The Bipartisan Budget Act of 2018, P.L. 115-123, enacted in February, contains many tax provisions, including retroactive extension of a number of tax provisions for 2017 only and relief for victims of the California wildfires.
CALIFORNIA WILDFIRE RELIEF
Retirement plan distributions and loans
The act provides that the 10% additional tax imposed by Sec. 72(t) on early distributions from a qualified retirement plan will not apply to any "qualified wildfire distribution." A qualified wildfire distribution is any distribution (up to $100,000) from a plan described in Sec. 402(c)(8)(B) made to a "qualified individual" during prescribed periods. A qualified wildfire distribution can be made to an individual whose principal place of abode during any portion of the period from Oct. 8, 2017, to Dec. 31, 2017, was located in the presidentially declared California wildfire disaster area and who sustained an economic loss by reason of the wildfires. The act also allows eligible taxpayers to spread out any income inclusion resulting from those distributions over a three-year period.
Taxpayers who receive qualified wildfire distributions can repay them into a qualified plan (other than an individual retirement account (IRA)) within three years of the distribution, and the repayment will be treated as an eligible rollover distribution. Repayment to an IRA will be treated as a transfer from an eligible retirement plan in a direct trustee-to-trustee transfer within 60 days of the distribution. Similarly, taxpayers who made withdrawals from qualified plans after March 31, 2017, and before Jan. 15, 2018, to purchase or construct a residence in one of the wildfire disaster areas and whose purchase or construction was canceled because of one of the wildfires can repay those distributions on or before June 30, 2018.
The act also increases the limit on the amount of a loan from a qualified employer plan that will not be treated as a distribution, from $50,000 to $100,000. This increase applies to loans made between Feb. 9, 2018, and Dec. 31, 2018. The act also removes a present-value limitation and allows for a one-year delay for the repayment of these loans.
Employee retention tax credit
The act provides eligible employers with an employee retention tax credit. Eligible employers must have conducted an active trade or business on Oct. 8, 2017, in the California wildfire disaster zone that was inoperable any day after Oct. 8, 2017, and before Jan. 1, 2018. (A...