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KATRINA RELIEF PASSES SENATE

September 16, 2005

The Senate yesterday passed its version of short-term tax relief to deal with the Katrina disaster. Tax Analysts summarizes the provisions of the Senate version of H.R. 3768:

* hold families harmless against the loss of tax benefits due to temporary relocations and allow individuals to use their 2004 income to determine the child credit and the earned income tax credit on their 2005 returns;
* provide to taxpayers who house displaced individuals an additional personal exemption of $500 per displaced person;
* extend the work opportunity tax credit to employers that hire displaced storm victims;
* provide to employers located in the disaster zone a 40 percent tax credit for wages (up to $6,000) paid to employees through the remainder of 2005;
* waive the 10 percent tax on early distributions from IRAs and pensions for individuals affected by the hurricane;
* exempt from income tax storm victims' debts discharged by commercial lenders;
* allow full deductibility of personal casualty losses for hurricane victims;
* extend the replacement period for homes and businesses damaged by the hurricane;
* relax some restrictions on mortgage revenue bonds;
* raise the permitted charitable contribution level for corporations and individuals;
* increase the charitable mileage reimbursement rate;
* enhance the deduction for charitable donations of food and books; and
* extend tax filing deadlines and waive penalties and interest that would have applied on income, estate and gift, employment, and excise taxes for at least six months.

This is similar to the House-passed version of the bill, so the final bill will look much like this.

WHAT ABOUT ROUND TWO?

This is only the first round of Katrina tax provisions. Another bill will put in longer-term reconstruction incentives, perhaps including a $200,000 Section 179 deduction and restored bonus depreciation for the disaster area proposed last night by the President.

LINKS:

Tax Analysts free coverage

Joint Committee on Taxation explanation of House-passed bill

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