,,ii #aaeth ,,congress #ast ,session ,s4 #aijg ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,october #c1 #bjag ,mr4 ,nelson introduced the following bill2 which was read twice and referred to the ,committee on ,finance ,a ,,bill ,to amend the ,internal ,revenue ,code of #aihf to provide tax relief for disaster areas1 and for other purposes4 #a4 ,short title2 table of contents 7a7 ,short title ,this ,act may be cited as the ,national ,disaster ,tax ,relief ,act of #bjag4 7b7 ,table of contents ,the table of contents for this ,act is as follows3 ,sec4 #a4 ,short title2 table of contents4 ,,title ,i--,tax relief relating to disasters ,sec4 #aja4 ,expensing of qualified disaster expenses4 ,sec4 #ajb4 ,net operating losses attributable to disasters4 ,sec4 #ajc4 ,increase in new markets tax credit for investments in community development entities serving disaster areas4 ,sec4 #ajd4 ,exclusions of certain cancellations of indebtedness by reason of disasters4 ,sec4 #aje4 ,advanced refundings of certain tax-exempt bonds4 ,sec4 #ajf4 ,additional low-income housing credit allocations4 ,,title ,,ii--,permanent disaster tax relief provisions ,sec4 #bja4 ,exclusion for disaster mitigation payments received from ,state and local governments4 ,sec4 #bjb4 ,catastrophe ,savings ,accounts4 ,,title ,,iii--,other permanent tax provisions ,sec4 #cja4 ,repeal of limitation on cover over of distilled spirits taxes to ,virgin ,islands and ,puerto ,rico4 ,sec4 #cjb4 ,deduction for income attributable to domestic production activities in ,puerto ,rico made permanent4 ,sec4 #cjc4 ,refundable child tax credit parity for residents of ,puerto ,rico1 ,american ,samoa1 ,guam1 the ,northern ,mariana ,islands1 and the ,virgin ,islands4 ,,title ,,iv--,treatment of certain possessions ,sec4 #dja4 ,treatment of possessions4 ,i ,tax relief relating to disasters #aja4 ,expensing of qualified disaster expenses 7a7 ,in general ,part ,,vi of subchapter ,b of chapter #a of the ,internal ,revenue ,code of #aihf is amended by inserting after section #aih the following3 #aih;,a4 ,expensing of qualified disaster expenses 7a7 ,in general ,a taxpayer may elect to treat any qualified disaster expenses which are paid or incurred by the taxpayer as an expense which is not chargeable to capital account4 ,any expense which is so treated shall be allowed as a deduction for the taxable year in which it is paid or incurred4 7b7 ,qualified disaster expense ,for purposes of this section-- 7#a7 ,in general ,the term qualified disaster expense means any expenditure-- 7,a7 which is paid or incurred in connection with a trade or business or with business-related property1 7,b7 which is-- 7i7 for the abatement or control of hazardous substances that were released due to a federally declared disaster occurring during the period beginning on ,january #a1 #bjab1 and ending on ,december #ca1 #bjbb1 7ii7 for the removal of debris from1 or the demolition of structures on1 real property which is business-related property and which is damaged or destroyed as a result of a federally declared disaster occurring during such period1 or 7iii7 for the repair of business-related property damaged as a result of a federally declared disaster occurring during any such period1 and 7,c7 which is otherwise chargeable to capital account4 7#b7 ,special rule for replanting of citrus plants lost by reason of casualty ,amounts paid or incurred by a taxpayer in any taxable year beginning after ,december #ca1 #bjaf1 for the replanting as described in section #bfc;,a7d77#b77;,a7 of citrus plants which were lost or damaged1 due to disease or to a federally declared disaster1 while such plants were in the hands of a person other than the taxpayer shall be treated as a qualified disaster expense of the taxpayer if-- 7,a7 such other person has an equity interest of not less than #ej percent in the replanted citrus plants at all times during the taxable year in which such amounts are paid or incurred1 and the taxpayer holds any part of the remaining equity interest1 or 7,b7 the taxpayer acquired the entirety of such other person's equity interest in the land on which the lost or damaged citrus plants were located at the time of such loss or damage1 and the replanting is on such land4 7c7 ,other definitions ,for purposes of this section-- 7#a7 ,business-related property ,the term business-related property means property which is-- 7,a7 held by the taxpayer for use in a trade or business or for the production of income1 or 7,b7 described in section #abba7;a77#a7 in the hands of the taxpayer4 7#b7 ,federally declared disaster ,the term federally declared disaster has the meaning given such term by section #afe7;i77#e77;,a74 7d7 ,deduction recaptured as ordinary income on sale1 etc ,solely for purposes of section #abde1 in the case of property with respect to which a qualified disaster expense would have been capitalized but for this section-- 7#a7 the deduction allowed by this section for such expense shall be treated as a deduction for depreciation1 and 7#b7 such property 7if not otherwise section #abde property7 shall be treated as section #abde property solely for purposes of applying section #abde to such deduction4 7e7 ,coordination with other provisions ,sections #aih1 #bhj;,b1 and #dfh shall not apply to amounts which are treated as expenses not chargeable to capital account under this section4 7f7 ,regulations ,the ,secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section4 7g7 ,termination ,this section shall not apply to amounts paid or incurred after ,december #ca1 #bjbc4 4 7b7 ,clerical amendment ,the table of sections for part ,,vi of subchapter ,b of chapter #a of the ,internal ,revenue ,code of #aihf is amended by inserting after the item relating to section #aih the following item3 ,sec4 #aih;,a4 ,expensing of qualified disaster expenses4 4 7c7 ,effective date ,the amendments made by this section shall apply to amounts paid or incurred after the date of the enactment of this ,act4 #ajb4 ,net operating losses attributable to disasters 7a7 ,in general ,section #agb7;b77#a7 of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following3 7,g7 ,certain losses attributable to federally declared disasters ,in the case of a taxpayer who has a qualified disaster loss 7as defined in subsection 7i771 such loss shall be a net operating loss carryback to each of the #e taxable years preceding the taxable year of such loss4 4 7b7 ,rules relating to qualified disaster losses ,section #agb of the ,internal ,revenue ,code of #aihf is amended by redesignating subsection 7i7 as subsection 7j7 and by inserting after subsection 7h7 the following3 7i7 ,rules relating to qualified disaster losses ,for purposes of this section-- 7#a7 ,in general ,the term qualified disaster loss means the lesser of-- 7,a7 the sum of-- 7i7 the losses allowable under section #afe for the taxable year-- 7,i7 attributable to a federally declared disaster 7as defined in section #afe7;i77#e77;,a77 occurring after ,december #ca1 #bjaa1 and before ,january #a1 #bjbc1 and 7,,ii7 occurring in a disaster area 7as defined in section #afe7;i77#e77;,b771 and 7ii7 the deduction for the taxable year for qualified disaster expenses which is allowable under section #aih;,a7a71 or which would be so allowable if not otherwise treated as an expense1 or 7,b7 the net operating loss for the taxable year in which the taxpayer had the losses described in subparagraph 7,a74 7#b7 ,exclusion ,the term qualified disaster loss shall not include any loss with respect to any property described in section #adjj,n7p77#c74 7#c7 ,coordination with subsection 7b77#b7 ,for purposes of applying subsection 7b77#b71 a qualified disaster loss for any taxable year shall be treated in a manner similar to the manner in which a specified liability loss is treated4 7#d7 ,election ,any taxpayer entitled to a #e-year carryback under subsection 7b77#a77;,g7 from any loss year may elect to have the carryback period with respect to such loss year determined without regard to subsection 7b77#a77;,g74 ,such election shall be made in such manner as may be prescribed by the ,secretary and shall be made by the due date 7including extensions of time7 for filing the taxpayer's return for the taxable year of the net operating loss4 ,such election1 once made for any taxable year1 shall be irrevocable for such taxable year4 4 7c7 ,effective date ,the amendments made by this section shall apply to losses arising in taxable years beginning after ,december #ca1 #bjaa4 #ajc4 ,increase in new markets tax credit for investments in community development entities serving disaster areas 7a7 ,in general ,subsection 7f7 of section #de;,d of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new paragraph3 7#d7 ,increased special allocation for community development entities serving disaster areas 7,a7 ,in general ,in the case of each calendar year beginning after the date of the enactment of the ,national ,disaster ,tax ,relief ,act of #bjag and before ,january #a1 #bjbc1 for which there is a limitation