such spouse is blind shall be made as of the time of 
 such death.
 (3) Higher amount for certain unmarried 
 individuals.--In the case of an individual who is not 
 married and is not a surviving spouse, paragraphs (1) 
 and (2) shall be applied by substituting ``$750'' for 
 ``$600''.
 (4) Blindness defined.--For purposes of this 
 subsection, an individual is blind only if his central 
 visual acuity does not exceed 20/200 in the better eye 
 with correcting lenses, or if his visual acuity is 
 greater than 20/200 but is accompanied by a limitation 
 in the fields of vision such that the widest diameter 
 of the visual field subtends an angle no greater than 
 20 degrees.
 (g) Marital status.--For purposes of this section, marital 
status shall be determined under section 7703.

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 PART III--ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME

Sec. 101. Certain death payments.
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Sec. 139M. Compensation for losses or damages resulting from certain 
 wildfires.

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SEC. 139M. COMPENSATION FOR LOSSES OR DAMAGES RESULTING FROM CERTAIN 
 WILDFIRES.

 (a) In General.--Gross income shall not include any amount 
received by an individual as a qualified wildfire relief 
payment.
 (b) Qualified Wildfire Relief Payment.--For purposes of this 
section--
 (1) In general.--The term ``qualified wildfire relief 
 payment'' means any amount received by or on behalf of 
 an individual as compensation for losses, expenses, or 
 damages (including compensation for additional living 
 expenses, lost wages (other than compensation for lost 
 wages paid by the employer which would have otherwise 
 paid such wages), personal injury, death, or emotional 
 distress) incurred as a result of a qualified wildfire 
 disaster, but only to the extent the losses, expenses, 
 or damages compensated by such payment are not 
 compensated for by insurance or otherwise.
 (2) Qualified wildfire disaster.--The term 
 ``qualified wildfire disaster'' means any Federally 
 declared disaster (as defined in section 165(i)(5)(A)) 
 declared after December 31, 2014, and before January 1, 
 2027, as a result of any forest or range fire.
 (c) Denial of Double Benefit.--Notwithstanding any other 
provision of this title--
 (1) no deduction or credit shall be allowed (to the 
 individual for whose benefit a qualified wildfire 
 relief payment is made) for, or by reason of, any 
 expenditure to the extent of the amount excluded under 
 this section with respect to such expenditure, and
 (2) no increase in the basis or adjusted basis of any 
 property shall result from any amount excluded under 
 this section with respect to such property.

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 PART VI--ITEMIZED DEDUCTIONS FOR INDIVIDUALS 
 AND CORPORATIONS

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SEC. 165. LOSSES.

 (a) General rule.--There shall be allowed as a deduction any 
loss sustained during the taxable year and not compensated for 
by insurance or otherwise.
 (b) Amount of deduction.--For purposes of subsection (a), the 
basis for determining the amount of the deduction for any loss 
shall be the adjusted basis provided in section 1011 for 
determining the loss from the sale or other disposition of 
property.
 (c) Limitation on losses of individuals.--In the case of an 
individual, the deduction under subsection (a) shall be limited 
to--
 (1) losses incurred in a trade or business;
 (2) losses incurred in any transaction entered into 
 for profit, though not connected with a trade or 
 business; and
 (3) except as provided in subsection (h), losses of 
 property not connected with a trade or business or a 
 transaction entered into for profit, if such losses 
 arise from fire, storm, shipwreck, or other casualty, 
 or from theft.
 (d) Wagering losses.--
 (1) In general.--For purposes of losses from wagering 
 transactions, the amount allowed as a deduction for any 
 taxable year--
 (A) shall be equal to 90 percent of the 
 amount of such losses during such taxable year, 
 and
 (B) shall be allowed only to the extent of 
 the gains from such transactions during such 
 taxable year.
 (2) Special rule.--For purposes of paragraph (1), the 
 term ``losses from wagering transactions'' includes any 
 deduction otherwise allowable under this chapter 
 incurred in carrying on any wagering transaction.
 (e) Theft losses.--For purposes of subsection (a), any loss 
arising from theft shall be treated as sustained during the 
taxable year in which the taxpayer discovers such loss.
