Tax Provisions to Assist with Disaster
Recovery
Erika K. Lunder
Legislative Attorney
Carol A. Pettit
Legislative Attorney
Jennifer Teefy
Information Research Specialist
November 29, 2012
Congressional Research Service
7-5700
www.crs.gov
R42839
CRS Report for Congress
Pr
epared for Members and Committees of Congress
Tax Provisions to Assist with Disaster Recovery
Summary
Relief after a natural or man-made disaster may come from what many might consider an
unlikely source: the Internal Revenue Code (IRC). The IRC includes several tax relief provisions
that apply to affected taxpayers. Some of these provisions are permanent. The following are
among the permanent provisions discussed in this report:
• casualty loss deductions, IRC Section 165;
• exemption from taxation for disaster relief payments to individuals, IRC
Section 139;
• exemption from taxation for certain insurance payments, IRC Section 123; and
• deferral of gain from the involuntary conversion of homes destroyed or damaged
by a disaster, IRC Section 1033.
In recent years, Congress has enacted tax legislation generally intended to assist victims of
specific disasters; as a result, these laws were temporary in nature. One act, however, provided
more general, but still temporary, relief for any federally declared disaster occurring prior to
January 1, 2010. The acts providing temporary relief include the following:
• The Job Creation and Worker Assistance Act of 2002, P.L. 107-147, which
provided tax benefits for areas of New York City damaged by the terrorist attacks
of September 11, 2001;
• The Katrina Emergency Tax Relief Act of 2005 (KETRA), P.L. 109-73, which
provided tax relief to assist the victims of Hurricane Katrina in 2005;
• The Gulf Opportunity Zone (GO Zone) Act of 2005, P.L. 109-135, which
provided tax relief to those affected by Hurricanes Katrina, Rita, and Wilma in
2005; and
• The Heartland Disaster Tax Relief Act of 2008, P.L. 110-343, which provided tax
relief to assist recovery from both the severe weather that affected the Midwest
during the summer of 2008 and Hurricane Ike. This act also included general
disaster tax relief provisions that applied to federally declared disasters occurring
before January 1, 2010.
This report provides a basic overview of existing, permanent provisions that benefit victims of
disasters, as well as past, targeted legislative responses to particular disasters. The relief is
discussed without examining either the qualifications for or the limitation on claiming the
provisions’ benefits. In light of Hurricane Sandy, this report is designed to help Congress identify
previous legislative responses to recent disasters.
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Contents
Permanent Provisions ...................................................................................................................... 2
Disaster Assistance Payments to Individuals ............................................................................. 2
Certain Insurance Payments ...................................................................................................... 2
Casualty Loss, Involuntary Conversion, Etc. ............................................................................ 2
IRS Authority to Suspend Deadlines ......................................................................................... 3
Underpayment of Income Tax ................................................................................................... 3
Retirement Plan Rollovers ......................................................................................................... 3
General Provisions That Have Recently Expired ............................................................................ 3
Provisions Applicable to Federally Declared Disasters Occurring Prior to January 1,
2010 ........................................................................................................................................ 3
Casualty Losses ................................................................................................................... 4
Expensing ............................................................................................................................ 4
Net Operating Losses .......................................................................................................... 5
Bonus Depreciation ............................................................................................................. 5
Mortgage Revenue Bonds ................................................................................................... 6
Other Recently Expired General Provisions .............................................................................. 6
Expensing of Environmental Remediation Costs ................................................................ 6
Charitable Contributions of Inventory ................................................................................ 7
Provisions Targeting Specific Disasters ........................................................................................... 7
Involuntary Conversions ........................................................................................................... 7
Discharge of Indebtedness ......................................................................................................... 8
Retirement Plan Distributions ................................................................................................... 9
Employment Relief .................................................................................................................. 10
Work Opportunity Tax Credit ............................................................................................ 10
Retention Credit ................................................................................................................ 10
Employer-Provided Housing ............................................................................................. 11
Bonds ....................................................................................................................................... 11
Tax-Exempt Bonds ............................................................................................................ 11
Tax Credit Bonds ............................................................................................................... 12
Gulf Coast Recovery Bonds .............................................................................................. 12
Charitable Giving Incentives ................................................................................................... 12
Limits on Charitable Deductions ....................................................................................... 12
Housing Exemption ........................................................................................................... 13
Mileage Rate and Reimbursement .................................................................................... 13
Leasehold Improvements ......................................................................................................... 13
Credit Computations ................................................................................................................ 13
Treasury Authority to Make Adjustments Relating to Status .................................................. 14
Education Credits .................................................................................................................... 14
Low-Income Housing Tax Credit ............................................................................................ 15
Rehabilitation Credit ............................................................................................................... 15
New Markets Tax Credit .......................................................................................................... 15
Small Timber Producers .......................................................................................................... 16
Public Utility Losses ................................................................................................................ 16
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Tables
Table A-1. Comparison of Temporary Provisions Contained in Prior Acts ................................... 17
Appendixes
Appendix. Comparison Among Laws ............................................................................................ 17
Contacts
Author Contact Information........................................................................................................... 19
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Tax Provisions to Assist with Disaster Recovery
he Internal Revenue Code (IRC) includes several permanent provisions that become
relevant when taxpayers are affected by disasters. For example, individuals are generally
Tnot taxed on disaster relief payments, and taxpayers whose homes are destroyed by
disasters may be able to defer any gain arising from an involuntary conversion.
