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Tax Relief Act of 2005

Tax Relief Act of 2005, as Passed by the Senate on 11/17/05

December 9, 2005

109th Congress

109th CONGRESS

1st Session

S. 2020

AN ACT

To provide for reconciliation pursuant to section 202(b) of the concurrent resolution on the budget for fiscal year 2006.

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

SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF CONTENTS.

(a) Short Title- This Act may be cited as the `Tax Relief Act of 2005'.

(b) Amendment of 1986 Code- Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Internal Revenue Code of 1986.

(c) Table of Contents- The table of contents for this Act is as follows:

Sec. 1. Short title; amendment of 1986 Code; table of contents.

TITLE I --TAX BENEFITS FOR AREAS AFFECTED BY HURRICANES KATRINA, RITA, AND WILMA

Subtitle A --Gulf Opportunity Zone Benefits

Sec. 101. Gulf Opportunity Zone benefits.

Sec. 102. Expansion of Hope Scholarship and Lifetime Learning Credit for students in the Gulf Opportunity Zone.

Sec. 103. Extension of special rules for mortgage revenue bonds.

Sec. 104. Housing relief for individuals affected by Hurricane Katrina.

Subtitle B --Tax Benefits Related to Hurricanes Rita and Wilma

Sec. 111. Extension of certain emergency tax relief for Hurricane Katrina to Hurricanes Rita and Wilma.

TITLE II --EXTENSION OF EXPIRING PROVISIONS

Subtitle A --Multi-Year Extensions

Sec. 201. Extension of increased expensing for small business.

Sec. 202. Credit for elective deferrals and IRA contributions.

Sec. 203. Above-the-line deduction for higher education.

Sec. 204. Extension and modification of new markets tax credit.

Subtitle B --One-Year Extensions

Sec. 211. Election to deduct State and local general sales taxes.

Sec. 212. Extension and increase in minimum tax relief to individuals.

Sec. 213. Allowance of nonrefundable personal credits against regular and alternative minimum tax liability.

Sec. 214. Extension and modification of research credit.

Sec. 215. Work Opportunity Tax credit and Welfare-to-Work credit.

Sec. 216. Qualified zone academy bonds.

Sec. 217. Deduction for corporate donations of computer technology and equipment.

Sec. 218. Above-the-line deduction for certain expenses of elementary and secondary school teachers.

Sec. 219. Expensing of Brownfields remediation costs.

Sec. 220. Tax incentives for investment in the District of Columbia .

Sec. 221. Indian employment tax credit.

Sec. 222. Accelerated depreciation for business property on Indian reservation.

Sec. 223. Fifteen-year straight-line cost recovery for qualified leasehold improvements and qualified restaurant improvements.

Sec. 224. Extension of full credit for qualified electric vehicles.

Subtitle C --Application of EGTRRA Sunset

Sec. 231. Application of EGTRRA sunset to this title.

TITLE III --PROVISIONS RELATING TO CHARITABLE DONATIONS

Subtitle A --Charitable Giving Incentives

Sec. 301. Charitable deduction for nonitemizers.

Sec. 302. Tax-free distributions from individual retirement plans for charitable purposes.

Sec. 303. Modification of charitable deduction for contributions of food inventory.

Sec. 304. Basis adjustment to stock of S corporation contributing property.

Sec. 305. Modification of charitable deduction for contributions of book inventory.

Sec. 306. Modification of tax treatment of certain payments to controlling exempt organizations and public disclosure of information relating to unrelated business income.

Sec. 307. Encouragement of contributions of capital gain real property made for conservation purposes.

Sec. 308. Enhanced deduction for charitable contribution of literary, musical, artistic, and scholarly compositions.

Sec. 309. Mileage reimbursements to charitable volunteers excluded from gross income.

Sec. 310. Alternative percentage limitation for corporate charitable contributions to the mathematics and science partnership program.

Subtitle B --Reforming Charitable Organizations

Part I --General Reforms

Sec. 311. Tax involvement by exempt organizations in tax shelter transactions.

Sec. 312. Excise tax on certain acquisitions of interests in insurance contracts in which certain exempt organizations hold an interest.

