Tax Fairness for Disaster Victims Act

Section 32 of the Internal Revenue Code of 1986 is amended by inserting after subsection (f) the following new subsection:

In the case of a qualified individual who elects the application of this subsection (at such time and in such manner as the Secretary may provide)—

(A) if the earned income of the taxpayer for the taxable year which includes the applicable date is less than the earned income of the taxpayer for the preceding taxable year, the credits allowed under this section and section 24(d) shall be determined by substituting—

(i) such earned income for the preceding taxable year, for

(ii) such earned income for the taxable year which includes the applicable date, and

(B) if the social security taxes of the taxpayer for the taxable year which includes the applicable date is less than the social security taxes of the taxpayer for the preceding taxable year, the credit allowed under section 24(d) shall be determined by substituting—

(i) such social security taxes for the preceding taxable year, for

(ii) such social security taxes for the taxable year which includes the applicable date.

For purposes of this subsection—

The term qualified individual means any individual whose principal place of abode on the applicable date was located in a disaster area with respect to a federally declared disaster.

The term applicable date means, with respect to any federally declared disaster, the first day of the period specified by the Federal Emergency Management Agency as the period during which such disaster occurred.

The terms federally declared disaster and disaster have the respective meanings given such terms by section 165(i)(5).

The term social security taxes has the meaning given such term by section 24(d)(2).

For purposes of paragraph (1), in the case of a joint return—

(A) such paragraph shall apply if either spouse is a qualified individual,

(B) the earned income of the taxpayer for the preceding taxable year shall be the sum of the earned income of each spouse for such preceding taxable year, and

(C) the social security taxes of the taxpayer for the preceding taxable year shall be the sum of the social security taxes of each spouse for such preceding taxable year.

Any election made under paragraph (1) shall apply for all purposes of paragraph (1).

Except as otherwise provided in this subsection, this title shall be applied without regard to any substitution under paragraph (1).

Section 6213(g)(2) of such Code is amended by striking and at the end of subparagraph (U), by striking the period at the end of subparagraph (V) and inserting, and, and by inserting after subparagraph (V) the following new subparagraph:

(W) an incorrect use of earned income or social security taxes pursuant to section 32(g).

The amendments made by this section shall apply to determinations of earned income and social security taxes for taxable years beginning after the date of the enactment of this Act.