Sponsors (32)
Official title: To provide tax relief with respect to certain Federal disasters, and for other purposes.
Introduced December 18, 2025 by Judy Chu · Last progress December 18, 2025
The bill provides targeted, immediate tax and disaster relief (preserving credits, enabling liquidity, boosting donations and housing recovery, and speeding FEMA assistance) for disaster‑affected individuals and communities at the cost of reduced federal revenue, added administrative complexity, timing limitations that may leave some unable to benefit, and potential long‑term risks to retirement security.
Low-income and disaster‑displaced families (including parents) can use prior‑year earned income to calculate the refundable child tax credit and the earned income tax credit for 2025, preserving those benefits if earnings fall due to a qualified disaster.
State and local governments (and disaster survivors) can access Stafford Act individual and public assistance retroactive to Dec 28, 2024 through enactment, with a capped incident period, enabling faster, clearer access to federal disaster aid.
Disaster‑affected taxpayers can take up to $100,000 in penalty‑free retirement plan distributions, spread the tax on those distributions over three years, recontribute amounts within three years, and access temporarily larger plan loans with delayed repayments to provide immediate liquidity during recovery.
The package increases near‑term federal tax expenditures (preserved refundable credits, expanded charitable deductions, casualty/compensation exclusions, and larger LIHTC allocations), reducing federal revenue and potentially increasing deficits or requiring offsets that affect all taxpayers.
Allowing penalty‑free withdrawals and larger plan loans risks depleting retirement savings for affected individuals, leading to lower retirement income later for those who tap plans during recovery.
Tight, short windows and date restrictions (the donation election window, the Jan 1, 2025–60‑day declaration window, and a 30‑day incident cap) may exclude many disaster‑impacted communities, donors, or projects from eligibility, leaving some needs unmet.
Based on analysis of 8 sections of legislative text.
Temporary tax changes for qualified disasters: prior‑year income for 2025 refundable credits, relaxed charitable deduction limits, penalty‑free retirement distributions with extended rollovers, modified casualty loss rules, wildfire exclusion tweaks, and temporary LIHTC increases.
Provides a package of temporary tax relief for people and communities hit by major disasters declared between Dec 28, 2024 and shortly after enactment. It lets disaster-affected taxpayers use prior-year earned income for 2025 EITC and refundable CTC calculations, eases limits on charitable cash gifts for disaster relief, exempts certain disaster retirement withdrawals from the 10% penalty and spreads their tax impact, and creates special tax rules for casualty loss deductions and wildfire compensation exclusion. It also raises state LIHTC ceilings for 2026–2027 based on allocations to buildings in qualified disaster zones to help preserve and rebuild affordable housing. The bill changes multiple parts of the Internal Revenue Code to speed after-disaster cash flow and rebuild incentives: refundable credit calculations, charitable contribution caps and carryovers, retirement-plan distribution and rollover treatment, casualty loss and standard deduction interaction, wildfire compensation income exclusion, and temporary increases and safe-harbors for low‑income housing credits for damaged properties.