Sec. 313. Increase in penalty excise taxes on public charities, social welfare organizations, and private foundations.

Sec. 314. Reform of charitable contributions of certain easements on buildings in registered historic districts.

Sec. 315. Charitable contributions of taxidermy property.

Sec. 316. Recapture of tax benefit for charitable contributions of exempt use property not used for an exempt use.

Sec. 317. Limitation of deduction for charitable contributions of clothing and household items.

Sec. 318. Modification of recordkeeping requirements for certain charitable contributions.

Sec. 319. Contributions of fractional interests in tangible personal property.

Sec. 320. Provisions relating to substantial and gross overstatements of valuations of charitable deduction property.

Sec. 321. Additional standards for credit counseling organizations.

Sec. 322. Expansion of the base of tax on private foundation net investment income.

Sec. 323. Definition of convention or association of churches.

Sec. 324. Notification requirement for entities not currently required to file.

Sec. 325. Disclosure to State officials of proposed actions related to exempt organizations.

Part II --Improved Accountability of Donor Advised Funds

Sec. 331. Excise tax on sponsoring organizations of donor advised funds for failure to meet distribution requirements.

Sec. 332. Prohibited transactions.

Sec. 333. Treatment of charitable contribution deductions to donor advised funds.

Sec. 334. Returns of, and applications for recognition by, sponsoring organizations.

Part III --Improved Accountability of Supporting Organizations

Sec. 341. Requirements for supporting organizations.

Sec. 342. Excise tax on supporting organizations for failure to meet distribution requirements.

Sec. 343. Excess benefit transactions.

Sec. 344. Excess business holdings of supporting organizations.

Sec. 345. Treatment of amounts paid to supporting organizations by private foundations.

Sec. 346. Returns of supporting organizations.

TITLE IV --MISCELLANEOUS PROVISIONS

Sec. 401. Restructuring of New York Liberty Zone tax credits.

Sec. 402. Modification to S corporation passive investment income rules.

Sec. 403. Modification of effective date of disregard of certain capital expenditures for purposes of qualified small issue bonds.

Sec. 404. Premiums for mortgage insurance.

Sec. 405. Sense of the Senate on use of no-bid contracting by Federal Emergency Management Agency.

Sec. 406. Disability preference program for tax collection contracts.

Sec. 407. Sense of Congress regarding Doha Round.

Sec. 408. Modification of bond rule.

Sec. 409. Treatment of certain stock option plans under nonqualified deferred compensation rules.

Sec. 410. Sense of the Senate regarding the dedication of excess funds.

TITLE V --REVENUE OFFSET PROVISIONS

Subtitle A --Provisions Designed To Curtail Tax Shelters

Sec. 501. Understatement of taxpayer's liability by income tax return preparer.

Sec. 502. Modification of effective date of exception from suspension rules for certain listed and reportable transactions.

Sec. 503. Frivolous tax submissions.

Sec. 504. Penalty for promoting abusive tax shelters.

Sec. 505. Penalty for aiding and abetting the understatement of tax liability.

Subtitle B --Economic Substance Doctrine

Sec. 511. Clarification of economic substance doctrine.

Sec. 512. Penalty for understatements attributable to transactions lacking economic substance, etc.

Sec. 513. Denial of deduction for interest on underpayments attributable to noneconomic substance transactions.

Subtitle C --Improvements in Efficiency and Safeguards in Internal Revenue Service Collection

Sec. 521. Waiver of user fee for installment agreements using automated withdrawals.

Sec. 522. Termination of installment agreements.

Sec. 523. Partial payments required with submission of offers-in-compromise.

Subtitle D --Penalties and Fines

Sec. 531. Increase in criminal monetary penalty limitation for the underpayment or overpayment of tax due to fraud.

Sec. 532. Doubling of certain penalties, fines, and interest on underpayments related to certain offshore financial arrangements.

Sec. 533. Denial of deduction for certain fines, penalties, and other amounts.

Sec. 534. Denial of deduction for punitive damages.

Sec. 535. Increase in penalty for bad checks and money orders.

