Contact: Rob Ostrander 202.224.7627 Shana Stribling 202.224.0309
Thursday, April 14, 2005

WASHINGTON, D.C. U.S. Senator Kit Bond today praised his colleagues for passing his legislation to prevent the Internal Revenue Service (IRS) from taxing disaster funds. Bond’s bill passed the Senate by unanimous consent last night.

“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,” said Bond.

Bond introduced his legislation when the IRS began threatening to tax funds for thousands of communities victimized by natural disasters such as floods, tornados, and hurricanes. Specifically, the IRS was threatening to tax 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 Missouri and throughout the nation. Congress has exempted disaster-relief payments to individuals recovering from a hurricane, flood, tornado or other natural disaster from income taxes, and Bond’s legislation ensures FEMA mitigation programs are now exempted as well.

Bond stressed that for states like Missouri, frequently hit by tornados and floods, this legislation is crucial. He 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. Without Bond’s legislative fix 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, introduced on the House side by Congressman Mark Foley of Florida, 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. Also, the bill is retroactive to all open tax years.

The legislation is expected to pass the House of Representatives this evening and will then be sent to the President to be signed into law.