HR5366-119

What This Bill Does

The enrolled Doug LaMalfa Federal Disaster Tax Relief Certainty Act adds a permanent Internal Revenue Code framework for qualified net disaster losses tied to Stafford Act major disasters whose incident periods begin on or after December 28, 2019 and before January 1, 2027. A qualified net disaster loss is covered personal casualty losses minus relevant casualty gains. The special calculation allows the qualified loss without applying the ordinary 10-percent-of-adjusted-gross-income threshold to that portion, uses a $500 per-casualty floor for qualified disaster losses instead of the ordinary $100 floor, and permits the qualified net disaster-loss deduction in addition to the standard deduction. These amendments apply to taxable years beginning after December 31, 2024 and displace overlapping temporary provisions for those years. The bill also excludes qualified wildfire relief payments from individual gross income when they compensate otherwise-unreimbursed losses, expenses, or damages, including additional living expenses, certain lost wages, personal injury, death, and emotional distress. Covered wildfire disasters are federally declared forest or range fires declared after 2014 and before 2027. To prevent double benefits, an individual cannot also claim a deduction or credit for an expenditure covered by an excluded payment and cannot increase property basis by the excluded amount. The wildfire exclusion applies to payments received in taxable years beginning after December 31, 2025. The enrolled and passed-house texts are substantively the same; the final changes are legislative-formatting changes.

Who Benefits and How

Individuals with uninsured or underinsured personal casualty losses from covered major disasters may deduct more of their loss, including when using the standard deduction. Wildfire survivors may exclude compensation for living expenses, lost wages, injury, death, emotional distress, and property losses from taxable income. Disaster-relief administrators, settlement programs, tax preparers, and affected state agencies gain a single codified framework replacing overlapping temporary provisions. Covered households gain certainty about disaster dates, loss calculations, payment eligibility, and effective tax years.

Who Bears the Burden and How

The Internal Revenue Service must update forms, instructions, processing, and enforcement for the special casualty calculation, standard-deduction add-on, wildfire exclusion, effective dates, and coordination with superseded statutes. Claimants must document disaster declarations, incident periods, losses, gains, insurance, payments, and tax years. The federal Treasury bears reduced revenue from larger deductions and excluded wildfire compensation. Wildfire recipients cannot also claim deductions, credits, or basis increases for the same compensated expenditures, and payers or tax professionals may face information-reporting and substantiation work.

Key Provisions

• Creates a special casualty-loss calculation for covered major-disaster losses.
• Provides coverage for qualifying incident periods beginning after December 28, 2019 and before January 1, 2027.
• Modifies the casualty limit to a $500 floor and removes the ordinary ten-percent income threshold from the qualified portion.
• Expands the standard deduction by allowing the qualified net disaster loss in addition to it.
• Provides a gross-income exclusion for otherwise-unreimbursed qualified wildfire relief payments.
• Bars duplicate deductions, credits, and property-basis increases for excluded wildfire payments.
• Establishes effective dates after 2024 for casualty rules and after 2025 for the wildfire-payment exclusion.