under paragraph 7#a71 such limitation shall be increased by #ejj1jjj1jjj1 to be allocated among qualified community development entities to make qualified low-income community investments within any covered federally declared disaster area4 7,b7 ,allocation of increase ,the amount of the increase in limitation under subparagraph 7,a7 shall be allocated by the ,secretary under paragraph 7#b7 to qualified community development entities and shall give priority to such entities with a record of having successfully provided capital or technical assistance to businesses or communities within any covered federally declared disaster area or areas for which the allocation is requested4 7,c7 ,application of carryforward ,paragraph 7#c7 shall be applied separately with respect to the amount of any increase under subparagraph 7,a74 7,d7 ,covered federally declared disaster area ,for purposes of this paragraph1 the term covered federally declared disaster area means any disaster area with respect to which a federally declared disaster is declared which occurs after ,december #ca1 #bjaa1 and before ,january #a1 #bjbc4 ,for purposes of the preceding sentence1 the terms federally declared disaster and disaster area have the meanings given such terms in section #afe7;i77#e74 4 7b7 ,effective date ,the amendments made by this section shall apply to calendar years beginning after ,december #ca1 #bjaf4 #ajd4 ,exclusions of certain cancellations of indebtedness by reason of disasters 7a7 ,in general ,section #ajh of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new subsection3 7j7 ,discharge of indebtedness for individuals affected by disasters 7#a7 ,in general ,except as provided in paragraph 7#b71 gross income shall not include any amount which 7but for this subsection7 would be includible in gross income by reason of any discharge 7in whole or in part7 of indebtedness of a natural person described in paragraph 7#c7 by an applicable entity 7as defined in section #fjej,p7c77#a77 during the applicable period4 7#b7 ,exceptions for business indebtedness ,paragraph 7#a7 shall not apply to any indebtedness incurred in connection with a trade or business4 7#c7 ,persons described ,a natural person is described in this paragraph if1 with respect to any federally declared disaster occurring after ,december #ca1 #bjaa1 and before ,january #a1 #bjbc1 the principal place of abode of such person on the applicable disaster date was located in the disaster area4 7#d7 ,applicable period ,for purposes of this subsection1 the term applicable period means the period beginning on the applicable disaster date and ending on the date which is #bd months after such date4 7#e7 ,other definitions ,for purposes of this subsection-- 7,a7 ,federally declared disaster2 disaster area ,the terms federally declared disaster and disaster area have the meanings given such terms under section #afe7;i77#e74 7,b7 ,applicable disaster date ,the term applicable disaster date means1 with respect to any federally declared disaster1 the date on which such federally declared disaster occurs4 4 7b7 ,effective date ,the amendment made by this section shall apply to discharges made on or after ,december #ca1 #bjae4 #aje4 ,advanced refundings of certain tax-exempt bonds 7a7 ,in general ,section #adi7;d7 of the ,internal ,revenue ,code of #aihf is amended by redesignating paragraph 7#g7 as paragraph 7#h7 and by inserting after paragraph 7#f7 the following new paragraph3 7#g7 ,special rule with respect to certain natural disasters 7,a7 ,in general ,with respect to a bond described in subparagraph 7,c71 #a additional advance refunding after the date of the enactment of the ,national ,disaster ,tax ,relief ,act of #bjag and before ,january #a1 #bjbc1 shall be allowed under the rules of this subsection if-- 7i7 the ,governor of the ,state designates the advance refunding bond for purposes of this subsection1 and 7ii7 the requirements of subparagraph 7,e7 are met4 7,b7 ,certain private activity bonds ,subparagraph 7,a7 shall apply with respect to a bond described in subparagraph 7,c7 which is an exempt facility bond described in paragraph 7#a7 or 7#b7 of section #adb7;a7 notwithstanding paragraph 7#b7 of this subsection4 7,c7 ,bonds described ,a bond is described in this paragraph if1 with respect to any federally declared disaster1 such bond-- 7i7 was outstanding on the applicable disaster date1 and 7ii7 is issued by an applicable ,state or a political subdivision thereof4 7,d7 ,aggregate limit ,the maximum aggregate face