Subtitle E --Provisions To Discourage Expatriation

Sec. 541. Tax treatment of inverted entities.

Sec. 542. Revision of tax rules on expatriation of individuals.

Subtitle F --Miscellaneous Provisions

Sec. 551. Treatment of contingent payment convertible debt instruments.

Sec. 552. Grant of Treasury regulatory authority to address foreign tax credit transactions involving inappropriate separation of foreign taxes from related foreign income.

Sec. 553. Repeal of special property exception to leasing provisions of the American Jobs Creation Act of 2004.

Sec. 554. Application of earnings stripping rules to partners which are corporations.

Sec. 555. Limitation of employer deduction for certain entertainment expenses.

Sec. 556. Increase in age of minor children whose unearned income is taxed as if parent's income.

Sec. 557. Loan and redemption requirements on pooled financing requirements.

Sec. 558. Reporting of interest on tax-exempt bonds.

Sec. 559. Modification of credit for producing fuel from a nonconventional source.

Sec. 560. Modification of individual estimated tax safe harbor.

Sec. 561. Revaluation of LIFO inventories of large integrated oil companies.

Sec. 562. Elimination of amortization of geological and geophysical expenditures for major integrated oil companies.

Sec. 563. Valuation of employee personal use of noncommercial aircraft.

Sec. 564. Application of FIRPTA to regulated investment companies.

Sec. 565. Treatment of distributions attributable to FIRPTA gains.

Sec. 566. Prevention of avoidance of tax on investments of foreign persons in United States real property through wash sale transactions.

Sec. 567. Modifications to rules relating to taxation of distributions of stock and securities of a controlled corporation.

Sec. 568. Amortization of expenses incurred in creating or acquiring music or music copyrights.

Sec. 569. Credit to holders of rural renaissance bonds.

Sec. 570. Modification of treatment of loans to qualified continuing care facilities.

Sec. 571. Modifications of foreign tax credit rules applicable to large integrated oil companies which are dual capacity taxpayers.

Sec. 572. Exclusion of gain from sale of a principal residence by certain employees of the intelligence community.

Sec. 573. Disability preference program for tax collection contracts.

TITLE VI --COMPLIANCE WITH CONGRESSIONAL BUDGET ACT

Sec. 601. Sunset of certain provisions and amendments.

TITLE I --TAX BENEFITS FOR AREAS AFFECTED BY HURRICANES KATRINA, RITA, AND WILMA

Subtitle A --Gulf Opportunity Zone Benefits

SEC. 101. GULF OPPORTUNITY ZONE BENEFITS.

(a) In General- Chapter 1 is amended by adding at the end the following new subchapter:

`Subchapter Z --Hurricane Relief Benefits

` Sec. 1400N . Definitions.

` Sec. 1400O . Tax benefits for Gulf Opportunity Zone.

` SEC. 1400N . DEFINITIONS.

`For purposes of this subchapter --

`(1) GULF OPPORTUNITY ZONE- The term `Gulf Opportunity Zone' or `GO Zone' means that portion of the Hurricane Katrina disaster area determined by the President to warrant individual or individual and public assistance from the Federal Government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act by reason of Hurricane Katrina.

`(2) HURRICANE KATRINA DISASTER AREA- The term `Hurricane Katrina disaster area' means an area with respect to which a major disaster has been declared by the President before September 14, 2005, under section 401 of such Act by reason of Hurricane Katrina.

`(3) RITA GO ZONE- The term `Rita GO Zone' means that portion of the Hurricane Rita disaster area determined by the President to warrant individual or individual and public assistance from the Federal Government under such Act by reason of Hurricane Rita.

`(4) HURRICANE RITA DISASTER AREA- The term `Hurricane Rita disaster area' means an area with respect to which a major disaster has been declared by the President before October 6, 2005, under section 401 of such Act by reason of Hurricane Rita.

`(5) WILMA GO ZONE- The term `Wilma GO Zone' means that portion of the Hurricane Wilma disaster area determined by the President to warrant individual or individual and public assistance from the Federal Government under such Act by reason of Hurricane Wilma.