 (f) Capital losses.--Losses from sales or exchanges of 
capital assets shall be allowed only to the extent allowed in 
sections 1211 and 1212.
 (g) Worthless securities.--
 (1) General rule.--If any security which is a capital 
 asset becomes worthless during the taxable year, the 
 loss resulting therefrom shall, for purposes of this 
 subtitle, be treated as a loss from the sale or 
 exchange, on the last day of the taxable year, of a 
 capital asset.
 (2) Security defined.--For purposes of this 
 subsection, the term ``security'' means--
 (A) a share of stock in a corporation;
 (B) a right to subscribe for, or to receive, 
 a share of stock in a corporation; or
 (C) a bond, debenture, note, or certificate, 
 or other evidence of indebtedness, issued by a 
 corporation or by a government or political 
 subdivision thereof, with interest coupons or 
 in registered form.
 (3) Securities in affiliated corporation.--For 
 purposes of paragraph (1), any security in a 
 corporation affiliated with a taxpayer which is a 
 domestic corporation shall not be treated as a capital 
 asset. For purposes of the preceding sentence, a 
 corporation shall be treated as affiliated with the 
 taxpayer only if--
 (A) the taxpayer owns directly stock in such 
 corporation meeting the requirements of section 
 1504(a)(2), and
 (B) more than 90 percent of the aggregate of 
 its gross receipts for all taxable years has 
 been from sources other than royalties, rents 
 (except rents derived from rental of properties 
 to employees of the corporation in the ordinary 
 course of its operating business), dividends, 
 interest (except interest received on deferred 
 purchase price of operating assets sold), 
 annuities, and gains from sales or exchanges of 
 stocks and securities.
 In computing gross receipts for purposes of the 
 preceding sentence, gross receipts from sales or 
 exchanges of stocks and securities shall be taken into 
 account only to the extent of gains therefrom.
 (h) Treatment of Casualty Gains and Losses.--
 (1) Dollar limitation per casualty.--Any loss of an 
 individual described in subsection (c)(3) shall be 
 allowed only to the extent that the amount of the loss 
 to such individual arising from each casualty, or from 
 each theft, exceeds [$500 ($100 for taxable years 
 beginning after December 31, 2009)] $100 ($500 in the 
 case of any qualified disaster-related personal 
 casualty losses (as defined in paragraph (6)(C)).
 (2) Net casualty loss allowed only to the extent it 
 exceeds 10 percent of adjusted gross income.--
 (A) In general.--If the personal casualty 
 losses for any taxable year exceed the personal 
 casualty gains for such taxable year, such 
 losses shall be allowed for the taxable year 
 only to the extent of the sum of--
 (i) the amount of the personal 
 casualty gains for the taxable year, 
 plus
 (ii) so much of such excess as 
 exceeds 10 percent of the adjusted 
 gross income of the individual.
 (B) Special rule where personal casualty 
 gains exceed personal casualty losses.--If the 
 personal casualty gains for any taxable year 
 exceed the personal casualty losses for such 
 taxable year--
 (i) all such gains shall be treated 
 as gains from sales or exchanges of 
 capital assets, and
 (ii) all such losses shall be treated 
 as losses from sales or exchanges of 
 capital assets.
 (3) Definitions of personal casualty gain and 
 personal casualty loss.--For purposes of this 
 subsection--
 (A) Personal casualty gain.--The term 
 ``personal casualty gain'' means the recognized 
 gain from any involuntary conversion of 
 property which is described in subsection 
 (c)(3) arising from fire, storm, shipwreck, or 
 other casualty, or from theft.
 (B) Personal casualty loss.--The term 
 ``personal casualty loss'' means any loss 
 described in subsection (c)(3). For purposes of 
 paragraph (2), the amount of any personal 
 casualty loss shall be determined after the 
 application of paragraph (1).
 (4) Special rules.--
 (A) Personal casualty losses allowable in 
 computing adjusted gross income to the extent 
 of personal casualty gains.--In any case to 
 which paragraph (2)(A) applies, the deduction 
 for personal casualty losses for any taxable 
 year shall be treated as a deduction allowable 
 in computing adjusted gross income to the 
 extent such losses do not exceed the personal 
 casualty gains for the taxable year.