In recent years, Congress has enacted temporary tax legislation intended to assist victims of
disasters. Most often, these temporary provisions applied to specific, identified disasters (e.g.,
Hurricane Katrina). However, in 2008, as part of legislation targeting specific disasters, Congress
also enacted temporary provisions that applied generally to federally declared disasters occurring
prior to January 1, 2010.1 The following is a list of the primary laws that have provided relief:
• The Job Creation and Worker Assistance Act of 2002 (Job Creation Act), P.L.
107-147, which provided tax benefits for areas of New York City damaged by the
terrorist attacks of September 11, 2001;
• The Katrina Emergency Tax Relief Act of 2005 (KETRA), P.L. 109-73, which
provided tax relief intended to assist businesses and individuals affected by
Hurricane Katrina in 2005 and permanently extended the authority of the Internal
Revenue Service (IRS) to postpone certain deadlines;
• The Gulf Opportunity Zone Act of 2005 (GO Zone Act), P.L. 109-135, which
provided tax relief intended to assist businesses and individuals affected by
Hurricanes Katrina, Rita, and Wilma in 2005; and
• The Heartland Disaster Tax Relief Act of 2008 and other provisions in P.L. 110-
343 (Heartland Act), which provided tax relief intended to assist with the
recovery from the severe weather that affected the Midwest during the summer of
2008 and Hurricane Ike,2 as well as including some general disaster tax relief
provisions for federally declared disasters occurring prior to January 1, 2010.3
This report is intended to assist Congress by identifying provisions that have been enacted to
respond to past disasters. As such, it provides only a basic overview of the permanent and
temporary provisions. It does not discuss the provisions’ qualifications, limitations, and deadlines.
For example, some of the laws distinguished between the areas the President determined
warranted only public assistance under the Stafford Act, and those areas determined to warrant
individual or individual and public assistance, with the latter areas eligible for additional benefits,
and these types of distinctions are not noted in the report.4 The report makes no attempt to
evaluate the wisdom, efficacy, or fairness of any of the provisions.
The report is divided into three sections: (1) selected permanent disaster tax provisions; (2)
temporary provisions that applied generally to disasters; and (3) temporary provisions targeting
specific disasters. The Appendix contains a table that indicates which temporary provisions were
included in each act.
1.P.L. 110-343, Div. C (“Tax Extenders and Alternative Minimum Tax Relief Act of 2008”), Title VII, Subtitle B
2 P.L. 110-343, Div. C (“Tax Extenders and Alternative Minimum Tax Relief Act of 2008”), Title VII, Subtitle A. The
act also imposed a permanent requirement that §501(c)(3) charitable organizations report information on their disaster
relief activities and contributions on the annual information return (Form 990) filed with the IRS. See id at §703
(codified at 26 U.S.C. §6033(b)(14)).
3 P.L. 110-343, Div. C (“Tax Extenders and Alternative Minimum Tax Relief Act of 2008”), Title VII, Subtitle B.
4 See, e.g., P.L. 110-343, Div. C, Title VII, Subtitle A, §702(b).
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Permanent Provisions
Disaster Assistance Payments to Individuals
Section 139 of the IRC exempts qualified disaster relief payments from the recipient’s income.
These include payments made to, or for the benefit of, an individual (1) to reimburse or pay for
reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a
qualified disaster; (2) to reimburse or pay for reasonable and necessary expenses incurred for the
repair or rehabilitation of a personal residence or repair or replacement of its contents to the
extent that the need for such repair, rehabilitation, or replacement is attributable to a qualified
disaster; and (3) by a federal, state, or local government in connection with a qualified disaster in
order to promote the general welfare. The exclusion applies only to expenses not compensated for
by insurance or otherwise.
