Grassley And Baucus Unveil Tax Relief Plans For Katrina Victims

by Mike Godfrey, Tax-News.com, Washington

14 September 2005

Senate Finance Committee chairman, Senator Charles Grassley and ranking Democrat on the Committee, Senator Max Baucus on Monday unveiled a package of tax and other measures designed to assist those affected by Hurricane Katrina.

The proposed measures put forward in the package included:

• An exemption for indebtedness discharged by commercial lenders when the forgiveness is in response to damage suffered from Hurricane Katrina;
• A waiver of the 10% penalty tax for premature distributions from IRAs and qualified retirement plans (including defined benefit plans, 401(k) plans and 403(b) plans) for individuals whose principal residence is in a federally declared natural disaster area;
• Extension of the Work Opportunity Tax Credit to Katrina victims; and
• A 40% tax credit for wages paid up to $6,000 if paid after August 28, 2005, and before December 31, 2005, by employers located in the disaster zone in order to assist with employee retention.

Speaking to reporters on Monday, Senator Grassley announced that:

"Sen. Baucus and I have been working together on the Finance Committee to develop initiatives to help the victims of Hurricane Katrina both in the short and long term. We know that tax incentives helped to revitalize New York after 9-11. They can do the same for New Orleans, Gulfport and the other hurricane-hit areas."

"The immediate-relief package that we’re announcing today will help get short-term aid to hurricane victims by encouraging food donations and the employment of displaced individuals, for example. We also want to help protect Katrina victims from undeserved IRS trouble."

"We expect to see prompt action by Congress on this tax relief package. We need to get these tax incentives on the books and help Katrina victims make a fresh start. After this package is completed, our focus will be on longer-term tax incentives to help rebuild homes and businesses."

"We’re looking at depreciation changes, tax-exempt bond authority (arbitrage rebate), and enterprise-zone initiatives. Life will never be the same for our fellow citizens in the Gulf Region. And what we’ve all seen over the last two weeks will stay in the hearts and minds of all of us for years and years to come."

He concluded by announcing that:

"With this first initiative from the Finance Committee – and there will be more in other areas where we have jurisdiction – we want the victims in all of the affected areas to know that they can count on us to create a set of measures that will help return vitality and vigor to the Gulf region."

Recommended