amount of bonds outstanding on any applicable disaster date which may be designated under this subsection by the ,governor of a ,state shall not exceed #b1jjj1jjj1jjj4 7,e7 ,additional requirements ,the requirements of this subparagraph are met with respect to any advance refunding of a bond described in subparagraph 7,c7 if-- 7i7 no advance refundings of such bond would be allowed under this title on or after the applicable disaster date1 7ii7 the advance refunding bond is the only other outstanding bond with respect to the refunded bond1 and 7iii7 the requirements of section #adh are met with respect to all bonds issued under this paragraph4 7,f7 ,definitions ,for purposes of this subsection-- 7i7 ,federally declared disaster2 disaster area ,the terms federally declared disaster and disaster area have the meanings given such terms under section #afe7;i77#e74 7ii7 ,applicable disaster date ,the term applicable disaster date means1 with respect to any federally declared disaster1 the date on which such federally declared disaster occurs4 7iii7 ,applicable ,state ,the term applicable ,state means1 with respect to any federally declared disaster1 any ,state in which a portion of the disaster area is located4 4 7b7 ,effective date ,the amendment made by this section shall apply to bonds issued after the date of the enactment of this ,act4 #ajf4 ,additional low-income housing credit allocations 7a7 ,in general ,paragraph 7#c7 of section #db7;h7 of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new subparagraph3 7,j7 ,increase in ,state housing credit for ,states damaged by natural disasters 7i7 ,in general ,in the case of any calendar year beginning after the date of the enactment of the ,national ,disaster ,tax ,relief ,act of #bjag and before ,january #a1 #bjbc1 the ,state housing credit ceiling of each ,state any portion of which includes any portion of a qualifying disaster area shall be increased by so much of the aggregate housing credit dollar amount as does not exceed the applicable limitation allocated by the ,state housing credit agency of such ,state for such calendar year to buildings located in qualifying disaster areas4 7ii7 ,applicable limitation ,for purposes of clause 7i71 the applicable limitation is the greater of-- 7,i7 #h multiplied by the population of the qualifying disaster areas in such ,state1 or 7,,ii7 #ej percent of the ,state housing credit ceiling 7determined without regard to this subparagraph7 for #bjag4 7iii7 ,applicable percentage ,for purposes of this section1 the applicable percentage with respect to any building to which amounts are allocated under clause 7i7 shall be determined under subsection 7b77#b74 7iv7 ,allocations treated as made first from additional allocation amount for purposes of determining carryover ,for purposes of determining the unused ,state housing credit ceiling under subparagraph 7,c7 for any calendar year1 any increase in the ,state housing credit ceiling under clause 7i7 shall be treated as an amount described in clause 7ii7 of such subparagraph4 7v7 ,qualifying disaster area ,for purposes of this subparagraph1 the term qualifying federally declared disaster area means-- 7,i7 each county which is determined to warrant individual or individual and public assistance from the ,federal ,government under a qualifying natural disaster declaration described in clause 7vi77,i71 and 7,,ii7 each county not described in subclause 7,i7 which is included in the geographical area covered by a qualifying natural disaster declaration described in subclause 7,,ii7 or 7,,iii7 of clause 7vi74 7vi7 ,qualifying natural disaster declaration ,for purposes of clause 7v71 the term qualifying natural disaster declaration means-- 7,i7 a federally declared disaster 7as defined in section #afe7;i77#e77 occurring after ,december #ca1 #bjaa1 and before ,january #a1 #bjbc1 or 7,,ii7 a natural disaster declared by the ,secretary of ,agriculture4 4 7b7 ,eligibility for difficult development area ,for purposes of section #db of the ,internal ,revenue ,code of #aihf1 any area located in a disaster area 7as defined in section #afe7;i77#e77;,b7 of the ,internal ,revenue ,code of #aihf7 shall be designated a difficult development area for purposes of section #db7;d77#e77;,b77iii7 of such ,code for any #bd-month period following the date of a federally declared disaster1 if the area qualifies to be such a difficult development area at any time within such #bd-month period4 7c7 ,effective date ,the amendment made by this section shall take effect