 (B) Joint returns.--For purposes of this 
 subsection, a husband and wife making a joint 
 return for the taxable year shall be treated as 
 1 individual.
 (C) Determination of adjusted gross income in 
 case of estates and trusts.--For purposes of 
 paragraph (2), the adjusted gross income of an 
 estate or trust shall be computed in the same 
 manner as in the case of an individual, except 
 that the deductions for costs paid or incurred 
 in connection with the administration of the 
 estate or trust shall be treated as allowable 
 in arriving at adjusted gross income.
 (D) Coordination with estate tax.--No loss 
 described in subsection (c)(3) shall be allowed 
 if, at the time of filing the return, such loss 
 has been claimed for estate tax purposes in the 
 estate tax return.
 (E) Claim required to be filed in certain 
 cases.--Any loss of an individual described in 
 subsection (c)(3) to the extent covered by 
 insurance shall be taken into account under 
 this section only if the individual files a 
 timely insurance claim with respect to such 
 loss.
 (5) Limitation for taxable years beginning after 
 2017.--
 (A) In general.--In the case of an 
 individual, except as provided in subparagraph 
 (B), any personal casualty loss which (but for 
 this paragraph) would be deductible in a 
 taxable year beginning after December 31, 2017, 
 shall be allowed as a deduction under 
 subsection (a) only to the extent it is 
 attributable to a Federally declared disaster 
 (as defined in subsection (i)(5)) or a State 
 declared disaster.
 (B) Exception related to personal casualty 
 gains.--If a taxpayer has personal casualty 
 gains for any taxable year to which 
 subparagraph (A) applies--
 (i) subparagraph (A) shall not apply 
 to the portion of the personal casualty 
 loss not attributable to a Federally 
 declared disaster (as so defined) or a 
 State declared disaster to the extent 
 such loss does not exceed such gains, 
 and
 (ii) in applying paragraph (2) for 
 purposes of subparagraph (A) to the 
 portion of personal casualty loss which 
 is so attributable to such a disaster, 
 the amount of personal casualty gains 
 taken into account under paragraph 
 (2)(A) shall be reduced by the portion 
 of such gains taken into account under 
 clause (i).
 (C) State declared disaster.--For purposes of 
 this paragraph--
 (i) In general.--The term ``State 
 declared disaster'' means, with respect 
 to any State, any natural catastrophe 
 (including any hurricane, tornado, 
 storm, high water, wind-driven water, 
 tidal wave, tsunami, earthquake, 
 volcanic eruption, landslide, mudslide, 
 snowstorm, or drought), or, regardless 
 of cause, any fire, flood, or 
 explosion, in any part of the State, 
 which in the determination of the 
 Governor of such State (or the Mayor, 
 in the case of the District of 
 Columbia) and the Secretary causes 
 damage of sufficient severity and 
 magnitude to warrant the application of 
 the rules of this section.
 (ii) State.--The term ``State'' 
 includes the District of Columbia, the 
 Commonwealth of Puerto Rico, the Virgin 
 Islands, Guam, American Samoa, and the 
 Commonwealth of the Northern Mariana 
 Islands.
 (6) Special rule for qualified net disaster losses.--
 (A) In general.--If an individual has a 
 qualified net disaster loss for any taxable 
 year, the amount determined under paragraph 
 (2)(A)(ii) shall be the sum of--
 (i) such qualified net disaster loss, 
 and
 (ii) so much of the excess referred 
 to in the matter preceding clause (i) 
 of paragraph (2)(A) (reduced by the 
 amount in clause (i) of this 
 subparagraph) as exceeds 10 percent of 
 the adjusted gross income of the 
 individual.
 (B) Qualified net disaster loss.--For 
 purposes of subparagraph (A), the term 
 ``qualified net disaster loss'' means the 
 excess (if any) of--
 (i) qualified disaster-related 
 personal casualty losses, over
 (ii) personal casualty gains reduced 
 by the portion of such gains taken into 
 account under paragraph (5)(B)(i).
 (C) Qualified disaster-related personal 
 casualty losses.--For purposes of this 
 paragraph--
 (i) In general.--The term ``qualified 
 disaster-related personal casualty 
 losses'' means losses described in 
 subsection (c)(3) (determined after 
 application of paragraph (1)) which 
 arise in a qualified disaster area on 
 or after the first day of the incident 
 period of the qualified disaster to 
 which such area relates, and which are 
 attributable to such disaster.
