House Approves Disaster Tax Relief Package

by Leroy Baker, Tax-News.com, New York

25 September 2008

The House of Representatives has given overwhelming support to a package of measures which aims to give tax relief to people and business affected by numerous natural disasters that have struck the US in 2008.

The Disaster Tax Relief Act of 2008, introduced by Ways and Means committee Chairman Charles Rangel (D - NY) and Rep. Dick Kind (D - Wis.) seeks to establish a flexible, national plan for dealing with disaster relief that would extend to floods, tornadoes, wildfires, hurricanes, or any other disaster that yields a presidential disaster declaration. It was approved after 419 Representatives voted for the bill, to 4 against.

The bill's provisions would allow businesses to immediately write off certain expenses relating to federally-declared disasters, and the loss carry back period for firms affected by disasters would be increased to five years from the two years permitted under existing tax law.

In addition, states would be allowed to issue some USD13bn of tax-exempt private activity bonds to finance the replacement, repair, reconstruction, or renovation of business property that was damaged or destroyed as a result of a federally-declared disaster. The Treasury would also be given the authority to allocate additional low-income tax credits to facilitate the cost of building low-cost homes.

Individual taxpayers would be permitted to claim expanded and enhanced casualty loss deductions relating to federal disasters, and charitable contribution limits would be relaxed for both individuals and businesses for charitable donations in disaster areas.

Under the bill, a “disaster” would be any area determined by the President to warrant assistance under the Robert T. Stafford Disaster Relief and Emergency Assistance Act after January 1, 2008. These tax benefits would be in place for three years, at which time Congress would need to extend them.

Rangel commented: “This legislation provides a national, flexible package of economic recovery incentives to help families and businesses get their feet back under them and move forward to a brighter future."

Kind added: "In the past, Congress has provided tax relief for disaster victims only in an ad hoc fashion, leaving many deserving individuals out. With this bill we have an opportunity change that immediately, and get help to all the families and businesses who need it to rebuild."

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