A qualified disaster is one determined by the President to warrant federal assistance under the
Stafford Act and, for the third type of payment, a disaster determined by an appropriate federal,
state, or local authority to warrant government assistance.
Certain Insurance Payments
For a taxpayer whose principal residence is damaged or destroyed by storm or other casualty, or
who is denied access to the residence by governmental authorities because of the occurrence or
threat of occurrence of such a casualty, gross income does not include payments made under an
insurance contract to compensate or reimburse the individual for household living expenses
resulting from the loss of use or occupancy of the residence.5 This exclusion applies only to the
extent the amount received does not exceed the amount by which the actual living expenses
incurred during the period of non-use or occupancy exceed the normal living expenses that would
have been incurred. In other words, the excluded amount generally represents expenses actually
incurred due to the casualty for renting housing and paying extraordinary expenses for such
things as food and transportation.
Casualty Loss, Involuntary Conversion, Etc.
Several provisions may apply in disaster situations, such as the provisions that permit taxpayers
to deduct casualty losses and defer gain on involuntary conversions. Although the general
provisions are permanent,6 Congress has enacted special temporary rules regarding aspects of
these provisions in the Job Creation Act, KETRA, the GO Zone Act, and the Heartland Act. For
this reason, these provisions are discussed below (see “Casualty Losses,” “Involuntary
Conversions”).
5 26 U.S.C. §123; 26 C.F.R. §1.123-1.
6 See, e.g., 26 U.S.C. §§165 (casualty losses), 1033 (involuntary conversions).
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IRS Authority to Suspend Deadlines
The Internal Revenue Service (IRS) has the express statutory authority to postpone tax-related
deadlines for certain taxpayers, including those affected by a federally declared disaster.7 These
deadlines include those for filing returns and making payments for income, gift, and estate taxes.
Prior to KETRA, income taxes withheld at source and employment taxes were explicitly excluded
from this authority, and excise taxes were not mentioned. KETRA permanently granted the IRS
the authority to postpone deadlines related to these taxes.8
Underpayment of Income Tax
An individual who underpays his or her estimated income tax is subject to a penalty equal to the
interest that would accrue on the underpayment, for the period of the underpayment.9 The IRS is
authorized to waive the underpayment penalty for underpayments due to casualty, disaster, or
other unusual circumstance if the imposition of the penalty would be inequitable and against good
conscience.10
Retirement Plan Rollovers
Rollover distributions from tax-deferred retirement plans and individual retirement accounts must
generally be transferred to an eligible plan within 60 days to avoid incurring income tax and
penalties.11 However, the Secretary of the Treasury (Secretary) has the statutory authority to
waive the 60-day period in hardship situations where failure to waive the deadline would be
against equity or good conscience.12 Events that could be considered hardships include casualties,
disasters, and other events beyond the reasonable control of the individual subject to the rollover
deadline.
General Provisions That Have Recently Expired
Provisions Applicable to Federally Declared Disasters Occurring
Prior to January 1, 2010
The Heartland Act contained several provisions that generally applied to federally declared
disasters declared after December 31, 2007, and before January 1, 2010.13 These provisions
7 26 U.S.C. §§7508, 7508A.
8 KETRA, P.L. 109-73, Title IV, §403. Additionally, KETRA and the GO Zone act mandated that the IRS use this
authority to extend deadlines to February 28, 2006. KETRA, P.L. 109-73, Title IV, §403; GO Zone, P.L. 109-135, Title
II, §201(a) (codified at 26 U.S.C. §1400S(c)).
9 26 U.S.C. §6654.
10 26 U.S.C. §6654(e)(3)(A).
11 26 U.S.C. §§402, 408.
12 26 U.S.C. §§402(c)(3)(B), 408(d)(3)(I).
13 Some, but not all, of these provisions applied to the 2008 Midwest storms and Hurricane Ike. P.L. 110-343, Div. C
(“Tax Extenders and Alternative Minimum Tax Relief Act of 2008”), Title VII, Subtitle B, §712. As discussed in this
(continued...)
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created temporary rules for casualty losses, expensing, net operating losses, bonus depreciation,
and mortgage revenue bonds.
Additionally, the Heartland Act, KETRA, and the GO Zone Act sometimes created special rules
for these same provisions applicable to the specific disasters covered by those acts. These are
mentioned in the footnotes.
