Bipartisan Coalition Introduces Tax Relief Bill for Hurricane Sandy Victims
A bipartisan group of House members from New York, New Jersey, and Connecticut recently introduced legislation to provide temporary tax relief for victims of Hurricane Sandy. The Hurricane Sandy Tax Relief Act of 2013 (H.R. 2137), modeled after a similar bill passed into law in the wake of Hurricane Katrina, is aimed at providing tax relief for victims of Hurricane Sandy in areas designated as Federal Disaster Areas by the president. A proposal to offer tax relief to Sandy victims was introduced in December during the 112th Congress, but was never enacted due to the rush to enact other year-end legislation and the wrangling over other Sandy aid.
The legislation is intended to complement the federal government’s relief and recovery efforts by providing additional tax relief to businesses, individuals, and municipalities affected by Hurricane Sandy. Among their proposals: Homeowners within the Sandy disaster area could avoid tax penalties for withdrawals from their IRAs or 401k retirement plans if the money is repaid within three years. That would free up cash for rebuilding. Other proposed provisions include waiving limits on deductions for personal losses, allowing families in the disaster zone to use their previous year’s earnings to calculate their child tax credit and the federal Earned Income Tax Credit, and increasing the limit on deductions for certain charitable donations. In addition, businesses could expense the cost of disaster recovery and use net operating losses to recover past tax payments.
With regard to housing assistance, the bill would increase allocation of the low-income housing tax credit (LIHTC) for declared disaster areas. The legislation increases the allocation of LIHTCs to $8 per individual states containing counties covered by the natural disaster declaration as a result of Hurricane Sandy.