HR3768SEP23

TheWeekInCongress.com

Week Ending September 16, 2005

H.R.3768 To provide emergency tax relief for persons affected by Hurricane Katrina.

BRIEF

The bill would aim to aid the victims of Hurricane Katrina in several ways related to taxes.

Individuals facing no assets or income can utilize their 2004 earnings amounts to calculate child credit and Earned Income Tax Credit for their 2005 returns.

Relocating will not cause a loss of eligibility for benefits.

If a victim mortgage or other debts are forgiven as a result of total destruction of the home, for example, that windfall would not be counted as taxable income as would normally be the case.

Withdrawals from 401(k) plan funds and IRA accounts can be made up to $100,000 without penalties providing the withdrawal is related to an emergency need. Repayment can be spread over three years.

Deductions for individual and corporation charitable donations are increased. The ten percent cap deduction for corporations is waived. Likewise, those helping and who drive can deduct for gasoline use at 70% of the rate of deduction for commercial use. Donations to food banks would be a deduction for individuals and book donation deductibles would be increased.

The bill also increases to $150,000 the availability of low-interest mortgages to build and buy homes in the impacted areas and provides tax incentives for businesses to employ the displaced or unemployed storm victims.

Individuals taking in a displaced person or persons will receive a reduction in taxable income reduction of $500 per person for one taxable year. The deduction can not exceed $2000.

Employers with a principal place of abode in the disaster area would see tax breaks for hiring over the next two years individuals from the disaster area. Employers also would receive a 40 percent tax break for wages paid to Ready Reserve--National Guard employees between August 28, 2005 and December 31, 2005.

Using a vehicle for charitable relief would allow for a mileage deduction up to 70 percent of current deduction rates and charitable organization can deduct the full amount.

Personal casualty loss limits are suspended.

Filing tax returns such as employment returns and excise tax return deadlines are extended until February 28, 2006. Earned Income Tax Credits can be calculated at last years rates and amounts per individual and taxpayers would not lose any deduction or credit or filing status change due to temporary relocation.

Sponsor: Representative Jim McCrery (R-LA-4^th)

Vote: Passed House by voice vote (September 15, 2005)

Cost to the taxpayers: This bill was provided by the Ways and Means Committee, the primary tax writing committee of the House. A similar bill after the 2004 Florida Hurricanes sponsored by Rep. Mark Foley (R-FL-18^th) also came to the floor with no cost data. The process of scoring this bill for cost will probably take about two weeks. An unofficial source scored the cost of this bill at nearly $6 billion through 2015. Update: October 1, 2005--"The Joint Committee on Taxation (JCT) estimates that enacting H.R. 3768 will reduce federal revenues by $3.2 billion in 2006, by $6.0 billion over the 2006-2010 period, and by $6.0 billion over the 2006-2015 period. In addition, JCT estimates that direct spending will increase by $128 million in 2006 and by $2 million in 2007 as a result of this legislation.

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