Casualty Losses
Taxpayers may deduct unreimbursed losses of property not connected to a trade or business when
the losses are from a casualty, such as a hurricane.14 In addition to losses from the actual damage
caused by the casualty, an individual may have a casualty loss if ordered by the state to demolish
or relocate the home and such order comes within 120 days of the federal declaration that the
location is a disaster area.
To determine the amount of the loss, two values are compared: decrease in fair market value
(FMV) as a result of the casualty and the taxpayer’s adjusted basis in the property (i.e., the cost of
the property with certain adjustments).15 The lower amount is the amount of the loss, subject to
several limitations: (1) the first $100 of each loss is not deductible and (2) only the aggregate
amount of the net loss (after applying the $100 limitation and offsetting casualty gains) that
exceeds 10% of adjusted gross income is deductible.
The deduction is generally claimed in the year of the loss. However, a loss in a federally declared
disaster area may be deducted in the year prior to the disaster.16
The Heartland Act made three changes for individuals affected by federally declared disasters
occurring prior to January 1, 2010: (1) it waived the 10% restriction; (2) it increased the standard
deduction by the amount of such losses (thus permitting individuals who did not itemize
deductions to deduct their losses); and (3) it increased the $100 floor to $500.17
Expensing
In general, capital expenditures must be added to a property’s basis rather than being expensed
(i.e., deducted in the current year). IRC Section 179 provides an exception so that a business may
expense the costs of certain property in the year it is placed in service. In general, the total cost of
the Section 179 property cannot exceed $125,000, and the deduction is decreased by one dollar
for every dollar that the total cost of all property the business placed in service during the year
exceeds $500,000—both numbers are adjusted for inflation. The Heartland Act increased the
(...continued)
report, the Heartland Act also provided special rules for these two disasters.
14 26 U.S.C. §165.
15 For a discussion of basis, see CRS Report RL34662, Tax Basis: What Is It? Why Is It Important?, by Carol A. Pettit.
16 26 U.S.C. §165(e).
17 Heartland Act, P.L. 110-343, Div. C, Title VII, Subtitle B, §706. Meanwhile, KETRA and the GO Zone Act had
waived the $100 and 10% floors for casualty losses from the 2005 hurricanes. KETRA, P.L. 109-73, Title IV, §402;
GO Zone Act, P.L. 109-135, Title II, §201(a) (codified at 26 U.S.C. §1400S(b)). The Heartland Act had similarly
waived the $100 limitation for the 2008 Midwest storms. Heartland Act, P.L. 110-343, Div. C, Title VII, Subtitle B,
§711.
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Section 179 limitations by up to $100,000 and $600,000 for qualified disaster area property for
federally declared disasters occurring prior to January 1, 2010.18
The Heartland Act also added IRC Section 198A, which permits full expensing (subject to
depreciation recapture) of qualified expenditures for the abatement or control of hazardous
substances released on account of a federally declared disaster, the removal of debris or the
demolition of structures on business-related real property damaged by such a disaster, and the
repair of business-related property damaged by such a disaster.19 This provision only applied to
federally declared disasters occurring prior to January 1, 2010.
Net Operating Losses
In general, a taxpayer’s net operating loss (NOL) may be carried back and deducted in the two tax
years before the NOL year, and then carried forward for up to 20 years after the NOL year.20
These methods are known as “carrybacks” and “carryovers,” respectively.
The carryback period is extended to three years for individuals who have a loss of property
arising from a casualty or theft.21 A three-year period also applies for small businesses and
farmers for NOLs attributable to federally declared disasters.22
The Heartland Act provided for a five-year carryback period for qualified losses from any
federally declared disaster occurring prior to January 1, 2010.23 For such disasters, it also
suspended the alternative minimum tax (AMT) provision that generally limits NOL deductions to
90% of alternative minimum taxable income.24
Bonus Depreciation
Taxpayers who acquire certain types of property may claim an additional depreciation amount
equal to 50% of the property’s adjusted basis for the year the property is placed in service.25 This
18 Heartland Act, P.L. 110-343, Div. C, Title VII, Subtitle B, §711. The GO Zone did the same for GO Zone property,
while Job Creation Act increased the limitations by lesser amounts for New York Liberty Zone property. GO Zone Act,
P.L. 109-135, Title I, §101(a) (codified at 26 U.S.C. §1400N(e)); Job Creation Act, P.L. 107-147, Title III, §301(a)
(codified at 26 U.S.C. §1400L(f)).
19 Heartland Act, P.L. 110-343, Div. C, Title VII, Subtitle B, §707. Meanwhile, both the GO Zone Act and the
Heartland Act allowed taxpayers to expense 50% of qualified clean-up costs for the removal of debris or the demolition
of structures on business real property in the applicable hurricane or Midwestern disaster zones. GO Zone Act, P.L.