`(6) HURRICANE WILMA DISASTER AREA- The term `Hurricane Wilma disaster area' means an area with respect to which a major disaster has been declared by the President before October 25, 2005, under section 401 of such Act by reason of Hurricane Wilma.

` SEC. 1400O . TAX BENEFITS FOR GULF OPPORTUNITY ZONE.

`(a) Special Allowance for Certain Property Acquired After August 27, 2005-

`(1) ADDITIONAL ALLOWANCE- In the case of any qualified Gulf Opportunity Zone property --

`(A) the depreciation deduction provided by section 167(a) for the taxable year in which such property is placed in service shall include an allowance equal to 50 percent of the adjusted basis of such property, and

`(B) the adjusted basis of the qualified Gulf Opportunity Zone property shall be reduced by the amount of such deduction before computing the amount otherwise allowable as a depreciation deduction under this chapter for such taxable year and any subsequent taxable year.

`(2) QUALIFIED GULF OPPORTUNITY ZONE PROPERTY- For purposes of this subsection --

`(A) IN GENERAL- The term `qualified Gulf Opportunity Zone property' means property --

`(i)(I) which is described in section 168(k)(2)(A)(i) , or

`(II) which is nonresidential real property or residential rental property,

`(ii) substantially all of the use of which is in the Gulf Opportunity Zone and is in the active conduct of a trade or business by the taxpayer in such Zone,

`(iii) the original use of which in the Gulf Opportunity Zone commences with the taxpayer after August 27, 2005,

`(iv) which is acquired by the taxpayer by purchase (as defined in section 179(d) ) after August 27, 2005, but only if no written binding contract for the acquisition was in effect before August 28, 2005, and

`(v) which is placed in service by the taxpayer on or before the termination date.

The term `termination date' means December 31, 2007 (December 31, 2008, in the case of nonresidential real property and residential rental property).

`(B) EXCEPTIONS-

`(i) ALTERNATIVE DEPRECIATION PROPERTY- The term `qualified Gulf Opportunity Zone property' shall not include any property described in section 168(k)(2)(D)(i) .

`(ii) TAX-EXEMPT BOND-FINANCED PROPERTY- Such term shall not include any property any portion of which is financed with the proceeds of any obligation the interest on which is exempt from tax under section 103.

`(iii) QUALIFIED REVITALIZATION BUILDINGS- Such term shall not include any qualified revitalization building with respect to which the taxpayer has elected the application of paragraph (1) or (2) of section 1400I (a).

`(iv) ELECTION OUT- For purposes of this subsection, rules similar to the rules of section 168(k)(2)(D)(iii) shall apply.

`(C) SPECIAL RULES- For purposes of this subsection, rules similar to the rules of section 168(k)(2)(E) shall apply, except that --

`(i) clause (i) thereof shall be applied by substituting `after August 27, 2005, and before the termination date (as defined in section 1400O (a)(2))' for `after September 10, 2001, and before January 1, 2005',

`(ii) clauses (ii), (iii), and (iv) thereof shall be applied by substituting `August 27, 2005' for `September 10, 2001' each place it appears, and

`(iii) clause (iv) thereof shall be applied by substituting `qualified Gulf Opportunity Zone property' for `qualified property'.

`(D) ALLOWANCE AGAINST ALTERNATIVE MINIMUM TAX- For purposes of this subsection, rules similar to the rules of section 168(k)(2)(G) shall apply.

`(3) RECAPTURE- For purposes of this subsection, rules similar to the rules under section 179(d)(10) shall apply with respect to any qualified Gulf Opportunity Zone property which ceases to be qualified Gulf Opportunity Zone property.

`(b) Increase in Expensing Under Section 179-

`(1) IN GENERAL- For purposes of section 179 --

`(A) the $100,000 amount in section 179(b)(1) for the taxable year shall be increased by the lesser of --

`(i) $100,000, or

`(ii) the cost of section 179 property (as defined in section 179(d) ) which is qualified Gulf Opportunity Zone property placed in service during the taxable year, and

`(B) the $400,000 amount in section 179(b)(2) for the taxable year shall be increased by the lesser of --

`(i) $600,000, or

`(ii) the cost of section 179 property (as so defined) which is qualified Gulf Opportunity Zone property placed in service during the taxable year.

