A third provision would allow individuals in regions devastated by Hurricane Katrina to take money penalty-free from their retirement accounts to help tide them over, and also acts to spur charitable contributions.

"I anticipate quick passage of this bill in both the House and Senate, followed by the president's signature, so that the victims of Hurricane Katrina can begin to immediately benefit from this tax relief," Rep. Jim McCrery, R-La., said late Tuesday

House action on the agreement is anticipated today. The Senate is expected to act on the agreement by the end of the week.

Regarding casualty losses, under present law, non-business casualty losses are deductible by taxpayers who itemize only to the extent they exceed 10 percent of adjusted gross income and a one-hundred-dollar floor.

In some circumstances, taxpayers are permitted to include a current-year casualty loss on an amended prior-year return. The bill would eliminate the 10 percent floor for casualty losses incurred in the Hurricane Katrina disaster area, including those claimed on amended returns.

"Removing the floor will result in increased loss deductions and the amended return option will get money to the victims much sooner, helping them to get back on their feet," legislators said.

Another provision would amend Sec. 1033(h) of the Tax Code, which deals with involuntary conversions. The senators said present law allows taxpayers not to recognize gain with respect to homes that are damaged or destroyed as a result of a disaster as defined by the president if the taxpayer replaces the property within a four-year period. Business property that is destroyed must be replaced within a two-year period to avoid gain recognition.

Proposed legislation, the senators said, would extend the replacement period to five years for a taxpayer to purchase property to replace property damaged or destroyed within the designated disaster area for Katrina. The extended replacement period applies to principal residences and business property.

Another provision would waive the 10 percent penalty for early withdrawal of funds from retirement plans for individuals living in a federally declared disaster area.

Besides removing some of the penalties for early withdrawal of funds for retirement plans, victims of Katrina would be allowed to exclude from gross income otherwise taxable IRA account withdrawals for a charitable contribution; the permitted individual limit for cash contributions would be raised from 50 percent to 60 percent for donations made this year; and the IRS commissioner would be able to extend deadlines for filing tax returns and paying income, estate and gift taxes. Under the latter provision, employment and excise taxes are specifically excluded.