109-135, Title I, §101(a) (codified at 26 U.S.C. §1400N(f)); Heartland Act, P.L. 110-343, Div. C, Title VII, Subtitle A,
§702(d)(3), (4).
20 26 U.S.C. §172.
21 26 U.S.C. §172(b)(1)(F).
22 See id.
23 Heartland Act, P.L. 110-343, Div. C, Title VII, Subtitle B, §708 (codified at 26 U.S.C. §172(b)(1)(J)). The act also
provided similar rules for qualified Midwest disaster losses. Heartland Act, P.L. 110-343, Div. C, Title VII, Subtitle A,
§702(d)(6). The GO Zone Act had allowed NOLs from the hurricanes to be carried back for five years. GO Zone Act,
P.L. 109-135, Title I, §101(a) (codified at 26 U.S.C. §1400N(k)).
24 26 U.S.C. §56(d); Heartland Act, P.L. 110-343, Div. C, Title VII, Subtitle B, §708 (codified at 26 U.S.C. §56(d)(3).
25 26 U.S.C. §168(k). For information on bonus depreciation, see CRS Report RL31852, Section 179 and Bonus
Depreciation Expensing Allowances: Current Law, Legislative Proposals in the 112th Congress, and Economic Effects,
by Gary Guenther.
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is commonly referred to as “bonus depreciation.” The Heartland Act provided a 50% bonus
depreciation provision for qualified property from a federally declared disaster occurring prior to
January 1, 2010.26
Mortgage Revenue Bonds
Mortgage revenue bonds are tax-exempt bonds used to finance below-market rate mortgages for
low and moderate-income homebuyers.27 In general, the homebuyers must not have owned a
residence for the past three years, and the houses’ costs may not exceed 90% of the average
purchase price for the area. However, for areas that are low-income or of chronic economic
distress, the three-year restriction does not apply and the purchase price limitation is increased to
110%.28
For individuals whose homes were declared unsafe or ordered to be demolished or relocated due
to a federally declared disaster occurring prior to January 1, 2010, the Heartland Act waived the
three-year restriction and increased the purchase price limitation from 90% to 110%.29 It also
permitted individuals whose homes were damaged by the disaster to treat the amount of owner-
financing provided for home repair and construction as a qualified rehabilitation loan, limited to
$150,000 (the amount is generally limited to $15,000),30 which had the effect of waiving the
three-year requirement for such financing.
Other Recently Expired General Provisions
In addition to the Heartland Act’s provisions that generally applied to any federally declared
disaster declared after December 31, 2007, and before January 1, 2010, other provisions in federal
law have provided temporary relief that were generally available (i.e., not restricted to specific
disasters).
Expensing of Environmental Remediation Costs
As mentioned above, capital expenditures must generally be added to the property’s basis rather
than being expensed (i.e., deducted in the current year). IRC Section 198 provided another
exception by allowing taxpayers to expense any qualifying environmental remediation costs paid
or incurred prior to January 1, 2012, for the abatement or control of hazardous substances at a
qualified contaminated site. Unlike the other expensing provisions discussed above (Sections 179
26 Heartland Act, P.L. 110-343, Div. C, Title VII, Subtitle B, §710 (codified at 26 U.S.C. §168(n)). The GO Zone Act
also provided a 50% bonus depreciation provision for qualified property, as well as granting the Secretary the authority
to suspend the deadline by which property must be placed in service, on a case-by-case basis, for up to one year for
taxpayers affected by the hurricanes. GO Zone Act, P.L. 109-135, Title I, §101(a) (codified at 26 U.S.C. §1400N(d)).
The Job Creation Act had provided for 30% additional depreciation. Job Creation Act, P.L. 107-147, Title III, §301(a)
(codified at 26 U.S.C. §1400L(b)).
27 26 U.S.C. §143.
28 26 U.S.C. §143(d)(2)(A), (e)(5).
29 P.L. 110-343, §709. KETRA and the GO Zone Act temporarily removed the three-year requirement for qualifying
homes, as well as increasing the limitation on qualified home improvement loans from $15,000 to $150,000 for loans
used to repair hurricane damage. KETRA, P.L. 109-73, Title IV, §404; GO Zone Act, P.L. 109-135, Title I, §104.
30 26 U.S.C. §143(d)(2)(B).
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and 198A), Section 198 is not limited to federally declared disasters or specific disasters. The
provision was enacted as a temporary one and has been extended several times, but has now
expired.