`(2) QUALIFIED GULF OPPORTUNITY ZONE PROPERTY- For purposes of this subsection, the term `qualified Gulf Opportunity Zone property' has the meaning given such term by subsection (a)(2).

`(3) COORDINATION WITH EMPOWERMENT ZONES AND RENEWAL COMMUNITIES- For purposes of sections 1397A and 1400J, qualified Gulf Opportunity Zone property shall not be treated as qualified zone property or qualified renewal property for any taxable year, unless the taxpayer elects not to have this subsection apply to all such qualified Gulf Opportunity Zone property placed in service by the taxpayer during the taxable year.

`(4) RECAPTURE- Rules similar to the rules under section 179(d)(10) shall apply with respect to any qualified Gulf Opportunity Zone property which ceases to be Gulf Opportunity Zone property.

`(c) Tax-Exempt Bond Financing-

`(1) IN GENERAL- For purposes of this title, any qualified Gulf Opportunity Zone Bond shall be treated as a qualified bond.

`(2) QUALIFIED GULF OPPORTUNITY ZONE BOND- For purposes of this subsection, the term `qualified Gulf Opportunity Zone Bond' means any bond issued as part of an issue if --

`(A) except as provided in paragraph (4), such bond meets the applicable requirements of part IV of subchapter B of this chapter,

`(B) such bond is issued by the State of Alabama, Louisiana, or Mississippi (or any political subdivision thereof),

`(C) the Governor of such State designates such bond for purposes of this section, and

`(D) such bond is issued after the date of the enactment of this section and before January 1, 2011.

`(3) LIMITATION ON AGGREGATE AMOUNT OF BONDS DESIGNATED- The maximum aggregate face amount of bonds which may be designated under this subsection shall not exceed the product of $2,500 multiplied by the portion of the State population which is in the Gulf Opportunity Zone (as determined on the basis of the most recent census estimate of resident population released by the Bureau of Census before August 28, 2005).

`(4) SPECIAL RULES- In applying this title to any qualified Gulf Opportunity Zone Bond, the following modifications shall apply:

`(A) Section 143 (relating to mortgage revenue bonds: qualified mortgage bond and qualified veterans' mortgage bond) shall be applied --

`(i) by treating any residence in the Gulf Opportunity Zone as a targeted area residence,

`(ii) by applying subsection (f)(3) without regard to subparagraph (A) thereof, and

`(iii) by substituting `$150,000' for `$15,000' in subsection (k)(4) thereof.

`(B) Section 146 (relating to volume cap) shall not apply.

`(C) Section 57(a)(5) shall not apply.

`(5) SEPARATE ISSUE TREATMENT OF PORTIONS OF AN ISSUE- This subsection shall not apply to the portion of an issue which (if issued as a separate issue) would be treated as a qualified bond or as a bond that is not a private activity bond (determined without regard to paragraph (1)), if the issuer elects to so treat such portion.

`(d) Advance Refundings of Certain Tax-Exempt Bonds-

`(1) IN GENERAL- With respect to a bond described in paragraph (2) issued as part of an issue 90 percent (95 percent in the case of a bond described in paragraph (2)(B)) or more of the net proceeds (as defined in section 150(a)(3) ) of which were used to finance facilities located within the Gulf Opportunity Zone (or property which is functionally related and subordinate to facilities located within the Gulf Opportunity Zone), one additional advanced refunding after the date of the enactment of this section and before January 1, 2007, shall be allowed under the applicable rules of section 149(d) if --

`(A) the chief executive officer of the issuer of the bond designates the advance refunding bond for purposes of this subsection, and

`(B) the requirements of paragraph (3) are met.

