Note: This is a guest blog written by Richard M. Cieri, a Certified Public Accountant in New Jersey and New York. He received his Bachelor of Science degree in accounting from Boston College and a Masters in Business Administration in Taxation and Management from New York University Graduate School of Business. Mr. Cieri is a partner in Burton, Cieri, Del Sordi & Co., LLC.
The permanent National Disaster Tax Relief proposal which amends the Internal Revenue Code to provide relief for disasters is gaining ground on Capital Hill. Similar bills in the U.S. House of Representatives and Senate were introduced to afford retroactive relief for Hurricane Sandy victims and for other victims of Federal declared disaster areas from 2012 to 2015.
Congressional actions are too sporadic and provide no reasons for their inconsistency. A more consistent nationwide handling of national disasters is necessary
In a September 24 letter to Representative Tom Reed (R-NY), who is the sponsor of the bill, AICPA Tax Executive Committee Chair Troy K Lewis wrote “We believe these provisions will provide taxpayers with certainty, fairness and the ability to promptly receive the relief they need after a natural disaster, while significantly reducing the administrative burdens on the Internal Revenue Service (IRS) to react to unexpected disasters.”
Here are some of the Title III relief provisions of H.R.3110 and companion bill S.1795, introduced by Rep. Reed and Senator David Vitter (R-LA):
- allowing an election to expense qualified disaster expenses (i.e., for the abatement of hazardous substances, removal of debris, demolition and repair of business-related property);
- increasing the tax deduction for charitable contributions for disaster relief for individual and corporate taxpayers;
- allowing through 2015 the deduction of losses and net operating losses attributable to disasters and to carry those losses back for 5 years;
- permitting the use of tax-exempt retirement plan funds in federally-declared disasters without penalty;
- allowing an additional tax exemption for individuals who are displaced as a result of a federally-declared disaster;
- allowing an exclusion from gross income of imputed income from the cancellation of indebtedness resulting from federally-declared disasters;
- providing a special rule to allow individuals affected by a disaster in 2012, 2013, 2014, or 2015 to claim a full earned income tax credit;
- increasing the rehabilitation tax credit for buildings affected by a federally-declared disaster;
- allowing an additional allocation of the low-income housing tax credit in 2016 to states affected by a federally-declared disaster occurring in 2013, 2014, or 2015;
- allowing an exclusion from gross income for disaster mitigation payments received from state and local governments;
- allowing a tax deduction for payments to a tax-exempt natural disaster fund;
- allowing a five-year replacement period for property located in a disaster area for purposes of the exclusion of gain from an involuntary conversion;
- provision of a credit to employers for a portion of the wages paid or incurred to workers who are not able to work at the disaster damaged business;
- allowing an enhanced tax deduction for medical expenses related to an injury occurring in a disaster area; and
- waiver of individual casualty loss limitations.
Citizens across the country should be treated alike and should receive automatic legally mandated access to the tax benefits for comparable losses in a more consistent manner. These bills will accomplish this, however, keep in mind that only 15% of bills made it passed committee and only about 3% were enacted in 2013 – 2015. Currently the bill has 20 co-sponsors (13 republicans and 7 democrats) in the house. In the Senate there are currently 10 co-sponsors (8 democrats and 2 republicans). Once again, If I can be of help to anymore, please contact me at 973-744-4332 ext. 15.
Richard M. Cieri, C.P.A., NJ & NY