As recently as this morning, the legislation excluded Floridians affected by Hurricane Katrina, providing emergency tax-relief only to individuals in areas designated by FEMA as eligible for individual assistance.  Since FEMA has, so far, denied individual assistance for Floridians affected by Hurricane Katrina, the legislation would not have applied to them.

Rep. Wasserman Schultz, who has introduced legislation to direct FEMA to provide individual assistance to Florida's victims of Hurricane Katrina, identified the obvious injustice of the language in the Katrina Emergency Tax Relief Act of 2005 and moved swiftly to get the oversight corrected.

Working with bi-partisan leadership; Rep. Rangel [D-NY] (Ranking Member of the Committee on Ways and Means), Rep. Thomas [R-CA] (Chairman of the Committee on Ways and Means), and Rep. McCrery [R-LA] (sponsor of the legislation) as well as Florida colleagues Rep. Foley [FL-16] (member of the Committee on Ways and Means), Rep. Mario Diaz-Balart [FL-25] and Rep. Shaw [FL-22] (Senior member of the Committee on Ways and Means) they were able to ensure that Floridians affected by Hurricane Katrina would be covered by this legislation.  (The Committee on Ways and Means is the committee that handles tax legislation and was the committee of jurisdiction for this legislation).

"FEMA has already turned its back on hundreds of Florida families who were affected by Hurricane Katrina," said Rep. Wasserman Schultz.  "I was not about to stand idly by as Congress prepared to do the same thing.  I just think people outside of Florida don't understand the extent of the damage that Katrina caused for many Floridians."

"Congresswoman Wasserman Schultz safeguarded her constituents' interests and ensured that they did not get left behind in the Hurricane Katrina relief package passed by the House today," said House Democratic Whip Steny Hoyer.  "She has once again shown what an effective and able advocate she is for the people of Florida's 20th Congressional District."

The following is a summary of the legislation Katrina Emergency Tax Relief Act of 2005 and the relief that it provides for Floridians affected by Hurricane Katrina:

Katrina Emergency Tax Relief Act of 2005

 RELIEF FOR INDIVIDUALS AFFECTED BY HURRICANE KATRINA

·         Holds families harmless against the loss of tax benefits due to temporary relocations.  Damage caused by the hurricane has displaced hundreds of thousands of individuals, who are temporarily living with family, friends or good Samaritans.  Under current law, a prolonged change in their living situation could affect their eligibility for various tax benefits.  The proposal allows individuals the option of using their 2004 income to calculate the child credit and the Earned Income Credit on their 2005 tax returns.  This special rule applies to individuals who (as of August 28, 2005) lived in areas eligible for individual assistance from the federal government as a result of the disaster.  The proposal also grants the U.S. Treasury Department the authority to ensure that taxpayers do not lose dependency exemptions or child credits for 2005 due to temporary relocations.

·         Ensures that families are not taxed on forgiven debt.  Under current law, amounts realized from the discharge of indebtedness are generally treated as taxable income to the individual.  The proposal ensures that individuals affected by the hurricane are not taxed on personal debt relief, such as the cancellation of a mortgage, provided before 2007. 

·         Provides tax relief for housing assistance to dislocated persons.  The proposal creates a special tax deduction for individuals who provide rent-free housing to dislocated persons for at least 60 days.  The deduction is $500 for each dislocated person housed in the individual's principal residence (up to a maximum of $2,000).  The deduction can be claimed in either 2005 or 2006, but cannot be claimed in both years with respect to the same person.

·         Allows full deductibility of personal casualty losses.  Under current law, individuals who itemize their deductions may deduct personal casualty losses to the extent they exceed 10   percent of adjusted gross income and a $100 floor.  The proposal waives the 10-percent and $100 floors, thus allowing individuals to fully recover their losses. 

·         Waives 10-percent tax on early distributions from IRAs and pensions for individuals affected by the hurricane.  In general, distributions from IRAs and pensions are subject to a 10-percent penalty if they are made before a certain age.  The penalty is intended to discourage individuals from withdrawing funds that are needed for retirement.  To ease the financial burden faced by many families in the disaster area, the proposal allows eligible individuals to withdraw a maximum of $100,000 from their IRAs and pensions without paying the 10-percent penalty.  Individuals eligible for the waiver may pay income tax on the distribution over three years.  Distributed amounts can be repaid to the IRA or pension plan over the three-year period following the distribution and receive rollover treatment.  The proposal also increases the limit on loans from pension plans from $50,000 to $100,000. 

·         Provides a longer period of time to replace damaged property without incurring tax. Under current law, insurance proceeds are not taxable if they are invested in replacement property within two years (with respect to damaged business property) or four years (with respect to damaged principal residences in Presidentially-declared disaster areas).  The proposal increases the reinvestment period to five years as long as the replacement property is located within the disaster area.

·         Expands the availability of below-market mortgages in the disaster areas.  Under current law, state and local governments may issue mortgage revenue bonds (MRBs) to finance low-interest rate mortgages for first-time homebuyers who meet certain income and purchase price limits.  The proposal waives the first-time homebuyer requirement so that individuals whose homes were damaged by the hurricane can qualify for these low-interest rate mortgages through 2007.

INCENTIVES FOR CHARITABLE DONATIONS RELATED TO HURRICANE KATRINA

·        Encourages cash donations by individuals.  Under current law, individuals may deduct charitable donations up to 50 percent of their adjusted gross income.  Deductions for charitable donations are further limited by the phase-out of itemized deductions.  Under the proposal, cash donations related to Hurricane Katrina are exempt from the 50-percent income limitation and the phase-out of itemized deductions if the donation is made before January 2006.

·        Encourages cash donations by corporations.  Under current law, corporations may deduct charitable donations up to 10 percent of their taxable income.  The proposal waives the 10-percent income limitation for cash donations related to Hurricane Katrina if the donation is made before January 2006. 

·         Increases the mileage reimbursement rate for charitable donation deductions.  Individuals may claim a tax deduction for the costs associated with using a personal vehicle for charitable work.  The deduction is calculated by using a mileage reimbursement rate of 14 cents-per-gallon.  The reimbursement rate for business use is set periodically through IRS guidance and currently stands at 48.5 cents-per-gallon.  The proposal sets the mileage reimbursement rate for charitable contributions at 70 percent of the standard business mileage rate.

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