`(2) BONDS DESCRIBED- A bond is described in this paragraph if such bond was outstanding on August 27, 2005, and is --

`(A) a State or local bond (as defined in section 103(c)(1) ) other than a private activity bond (as defined in section 141(a) ) issued by the State of Alabama, Louisiana, or Mississippi (or any political subdivision thereof), or

`(B) a qualified 501(c)(3) bond (as defined in section 145(a) ) issued by or on behalf of any such State or political subdivision.

`(3) ADDITIONAL REQUIREMENTS- The requirements of this paragraph are met with respect to any advance refunding of a bond described in paragraph (2) if --

`(A) no advance refundings of such bond would be allowed under any provision of law after August 27, 2005,

`(B) the advance refunding bond is the only other outstanding bond with respect to the refunded bond, and

`(C) the requirements of section 148 are met with respect to all bonds issued under this subsection.

`(e) Low-Income Housing Credit-

`(1) INCREASE IN STATE HOUSING CREDIT CEILING-

`(A) IN GENERAL- In the case of the State of Alabama, Louisiana, or Mississippi --

`(i) the amount otherwise determined under subclause (I) of section 42(h)(3)(C)(ii) for each calendar year beginning after 2005 and before 2010 shall be increased by an amount equal to 3 times the dollar amount otherwise specified for such calendar year under such subclause multiplied by the State population located in the Gulf Opportunity Zone (as determined on the basis of the most recent census estimate of resident population released by the Bureau of Census before August 28, 2005), and

`(ii) the unused State housing credit ceiling for such State for any calendar year under section 42(h)(3)(C)(i) shall be determined without regard to the amount of the increase determined under clause (i).

`(B) ELECTIVE CARRYFORWARD OF UNUSED INCREASED CEILING-

`(i) IN GENERAL- If the amount determined under section 42(h)(3)(C)(ii)(I) , as increased under subparagraph (A)(i), for any calendar year for any State described in subparagraph (A) exceeds the aggregate housing credit dollar amount allocated during such calendar year by such State, such State may elect to treat as a carryforward to the following calendar year an amount equal to lesser of --

`(I) the amount of such excess, or

`(II) the amount by which the amount determined under section 42(h)(3)(C)(ii)(I) for such calendar year was increased under subparagraph (A)(i)).

`(ii) USE OF CARRYFORWARD- If any State elects a carryforward under clause (i), any housing credit dollar amount allocated by such State during the calendar year following the calendar year in which the carryforward arose shall not be considered so allocated for purposes of section 42(h)(3)(C) and section 42(h)(3)(D) to the extent such housing credit dollar amount does not exceed the amount of the carryforward elected.

`(2) DIFFICULT DEVELOPMENT AREA-

`(A) IN GENERAL- For purposes of section 42 --

`(i) in the case of property placed in service during 2006, 2007, or 2008, the Gulf Opportunity Zone --

`(I) shall be treated as a difficult development area designated under subclause (I) of section 42(d)(5)(C)(iii) , and

`(II) shall not be taken into account for purposes of applying the limitation under subclause (II) of such section, and

`(ii) subsection (b)(2)(B) thereof shall be applied with respect to any such property placed in service in the Gulf Opportunity Zone by substituting `91 percent' and `39 percent' for `70 percent' and `30 percent', respectively.

`(B) APPLICATION- Subparagraph (A) shall apply only to --

`(i) housing credit dollar amounts allocated during the period beginning on January 1, 2006, and ending on December 31, 2008, and

`(ii) buildings placed in service during such period to the extent that paragraph (1) of section 42(h) does not apply to any building by reason of paragraph (4) thereof, but only with respect to bonds issued after December 31, 2005.

`(f) Treatment of Representations Regarding Income Eligibility for Purposes of Qualified Residential Rental Project Requirements- For purposes of determining if any residential rental project meets the requirements of section 142(d)(1) and if any certification with respect to such project meets the requirements under section 142(d)(7) , the operator of the project may rely on the representations of any individual applying for tenancy in such project that such individual's income will not exceed the applicable income limits of section 142(d)(1) upon commencement of the individual's tenancy if such tenancy begins during the 6-month period beginning on and after the date such individual was displaced by reason of Hurricane Katrina.

