Senate And House Pass Tax Bills To Aid Katrina Victims

by Mike Godfrey, Tax-News.com, Washington

21 September 2005

It emerged this week that both the House and the Senate have passed tax cutting bills designed to assist Hurricane Katrina victims.

According to reports the bills, which were both passed by voice votes, have slight differences which need to be discussed before the legislation can be signed by President Bush.

Among the measures contained in the upper house's bill, put together by Senate Finance Committee chairman, Senator Charles Grassley and ranking Democrat on the Committee, Senator Max Baucus, were:

• 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 earlier this month as the proposed tax package was unveiled, 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."

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