on the date of the enactment of this ,act4 ,,ii ,permanent disaster tax relief provisions #bja4 ,exclusion for disaster mitigation payments received from ,state and local governments 7a7 ,in general ,paragraph 7#b7 of section #aci7;g7 of the ,internal ,revenue ,code of #aihf is amended by inserting 1 or any other amount which is paid by a ,state or local government or an agency or instrumentality thereof1 after 7as in effect on such date74 7b7 ,effective date ,the amendment made by this section shall apply to payments received after the date of the enactment of this ,act4 #bjb4 ,catastrophe ,savings ,accounts 7a7 ,in general ,subchapter ,f of chapter #a of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new part3 ,,ix ,catastrophe ,savings ,accounts #ecj;,a4 ,catastrophe ,savings ,accounts 7a7 ,general rule ,a ,catastrophe ,savings ,account shall be exempt from taxation under this subtitle4 ,notwithstanding the preceding sentence1 such account shall be subject to the taxes imposed by section #eaa 7relating to imposition of tax on unrelated business income of charitable organizations74 7b7 ,catastrophe ,savings ,account ,for purposes of this section1 the term ,catastrophe ,savings ,account means a trust created or organized in the ,united ,states for the exclusive benefit of an individual or the individual's beneficiaries and which is designated 7in such manner as the ,secretary shall prescribe7 at the time of the establishment of the trust as a ,catastrophe ,savings ,account1 but only if the written governing instrument creating the trust meets the following requirements3 7#a7 ,except in the case of a qualified rollover contribution-- 7,a7 no contribution will be accepted unless it is in cash1 and 7,b7 contributions will not be accepted in excess of the account balance limit specified in subsection 7c74 7#b7 ,the trustee is a bank 7as defined in section #djh7n77 or another person who demonstrates to the satisfaction of the ,secretary that the manner in which that person will administer the trust will be consistent with the requirements of this section4 7#c7 ,the interest of an individual in the balance of the individual's account is nonforfeitable4 7#d7 ,the assets of the trust shall not be commingled with other property except in a common trust fund or common investment fund4 7c7 ,account balance limit 7#a7 ,in general ,the aggregate account balance for all ,catastrophe ,savings ,accounts maintained for the benefit of an individual 7including qualified rollover contributions7 shall not exceed-- 7,a7 in the case of an individual whose qualified deductible is not more than #a1jjj1 #ge1jjj1 and 7,b7 in the case of an individual whose qualified deductible is more than #a1jjj1 #aej1jjj4 7#b7 ,qualified deductible ,for purposes of this subsection1 with respect to an individual1 the term qualified deductible means the annual deductible for the individual's homeowners' insurance policy4 7d7 ,qualified rollover contribution ,for purposes of this section1 the term qualified rollover contribution means a contribution to a ,catastrophe ,savings ,account-- 7#a7 from another such account of the same beneficiary1 but only if such amount is contributed not later than the #fjth day after the distribution from such other account1 and 7#b7 from a ,catastrophe ,savings ,account of a spouse of the beneficiary of the account to which the contribution is made1 but only if such amount is contributed not later than the #fjth day after the distribution from such other account4 7e7 ,tax treatment of distributions 7#a7 ,in general ,any distribution from a ,catastrophe ,savings ,account shall be includible in the gross income of the distributee in the manner provided in section #gb4 7#b7 ,distributions for qualified catastrophe expenses 7,a7 ,in general ,no amount shall be includible in gross income under paragraph 7#a7 if the aggregate distributions during the taxable year do not exceed the qualified catastrophe expenses of the distributee during such taxable year4 7,b7 ,distributions in excess of expenses ,if such aggregate distributions exceed such expenses during the taxable year1 the amount otherwise includible in gross income under paragraph 7#a7 shall be reduced by the amount which bears the same ratio to the amount which would be includible in gross income under paragraph 7#a7 7without regard to this subparagraph7 as the qualified catastrophe expenses bear to such aggregate distributions4 7#c7 ,additional tax for distributions not used for qualified catastrophe expenses ,the