`(g) Application of New Markets Tax Credit to Investments in Community Development Entities Serving Gulf Opportunity Zone- For purposes of section 45D --

`(1) a qualified community development entity shall be eligible for an allocation under subsection (f)(2) thereof of the increase in the new markets tax credit limitation described in paragraph (2) only if a significant mission of such entity is the recovery and redevelopment of the Gulf Opportunity Zone,

`(2) the new markets tax credit limitation otherwise determined under subsection (f)(1) thereof shall be increased by an amount equal to --

`(A) $300,000,000 for 2005 and 2006, to be allocated among qualified community development entities to make qualified low-income community investments within the Gulf Opportunity Zone, and

`(B) $400,000,000 for 2007, to be so allocated, and

`(3) subsection (f)(3) thereof shall be applied separately with respect to the amount of the increase under paragraph (2).

`(h) Treatment of Net Operating Losses Attributable to Gulf Opportunity Zone Losses-

`(1) IN GENERAL- If a portion of any net operating loss of the taxpayer for any taxable year is a qualified Gulf Opportunity Zone loss, the following rules shall apply:

`(A) EXTENSION OF CARRYBACK PERIOD- Section 172(b)(1) shall be applied with respect to such portion --

`(i) by substituting `5 taxable years' for `2 taxable years' in subparagraph (A)(i), and

`(ii) by not taking such portion into account in determining any eligible loss of the taxpayer under subparagraph (F) for the taxable year.

`(B) SUSPENSION OF 90 PERCENT AMT LIMITATION- Section 56(d)(1) shall be applied by increasing the amount determined under subparagraph (A)(ii)(I) thereof by the sum of the carrybacks and carryovers of any net operating loss attributable to such portion.

`(2) QUALIFIED GULF OPPORTUNITY ZONE LOSS- For purposes of paragraph (1), the term `qualified Gulf Opportunity Zone loss' means the lesser of --

`(A) the amount of the net operating loss for the taxable year, or

`(B) the aggregate amount of the following deductions for such taxable year:

`(i) Any deduction for any qualified Gulf Opportunity Zone casualty loss.

`(ii) Any deduction for moving expenses paid or incurred after August 27, 2005, and before January 1, 2008, and allowable under this chapter to any taxpayer in connection with the employment of any individual --

`(I) whose principal place of abode was located in the Gulf Opportunity Zone before August 28, 2005,

`(II) who was unable to remain in such abode as the result of Hurricane Katrina, and

`(III) whose principal place of employment with the taxpayer after such expense is located in the Gulf Opportunity Zone.

For purposes of this clause, the term `moving expenses' has the meaning given such term by section 217(b) , except that the taxpayer's former residence and new residence may be the same residence if the initial vacating of the residence was as the result of Hurricane Katrina.

`(iii) Any deduction for expenses paid or incurred after August 27, 2005, and before January 1, 2008, and allowable under this chapter to temporarily house any employee of the taxpayer whose principal place of employment is in the Gulf Opportunity Zone.

`(iv) Any deduction for depreciation (or amortization in lieu of depreciation) allowable under this chapter with respect to any qualified Gulf Opportunity Zone property (as defined in subsection (a)(2)) for the taxable year such property is placed in service.

`(v) Any deduction for repair expenses (including expenses for removal of debris) allowable under this chapter paid or incurred after August 27, 2005, and before January 1, 2008, with respect to any damage attributable to Hurricane Katrina and in connection with property which is located in the Gulf Opportunity Zone.

`(3) QUALIFIED GULF OPPORTUNITY ZONE CASUALTY LOSS-

`(A) IN GENERAL- For purposes of paragraph (2)(B)(i), the term `qualified Gulf Opportunity Zone casualty loss' means any uncompensated section 1231 loss (as defined in section 1231(a)(3)(B) ) of property located in the Gulf Opportunity Zone if --

`(i) such loss is allowed as a deduction under section 165 for the taxable year, and

`(ii) such loss is attributable to Hurricane Katrina.