 (ii) Qualified disaster area.--The 
 term ``qualified disaster area'' means 
 any area with respect to which a major 
 disaster has been declared by the 
 President under section 401 of the 
 Robert T. Stafford Disaster Relief and 
 Emergency Assistance Act if the 
 incident period of the disaster with 
 respect to which such declaration is 
 made begins on or after December 28, 
 2019, and before January 1, 2027.
 (iii) Qualified disaster.--The term 
 ``qualified disaster'' means, with 
 respect to any qualified disaster area, 
 the disaster by reason of which a major 
 disaster was declared with respect to 
 such area.
 (iv) Incident period.--The term 
 ``incident period'' means, with respect 
 to any qualified disaster, the period 
 specified by the Federal Emergency 
 Management Agency as the period during 
 which such disaster occurred.
 (i) Disaster losses.--
 (1) Election to take deduction for preceding year.--
 Notwithstanding the provisions of subsection (a), any 
 loss occurring in a disaster area and attributable to a 
 federally declared disaster may, at the election of the 
 taxpayer, be taken into account for the taxable year 
 immediately preceding the taxable year in which the 
 disaster occurred.
 (2) Year of loss.--If an election is made under this 
 subsection, the casualty resulting in the loss shall be 
 treated for purposes of this title as having occurred 
 in the taxable year for which the deduction is claimed.
 (3) Amount of loss.--The amount of the loss taken 
 into account in the preceding taxable year by reason of 
 paragraph (1) shall not exceed the uncompensated amount 
 determined on the basis of the facts existing at the 
 date the taxpayer claims the loss.
 (4) Use of disaster loan appraisals to establish 
 amount of loss.--Nothing in this title shall be 
 construed to prohibit the Secretary from prescribing 
 regulations or other guidance under which an appraisal 
 for the purpose of obtaining a loan of Federal funds or 
 a loan guarantee from the Federal Government as a 
 result of a federally declared disaster may be used to 
 establish the amount of any loss described in paragraph 
 (1) or (2).
 (5) Federally declared disasters.--For purposes of 
 this subsection--
 (A) In general.--The term ``Federally 
 declared disaster'' means any disaster 
 subsequently determined by the President of the 
 United States to warrant assistance by the 
 Federal Government under the Robert T. Stafford 
 Disaster Relief and Emergency Assistance Act.
 (B) Disaster area.--The term ``disaster 
 area'' means the area so determined to warrant 
 such assistance.
 (j) Denial of deduction for losses on certain obligations not 
in registered form.--
 (1) In general.--Nothing in subsection (a) or in any 
 other provision of law shall be construed to provide a 
 deduction for any loss sustained on any registration-
 required obligation unless such obligation is in 
 registered form (or the issuance of such obligation was 
 subject to tax under section 4701).
 (2) Definitions.--For purposes of this subsection--
 (A) Registration-required obligation.--The 
 term ``registration-required obligation'' has 
 the meaning given to such term by section 
 163(f)(2).
 (B) Registered form.--The term ``registered 
 form'' has the same meaning as when used in 
 section 163(f).
 (3) Exceptions.--The Secretary may, by regulations, 
 provide that this subsection and section 1287 shall not 
 apply with respect to obligations held by any person 
 if--
 (A) such person holds such obligations in 
 connection with a trade or business outside the 
 United States,
 (B) such person holds such obligations as a 
 broker dealer (registered under Federal or 
 State law) for sale to customers in the 
 ordinary course of his trade or business,
 (C) such person complies with reporting 
 requirements with respect to ownership, 
 transfers, and payments as the Secretary may 
 require, or
 (D) such person promptly surrenders the 
 obligation to the issuer for the issuance of a 
 new obligation in registered form,
 but only if such obligations are held under 
 arrangements provided in regulations or otherwise which 
 are designed to assure that such obligations are not 
 delivered to any United States person other than a 
 person described in subparagraph (A), (B), or (C).