tax imposed by this chapter for any taxable year on any taxpayer who receives a payment or distribution from a ,catastrophe ,savings ,account which is includible in gross income shall be increased by #aj percent of the amount which is so includible4 7#d7 ,qualified catastrophe expenses ,for purposes of this subsection1 the term qualified catastrophe expenses means expenses paid or incurred by reason of a major disaster that has been declared by the ,president under section #dja of the ,robert ,t4 ,stafford ,disaster ,relief and ,emergency ,assistance ,act4 7#e7 ,exception for retirement distributions ,no amount shall be includible in gross income under paragraph 7#a7 7or subject to an additional tax under paragraph 7#c77 if the payment or distribution is made on or after the date on which the distributee attains age #fb4 7f7 ,tax treatment of accounts ,rules similar to the rules of paragraphs 7#b7 and 7#d7 of section #djh7;e7 shall apply to any ,catastrophe ,savings ,account4 4 7b7 ,tax on excess contributions 7#a7 ,in general ,subsection 7a7 of section #digc of the ,internal ,revenue ,code of #aihf is amended by striking or at the end of paragraph 7#e71 by inserting or at the end of paragraph 7#f71 and by inserting after paragraph 7#f7 the following new paragraph3 7#g7 a ,catastrophe ,savings ,account 7as defined in section #ecj;,a7b771 4 7#b7 ,excess contribution ,section #digc of such ,code is amended by adding at the end the following new subsection3 7i7 ,excess contributions to ,catastrophe ,savings ,accounts ,for purposes of this section1 in the case of a ,catastrophe ,savings ,account 7as defined in section #ecj;,a7b771 the term excess contributions means the amount by which the aggregate account balance for all ,catastrophe ,savings ,accounts maintained for the benefit of an individual exceeds the account balance limit under section #ecj;,a7c77#a74 4 7c7 ,conforming amendment ,the table of parts for subchapter ,f of chapter #a of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new item3 ,part ,,ix--,catastrophe ,savings ,accounts 4 7d7 ,contributions from insurance companies ,subsection 7c7 of section #hcb of the ,internal ,revenue ,code of #aihf is amended by striking and at the end of paragraph 7#ab71 by striking the period at the end of paragraph 7#ac7 and inserting 2 and1 and by adding at the end the following new paragraph3 7#ad7 contributions to a ,catastrophe ,savings ,account 7as defined in section #ecj;,a7b77 during the taxable year to the extent such contributions are not excess contributions 7as defined in section #digc7;i774 4 7e7 ,custodial accounts treated as trust ,for purposes of this section1 a custodial account shall be treated as a trust if-- 7#a7 the assets of such account are held by a bank 7as defined in section #djh7n7 of the ,internal ,revenue ,code of #aihf7 or another person who demonstrates1 to the satisfaction of the ,secretary of the ,treasury1 that the manner in which such person will administer the account will be consistent with the requirements of this section1 and 7#b7 the custodial account would1 except for the fact that it is not a trust1 constitute a ,catastrophe ,savings ,account 7as defined in section #ecj;,a7b7 of the ,internal ,revenue ,code of #aihf74 ,in the case of a custodial account treated as a trust by reason of the preceding sentence1 the custodian of such account shall be treated as the trustee thereof for purposes of the ,internal ,revenue ,code of #aihf4 7f7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 ,,iii ,other permanent tax provisions #cja4 ,repeal of limitation on cover over of distilled spirits taxes to ,virgin ,islands and ,puerto ,rico 7a7 ,in general ,section #gfeb of the ,internal ,revenue ,code of #aihf is amended by striking subsection 7f7 and by redesignating subsections 7g7 and 7h7 as subsections 7f7 and 7g71 respectively4 7b7 ,effective date ,the amendments made by this section shall apply to distilled spirits brought into the ,united ,states after ,december #ca1 #bjaf4 #cjb4 ,deduction for income attributable to domestic production activities in ,puerto ,rico made permanent 7a7 ,in general ,section #aii7;d77#h7 of the ,internal ,revenue ,code of #aihf is amended by striking subparagraph 7,c74 7b7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjaf4 #cjc4 ,refundable child tax credit parity for residents of ,puerto ,rico1 ,american ,samoa1 ,guam1 the ,northern ,mariana ,islands1 and the ,virgin ,islands 7a7 ,treatment of non-,mirror code possessions ,section #bd7;d7 of the ,internal ,revenue ,code of #aihf is amended by inserting after paragraph 7#b7 the following new paragraph3 7#c7 ,special rule for ,puerto ,rico and ,american ,samoa ,in the case of an individual who is a bona fide resident of ,puerto ,rico or ,american ,samoa during the entire taxable year-- 7,a7 paragraph 7#a77;,b77i7 shall not apply1 and 7,b7 paragraph 7#a77;,b77ii7 shall be applied without regard to the number of qualifying children of the taxpayer4 4 7b7 ,treatment of mirror code possessions 7#a7 ,in general ,the ,secretary of the ,treasury shall pay to each mirror code possession of the ,united ,states amounts equal to the loss to that possession by reason of the application of section #bd7;d7 of the ,internal ,revenue ,code of #aihf 7determined as if paragraph 7#c7 thereof1 as added by this section1 applied to bona fide residents of that possession7 with respect to taxable years beginning after ,december #ca1 #bjag4 ,such amounts shall be determined by the ,secretary of the ,treasury based on information provided by the government of the respective possession4 7#b7 ,possession of the united states ,for purposes of this subsection1 the term mirror code possession of the ,united ,states means ,guam1 the ,northern ,mariana ,islands1 and the ,virgin ,islands4 7#c7 ,treatment of payments ,for purposes of section #acbd7;b77#b7 of title #ca1 ,united ,states ,code1 the payments under this subsection shall be treated in the same manner as a refund due from the credit allowed under section #bd of the ,internal ,revenue ,code of #aihf by reason of subsection 7d7 of such section4 7c7 ,effective date ,the amendment made by this section shall apply to taxable years beginning after ,december #ca1 #bjag4 ,,iv ,treatment of certain possessions #dja4 ,treatment of possessions 7a7 ,payments to possessions 7#a7 ,mirror code possessions ,the ,secretary of the ,treasury shall pay to each possession of the ,united ,states with a mirror code tax system amounts equal to the loss to that possession by reason of the application of sections #aja1 #ajd1 and #bja4 ,such amounts shall be determined by the ,secretary of the ,treasury based on information provided by the government of the respective possession4 7#b7 ,other possessions ,the ,secretary of the ,treasury shall pay to each possession of the ,united ,states which does not have a mirror code tax system amounts estimated by the ,secretary of the ,treasury as being equal to the aggregate benefits that would have been provided to residents of such possession by reason of the application of sections #aja1 #ajd1 and #bja if a mirror code tax system had been in effect in such possession4 ,the preceding sentence shall not apply with respect to any possession of the ,united ,states unless such possession has a plan1 which has been approved by the ,secretary of the ,treasury1 under which such possession will promptly distribute such payments to the residents of such possession4 7b7 ,coordination with credit allowed against united states income taxes ,no increase in any credit1 deduction1 or exclusion determined under section #aih;,a1 #ajh7;j71 or #aci7;g7 of the ,internal ,revenue ,code of #aihf against ,united ,states income taxes for any taxable year shall be taken into account with respect to any person-- 7#a7 to whom the corresponding credit1 deduction1 or exclusion is allowed against taxes imposed by the possession by reason of section #aja1 #ajd1 or #bja1 whichever is applicable1 for such taxable year1 or 7#b7 who is eligible for a payment under a plan described in subsection 7a77#b7 with respect to such credit1 deduction1 or exclusion for the taxable year4 7c7 ,definitions and special rules 7#a7 ,possession of the united states ,for purposes of this subsection1 the term possession of the ,united ,states includes the ,commonwealth of ,puerto ,rico and the ,commonwealth of the ,northern ,mariana ,islands4 7#b7 ,mirror code tax system ,for purposes of this subsection1 the term mirror code tax system means1 with respect to any possession of the ,united ,states1 the income tax system of such possession if the income tax liability of the residents of such possession under such system is determined by reference to the income tax laws of the ,united ,states as if such possession were the ,united ,states4 7#c7 ,treatment of payments ,for purposes of section #acbd7;b77#b7 of title #ca1 ,united ,states ,code1 rules similar to the rules of section #ajja7;b77#c77;,c7 of the ,american ,recovery and ,reinvestment ,tax ,act of #bjji shall apply4