The Heartland Act was among those laws that temporarily extended Section 198.31 The GO Zone
Act had also extended the provision, but only for those costs for contaminated sites in the GO
Zone, as well as treating petroleum products as a hazardous substance.32
Charitable Contributions of Inventory
In general, donors of food inventory who are not C corporations may only claim a charitable
deduction that equals their basis in the inventory (typically, its cost).33 C corporations may deduct
the lesser of (1) the basis plus 50% of the property’s appreciated value or (2) two times basis.
KETRA provided special rules that allowed donors of wholesome food inventory to benefit from
this enhanced deduction and allowed C corporations to claim an enhanced deduction for
donations of book inventory to public schools.34 Neither provision was limited to donations
related to the hurricane, but both were originally set to expire on December 31, 2005. The
provisions have been extended several times since then, including by the Heartland Act (as part of
its tax extenders package, rather than its disaster relief provisions).35 Most recently, both
provisions were extended through December 31, 2011.36
Provisions Targeting Specific Disasters
Involuntary Conversions
An involuntary conversion occurs when property is converted to money or other property because
of its complete or partial destruction, theft, seizure, or condemnation, or if it is disposed of under
threat of condemnation.37 An example of an involuntary conversion is when an individual
receives an insurance payment for damaged property. If the cash or property that was received is
worth less than the basis of the property that was converted, the taxpayer has a loss, which may
qualify for deduction under the casualty loss rules discussed above. If the cash or property
received is worth more than the basis of the property that was converted, then the taxpayer has
realized a gain, which may or may not be immediately includable in gross income (“recognized”).
31 Heartland Act, P.L. 110-343, Div. C, Title III, §318.
32 GO Zone Act, P.L. 109-135, Title I, §101(a) (codified at 26 U.S.C. §1400N(g)).
33 IRC §170(e). For more information on the charitable contribution deduction, see CRS Report RL34608, Tax Issues
Relating to Charitable Contributions and Organizations, by Jane G. Gravelle and Molly F. Sherlock.
34 KETRA, P.L. 109-73, Title III, §§305 (codified at 26 U.S.C. §170 (e)(3)(C)(iv)), 306 (codified at 26 U.S.C.
§170(e)(3)(D)(iv)).
35 Heartland Act, P.L. 110-343, Div. C, Title III, §§323, 324.
36 P.L. 111-312 (“Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010”), Subtitle C,
§§740(a), 741(a).
37 26 U.S.C. §1033.
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There are no immediate tax consequences if the property is converted to property that is similar or
related in service or use (“similar property”).38 If, on the other hand, the property is involuntarily
converted to cash or dissimilar property, the taxpayer must recognize any gain unless purchasing
similar property within a certain time period. If the taxpayer purchases the replacement property
in a timely manner, an election is available that allows recognition of gain only to the extent that
the amount realized from the involuntary conversion exceeds the cost of the new property. The
time period is generally two years.
Taxpayers whose principal residence or any of its contents are involuntarily converted as a result
of a federally declared disaster qualify for three special rules.39 First, gain realized from the
receipt of insurance proceeds for unscheduled personal property (property in the home that is not
listed as being covered under the insurance policy) is not recognized. Second, any other insurance
proceeds received for the residence or its contents are treated as a common fund. If the fund is
used to purchase property that is similar or related in service or use to the converted residence or
its contents, then the owner may elect to recognize gain only to the extent that the common fund
exceeds the cost of the replacement property. Third, the replacement period for property
involuntarily converted as a result of a federally declared disaster is four years rather than two.
If a taxpayer’s business property is involuntarily converted as a result of a federally declared
disaster, then the taxpayer is not required to replace it with property that is similar or related in
service to the original property in order to avoid having to recognize gain on the conversion, as
long as the replacement property is still held for a type of business purpose.40 The replacement
period for business property is two years after the close of the first tax year in which any part of
the conversion gain is realized (the replacement period for condemned business property is three
years).
The Job Creation Act, KETRA, and the Heartland Act increased the two-year time period to
purchase the replacement property to five years for property in the applicable disaster area so
long as substantially all of the use of the replacement property occurs in such area.41
Discharge of Indebtedness
When all or part of a debt is forgiven, the amount of the cancellation is ordinarily included in the
income of the taxpayer receiving the benefit of the discharge.42 However, there are several
exceptions to this general rule. For example, no amount of the discharge is included in income if
the cancellation is intended to be a gift or is from the discharge of student loans for the
38 The taxpayer’s basis in the new property is the same as in the converted property; thus, he or she is able to defer
recognition of any gain until he or she sells or exchanges the new property.
