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Week Ending March 18, 2005

HR 1134 to amend the IRS Code of 1986 to provide for the proper tax treatment of certain disaster mitigation payments.

BRIEF

   Not to be confused with disaster relief grants, the bill would exclude qualified disaster mitigation grants from taxes as gross income. A qualified disaster mitigation payment is one paid from Robert Stafford Relief and Emergency Assistance Act or the National Flood Insurance program for disaster mitigation. Such payments were common after the half dozen hurricanes that pummeled Florida in 2004. Mitigation grants prevent damages from future natural disasters. Grants are provided to prevent flood damage to properties in floodplains, for replacing or strengthening roofs and windows and other measures that would reduce the impact of future storms and problems including earthquake damage. FEMA calculates the potential cost of disaster damage to a facility and then cuts a grant that is less than the expected cost of damage.

   Basically home, business or community improvements, the grants for such measures were not taxable as income until 2004 when the IRS revised its rules. The average grant is $83,000.

   The bill frees grant recipients from paying any taxes on their grants beginning after the date the bill is enacted.

   If you sold your property as a result of the disaster the sale amount is not excluded from taxes.

Sponsor: Representative Mark Foley (R-FL-16^th)

Vote: Passed House by voice cote (Mar. 16, 2005)

Cost to the taxpayers: Traditional procedures requiring cost information on bills seem to have been bypassed.

No cost data was provided in the bill or through the CBO.

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