LOSSES ATTRIBUTABLE TO FEDERALLY DECLARED DISASTERS.

SEC. 706. LOSSES ATTRIBUTABLE TO FEDERALLY DECLARED DISASTERS.(a) Waiver of Adjusted Gross Income Limitation.—(1) In general.—Subsection (h) of section 165 is amended by redesignating paragraphs (3) and (4) as paragraphs (4) and (5), respectively, and by inserting after paragraph (2) the following new paragraph:“(3) Special rule for losses in federally declared disasters.—“(A) In general.—If an individual has a net disaster loss for any taxable year, the amount determined under paragraph (2)(A)(ii) shall be the sum of—“(i) such 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) Net disaster loss.—For purposes of subparagraph (A), the term ‘net disaster loss’ means the excess of—“(i) the personal casualty losses—“(I) attributable to a federally declared disaster occurring before January 1, 2010, and“(II) occurring in a disaster area, over“(ii) personal casualty gains.“(C) Federally declared disaster.—For purposes of this paragraph—“(i) Federally declared disaster.—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.“(ii) Disaster area.—The term ‘disaster area’ means the area so determined to warrant such assistance.”.(2) Conforming amendments.—(A) Section 165(h)(4)(B) (as so redesignated) is amended by striking “paragraph (2)” and inserting “paragraphs (2) and (3)”.(B) Section 165(i)(1) is amended by striking “loss” and all that follows through “Act” and inserting “loss occurring in a disaster area (as defined by clause (ii) of subsection (h)(3)(C)) and attributable to a federally declared disaster (as defined by clause (i) of such subsection)”.122 STAT. 3922(C) Section 165(i)(4) is amended by striking “Presidentially declared disaster (as defined by section 1033(h)(3))” and inserting “federally declared disaster (as defined by subsection (h)(3)(C)(i)”.(D)(i) So much of subsection (h) of section 1033 as precedes subparagraph (A) of paragraph (1) thereof is amended to read as follows:“(h) Special Rules for Property Damaged by Federally Declared Disasters.—“(1) Principal residences.—If the taxpayer’s principal residence or any of its contents is located in a disaster area and is compulsorily or involuntarily converted as a result of a federally declared disaster—”.(ii) Paragraph (2) of section 1033(h) is amended by striking “investment” and all that follows through “disaster” and inserting “investment located in a disaster area and compulsorily or involuntarily converted as a result of a federally declared disaster”.(iii) Paragraph (3) of section 1033(h) is amended to read as follows:“(3) Federally declared disaster; disaster area.—The terms “federally declared disaster” and “disaster area” shall have the respective meaning given such terms by section 165(h)(3)(C).”.(iv) Section 139(c)(2) is amended to read as follows:“(2) federally declared disaster (as defined by section 165(h)(3)(C)(i)),”.(v) Subclause (II) of section 172(b)(1)(F)(ii) is amended by striking “Presidentially declared disasters (as defined in section 1033(h)(3))” and inserting “federally declared disasters (as defined by subsection (h)(3)(C)(i))”.(vi) Subclause (III) of section 172(b)(1)(F)(ii) is amended by striking “Presidentially declared disasters” and inserting “federally declared disasters”.(vii) Subsection (a) of section 7508A is amended by striking “Presidentially declared disaster (as defined in section 1033(h)(3))” and inserting “federally declared disaster (as defined by section 165(h)(3)(C)(i))”.(b) Increase in Standard Deduction by Disaster Casualty Loss.—(1) In general.—Paragraph (1) of section 63(c), as amended by the Housing Assistance Tax Act of 2008, is amended by striking “and” at the end of subparagraph (B), by striking the period at the end of subparagraph (C) and inserting “, and”, and by adding at the end the following new subparagraph:“(D) the disaster loss deduction.”.(2) Disaster loss deduction.—Subsection (c) of section 63, as amended by the Housing Assistance Tax Act of 2008, is amended by adding at the end the following new paragraph:“(8) Disaster loss deduction.—For the purposes of paragraph (1), the term ‘disaster loss deduction’ means the net disaster loss (as defined in section 165(h)(3)(B)).”.(3) Allowance in computing alternative minimum taxable income.—Subparagraph (E) of section 56(b)(1) is amended by adding at the end the following new sentence: “The preceding 122 STAT. 3923 sentence shall not apply to so much of the standard deduction as is determined under section 63(c)(1)(D).”.(c) Increase in Limitation on Individual Loss Per Casualty.—Paragraph (1) of section 165(h) is amended by striking “$100” and inserting “$500 ($100 for taxable years beginning after December 31, 2009)”.(d) Effective Dates.—(1) In general.—Except as provided by paragraph (2), the amendments made by this section shall apply to disasters declared in taxable years beginning after December 31, 2007.(2) Increase in limitation on individual loss per casualty.—The amendment made by subsection (c) shall apply to taxable years beginning after December 31, 2008.