39 26 U.S.C. §1033(h). Additionally, under 26 U.S.C. §121, individuals may exclude up to $250,000 ($500,000 if
married filing jointly) of gain from selling a principal residence if the taxpayer meets a use test (has lived in the house
for at least two years out of the last five years) and an ownership test (has owned the house, also for two years out of
the last five). If a taxpayer fails to meet the use test but experiences an unforeseen circumstance, the taxpayer may
claim a reduced exclusion. Unforeseen circumstances include the involuntary conversion of a residence and a natural or
man-made disaster (or act of war or terrorism) resulting in a casualty to a principal residence. See 26 C.F.R. §1.121-
3(e)(2).
40 26 U.S.C. §1033(h).
41 Job Creation Act, P.L. 107-147, Title III, §301(a) (codified at 26 U.S.C. §1400L(g)); KETRA, P.L. 109-73, Title IV,
§405; Heartland Act, P.L. 110-343, Div. C, Title VII, Subtitle A, §702(e)(5).
42 26 U.S.C. §61(a)(12).
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performance of qualifying services.43 There are also certain situations in which the taxpayer may
defer taxation, with the possibility of permanent exclusion, on income from the discharge of
indebtedness, such as if discharge occurs when the debtor is in Title 11 bankruptcy proceedings or
legally insolvent.44 Both KETRA and the Heartland Act included provisions that allowed victims
to exclude non-business debt forgiveness from income in certain conditions.
Victims of Hurricane Katrina were allowed to exclude non-business debt that was forgiven by a
governmental agency or certain financial institutions if the discharge occurred after August 24,
2005, and before January 1, 2007.45 Individuals were eligible for this benefit if (1) their principal
place of abode was in the core disaster area or (2) it was in the Hurricane Katrina disaster area
and they suffered an economic loss due to the hurricane. Individuals with certain tax attributes
(such as basis) were required to reduce them by the amount excluded from income, which has the
effect of deferring (rather than permanently eliminating) the tax on the cancelled debt.
For victims with a principal place of abode in a Midwestern disaster area, the Heartland Act
provided similar relief. However, if that home was in an area determined by the President to
warrant only public assistance, the individual also had to have suffered an economic loss due to
the severe weather.46
Retirement Plan Distributions
KETRA, the GO Zone Act, and the Heartland Act all provided relief relating to retirement plan
distributions. First, each act waived the 10% penalty that would otherwise apply on early
withdrawals made from a qualifying retirement plan47 if the individual’s principal place of abode
was in the disaster area and the individual sustained an economic loss due to the disaster.48 The
distributions were required to occur within a specified time frame, and the maximum amount that
could be withdrawn without penalty was $100,000. Funds could be re-contributed to a qualified
plan over a three-year period and receive tax-free rollover treatment. Additionally, with respect to
any taxable portion of the distribution, the individual could include one-third of such amount in
gross income over the course of three tax years rather than including the entire amount on the tax
return for the year of distribution.
Additionally, the acts permitted individuals who had received qualifying distributions to buy or
construct a principal residence in the applicable disaster area, but were prevented from doing so
by the disaster, to re-contribute the funds to a qualified plan without tax consequences.49
Further, the acts increased the amount disaster victims could borrow from their retirement plans
without immediate tax consequences.50 Under current law, the maximum amount that may be
43 26 U.S.C. §§102, 108.
44 26 U.S.C. §108(a).
45 KETRA, P.L. 109-73, Title IV, §401.
46 Heartland Act, P.L. 110-343, Div. C, Title VII, Subtitle A, §702(e)(4).
47 26 U.S.C. §72(t).
48 KETRA, P.L. 109-73, Title I, §101; GO Zone Act, P.L. 109-135, Title II, §201(a) (codified at 26 U.S.C. §1400Q(a));
Heartland Act, P.L. 110-343, Div. C, Title VII, Subtitle A, §702(d)(10).
49 KETRA, P.L. 109-73, Title I, §102; GO Zone Act, P.L. 109-135, Title II, §201(a) (codified at 26 U.S.C. §1400Q(b));
Heartland Act, P.L. 110-343, Div. C, Title VII, Subtitle A, §702(d)(10).
50 26 U.S.C. §72(p).
