Contact: Rob Ostrander 202.224.7627 Shana Stribling 202.224.0309
Thursday, February 3, 2005

WASHINGTON, D.C. U.S. Senator Kit Bond today announced that he re-introduced legislation to prevent the Internal Revenue Service (IRS) from taxing disaster funds. Currently the IRS is threatening to tax funds for thousands of communities victimized by natural disasters such as floods, tornados, and hurricanes.

“I am absolutely stunned at this latest antic by the IRS,” said Bond. “The last thing Americans who are working to prevent potential destruction from floods, tornados, and hurricanes need is for government-grant funding to be subject to tax. My bill ensures that the IRS’ disaster tax does not see the light of day."

Congress has specifically exempted disaster-relief payments to individuals recovering from a hurricane, flood, tornado or other natural disaster from income taxes. But the IRS is now looking at taxing Federal Emergency Management Agency's (FEMA) disaster mitigation programs for communities - the Hazards Mitigation Grant Program, the Pre-Disaster Mitigation Program, and the Flood Mitigation Assistance Program. Designed to manage future emergencies, these programs have been essential to countless communities in flood-prone Missouri and throughout the nation.

Speaking to his colleagues on the floor of the U.S. Senate, Bond cited the City of Union, Missouri, damaged heavily by a flash flood in May 2000, which used FEMA mitigation grant money to buy 17 properties in residential areas with substantial damage. These properties are now deed-restricted for open space which will prevent future development and potential flash flood-related deaths, keeping homes and people from in harm’s way. Under the IRS’ plan the individuals whose homes were purchased by the city would be forced to pay taxes on the proceeds of the buyout. For the homeowner building a storm shelter with grant money, he or she might be taxed upon receipt of the grant.

Bond’s legislation, S. 290 will prevent this and any type of taxation of disaster mitigation grants. His bill language will ensure that any federal grants to construct or modify property to mitigate future disaster damage will not be deemed “income” by the IRS and any grants currently out there are not subject to tax as well.

Congressman Mark Foley of Florida also re-introduced his companion bill in the House of Representatives.

Kit Bond is Missouri’s senior Senator and is now in his fourth term after having served the state previously during two terms as Governor.