 (k) Treatment as disaster loss where taxpayer ordered to 
demolish or relocate residence in disaster area because of 
disaster.--In the case of a taxpayer whose residence is located 
in an area which has been determined by the President of the 
United States to warrant assistance by the Federal Government 
under the Robert T. Stafford Disaster Relief and Emergency 
Assistance Act, if--
 (1) not later than the 120th day after the date of 
 such determination, the taxpayer is ordered, by the 
 government of the State or any political subdivision 
 thereof in which such residence is located, to demolish 
 or relocate such residence, and
 (2) the residence has been rendered unsafe for use as 
 a residence by reason of the disaster,
any loss attributable to such disaster shall be treated as a 
loss which arises from a casualty and which is described in 
subsection (i).
 (l) Treatment of certain losses in insolvent financial 
institutions.--
 (1) In general.--If--
 (A) as of the close of the taxable year, it 
 can reasonably be estimated that there is a 
 loss on a qualified individual's deposit in a 
 qualified financial institution, and
 (B) such loss is on account of the bankruptcy 
 or insolvency of such institution,
 then the taxpayer may elect to treat the amount so 
 estimated as a loss described in subsection (c)(3) 
 incurred during the taxable year.
 (2) Qualified individual defined.--For purposes of 
 this subsection, the term ``qualified individual'' 
 means any individual, except an individual--
 (A) who owns at least 1 percent in value of 
 the outstanding stock of the qualified 
 financial institution,
 (B) who is an officer of the qualified 
 financial institution,
 (C) who is a sibling (whether by the whole or 
 half blood), spouse, aunt, uncle, nephew, 
 niece, ancestor, or lineal descendant of an 
 individual described in subparagraph (A) or 
 (B), or
 (D) who otherwise is a related person (as 
 defined in section 267(b)) with respect to an 
 individual described in subparagraph (A) or 
 (B).
 (3) Qualified financial institution.--For purposes of 
 this subsection, the term ``qualified financial 
 institution'' means--
 (A) any bank (as defined in section 581),
 (B) any institution described in section 591,
 (C) any credit union the deposits or accounts 
 in which are insured under Federal or State law 
 or are protected or guaranteed under State law, 
 or
 (D) any similar institution chartered and 
 supervised under Federal or State law.
 (4) Deposit.--For purposes of this subsection, the 
 term ``deposit'' means any deposit, withdrawable 
 account, or withdrawable or repurchasable share.
 (5) Election to treat as ordinary loss.--
 (A) In general.--In lieu of any election 
 under paragraph (1), the taxpayer may elect to 
 treat the amount referred to in paragraph (1) 
 for the taxable year as an ordinary loss 
 described in subsection (c)(2) incurred during 
 the taxable year.
 (B) Limitations.--
 (i) Deposit may not be federally 
 insured.--No election may be made under 
 subparagraph (A) with respect to any 
 loss on a deposit in a qualified 
 financial institution if part or all of 
 such deposit is insured under Federal 
 law.
 (ii) Dollar limitation.--With respect 
 to each financial institution, the 
 aggregate amount of losses attributable 
 to deposits in such financial 
 institution to which an election under 
 subparagraph (A) may be made by the 
 taxpayer for any taxable year shall not 
 exceed $20,000 ($10,000 in the case of 
 a separate return by a married 
 individual). The limitation of the 
 preceding sentence shall be reduced by 
 the amount of any insurance proceeds 
 under any State law which can 
 reasonably be expected to be received 
 with respect to losses on deposits in 
 such institution.
 (6) Election.--Any election by the taxpayer under 
 this subsection for any taxable year--
 (A) shall apply to all losses for such 
 taxable year of the taxpayer on deposits in the 
 institution with respect to which such election 
 was made, and
 (B) may be revoked only with the consent of 
 the Secretary.
 (7) Coordination with section 166.--Section 166 shall 
 not apply to any loss to which an election under this 
 subsection applies.
 (m) Cross references.--
 (1) For special rule for banks with respect 
 to worthless securities, see section 582.
 (2) For disallowance of deduction for 
 worthlessness of securities to which subsection 
 (g)(2)(C) applies, if issued by a political 
 party or similar organization, see section 271.
 (3) For special rule for losses on stock in a 
 small business investment company, see section 
 1242.
 (4) For special rule for losses of a small 
 business investment company, see section 1243.
 (5) For special rule for losses on small 
 business stock, see section 1244.

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