`(B) REDUCTION FOR GAINS FROM INVOLUNTARY CONVERSION- The amount of qualified Gulf Opportunity Zone casualty loss which would (but for this subparagraph) be taken into account under subparagraph (A) for any taxable year shall be reduced by the amount of any gain recognized by the taxpayer for such year from the involuntary conversion by reason of Hurricane Katrina of property located in the Gulf Opportunity Zone.

`(C) COORDINATION WITH GENERAL DISASTER LOSS RULES- Subsection (j) and section 165(i) shall not apply to any qualified Gulf Opportunity Zone casualty loss to the extent such loss is taken into account under this subsection.

`(4) SPECIAL RULES- For purposes of paragraph (1), rules similar to the rules of paragraphs (2) and (3) of section 172(i) shall apply with respect to such portion.

`(i) Treatment of Public Utility Property Disaster Losses-

`(1) IN GENERAL- Upon the election of the taxpayer, in the case of any eligible public utility property loss --

`(A) section 165(i) shall be applied by substituting `the fifth taxable year immediately preceding' for `the taxable year immediately preceding',

`(B) an application for a tentative carryback adjustment of the tax for any prior taxable year affected by the application of subparagraph (A) may be made under section 6411, and

`(C) section 6611 shall not apply to any overpayment attributable to such loss.

`(2) ELIGIBLE PUBLIC UTILITY PROPERTY LOSS- For purposes of this subsection --

`(A) IN GENERAL- The term `eligible public utility property loss' means any loss with respect to public utility property located in the Gulf Opportunity Zone and attributable to Hurricane Katrina.

`(B) PUBLIC UTILITY PROPERTY- The term `public utility property' has the meaning given such term by section 168(i)(10) without regard to the matter following subparagraph (D) thereof.

`(3) WAIVER OF LIMITATIONS- If refund or credit of any overpayment of tax resulting from the application of paragraph (1) is prevented at any time before the close of the 1-year period beginning on the date of the enactment of this section by the operation of any law or rule of law (including res judicata), such refund or credit may nevertheless be made or allowed if claim therefor is filed before the close of such period.

`(j) Special Rule for Gulf Opportunity Zone Public Utility Casualty Losses-

`(1) IN GENERAL- The amount described in section 172(f)(1)(A) for any taxable year shall be increased by the amount of the Gulf Opportunity Zone public utility casualty loss for such year.

`(2) GULF OPPORTUNITY ZONE PUBLIC UTILITY CASUALTY LOSS- For purposes of this subsection, the term `Gulf Opportunity Zone public utility casualty loss' means any casualty loss of public utility property (as defined in section 168(i)(10) ) located in the Gulf Opportunity Zone if --

`(A) such loss is allowed as a deduction under section 165 for the taxable year,

`(B) such loss is attributable to Hurricane Katrina, and

`(C) the taxpayer elects the application of this subsection with respect to such loss.

`(3) REDUCTION FOR GAINS FROM INVOLUNTARY CONVERSION- The amount of Gulf Opportunity Zone public utility casualty loss which would (but for this paragraph) be taken into account under paragraph (1) for any taxable year shall be reduced by the amount of any gain recognized by the taxpayer for such year from the involuntary conversion by reason of Hurricane Katrina of public utility property (as so defined) located in the Gulf Opportunity Zone.

`(4) COORDINATION WITH GENERAL DISASTER LOSS RULES- Subsection (h) and section 165(i) shall not apply to any Gulf Opportunity Zone public utility casualty loss to the extent such loss is taken into account under paragraph (1).

`(5) ELECTION- Any election under paragraph (2)(C) shall be made in such manner as may be prescribed by the Secretary and shall be made by the due date (including extensions of time) for filing the taxpayer's return for the taxable year of the loss. Such election, once made for any taxable year, shall be irrevocable for such taxable year.

`(k) Special Rules for Small Timber Producers-

`(1) INCREASED EXPENSING FOR QUALIFIED TIMBER PROPERTY- In the case of qualified timber property any portion of which is located in the Gulf Opportunity Zone, in that portion of the Rita GO Zone which is not part of the Gulf Opportunity Zone, or in the Wilma GO Zone, the limitation under subparagraph (B) of

Tax Relief Act of 2005