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Tax Provisions to Assist with Disaster Recovery
borrowed without being treated as a taxable distribution is the lesser of (a) $50,000, reduced by
certain outstanding loans or (b) the greater of $10,000 or 50% of the present value of the
employee’s nonforfeitable accrued benefits. For loans made during the applicable period, the acts
increased this to the lesser of (1) $100,000, reduced by certain outstanding loans, or (2) the
greater of $10,000 or 100% of the present value of the employee’s nonforfeitable accrued
benefits, as well as extending certain loan repayment dates by one year.51
Employment Relief
Work Opportunity Tax Credit
Generally, businesses that hire individuals from groups with high unemployment rates or special
employment needs, such as high-risk youths and veterans, may claim the work opportunity tax
credit.52 The credit may be claimed for the wages of up to $6,000 that were paid during the
employee’s first year. For an employee who worked at least 400 hours, the credit equals 40% of
his or her wages—thus, the maximum credit is $2,400. For an employee who worked from 120 to
399 hours, the credit equals 25% of his or her wages. The credit does not apply to wages paid
after December 31, 2012.
KETRA allowed businesses to claim the work opportunity credit on wages paid to certain
employees hired after Hurricane Katrina.53 Eligible employees were those who had a principal
place of abode in the core disaster area and either (1) were hired during the two-year period
beginning August 28, 2005, for a position in the area or (2) were displaced by the Hurricane and
are hired after August 27, 2005, and before January 1, 2006. The Job Creation Act provided
similar treatment for New York Liberty Zone business employees and certain employees outside
the zone.54
Retention Credit
KETRA, the GO Zone Act, and the Heartland Act all provided a temporary retention credit for
disaster-damaged businesses that continued to pay wages to their employees who were unable to
continue in their jobs after the storm had rendered the business currently inoperable.55 Eligible
employees were those whose principal place of employment was in the applicable disaster area.
The credit equaled 40% of the employee’s first $6,000 in wages paid between the date the
business became inoperable and the date it resumed significant operations at that location (or the
end of the first calendar year, whichever came first). The credits were generally limited to those
employers who employed no more than 200 employees per day during the year before the
disaster.
51 KETRA, P.L. 109-73, Title I, §103; GO Zone Act, P.L. 109-135, §201(a) (codified at 26 U.S.C. §1400Q(c));
Heartland Act, P.L. 110-343, Div. C, Title VII, Subtitle A, §702(d)(10).
52 26 U.S.C. §51. For more information, see CRS Report RL30089, The Work Opportunity Tax Credit (WOTC), by
Christine Scott.
53 KETRA, P.L. 109-73, Title II, §201.
54 Job Creation Act, P.L. 107-147, Title III, §301(a) (codified at 26 U.S.C. §1400L(a)).
55 KETRA, P.L. 109-73, Title II, §202; GO Zone Act, P.L. 109-135, Title II, §201(a) (codified at 26 U.S.C. §1400R);
Heartland Act, P.L. 110-343, Div. C, Title VII, Subtitle A, §702(d)(11).
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Employer-Provided Housing
Both the GO Zone Act and the Heartland Act excluded the value of certain employer-provided
housing, limited to $600 per month, from the employee’s income and allowed the employer to
claim a credit equal to 30% of that amount.56 Among other requirements, the employee must have
had a principal residence in the applicable disaster area and have performed substantially all
employment services for that employer in that area. The employer must have had a trade or
business located within the applicable disaster area.
Bonds
Tax-Exempt Bonds
Both the GO Zone Act and the Heartland Act temporarily allowed affected states to issue tax-
exempt bonds to finance (1) qualified activities involving residential rental projects,
nonresidential real property, and public utility property located in the disaster area and (2) below-
market rate mortgages for low- and moderate-income homebuyers.57 Under the GO Zone Act, the
maximum amount of bonds that each state could issue was $2,500 multiplied by that state’s
population that was located in the GO Zone as determined prior to the date of Hurricane Katrina.
Under the Heartland Act, the maximum amount of bonds each state could issue was capped at
$1,000 multiplied by that state’s population in the disaster area, and the act expressly stated that
the bonds would have to be designated by the appropriate state authority on the basis of providing
assistance to where it was most needed. The Job Creation Act, meanwhile, allowed New York to
issue up to $8 billion (divided equally between the state and New York City) in tax-exempt bonds
to finance qualified activities involving residential rental projects, nonresidential real property,
and public utility property located in the disaster zone.58 The Job Creation Act and the GO Zone
Act also allowed one additional advance refunding of qualifying bonds that were issued by those
states and were outstanding on the date of Hurricane Katrina.59
The GO Zone Act and the Heartland Act allowed operators of low-income residential rental
projects financed by IRC Section 142(d) bonds to rely on the representations of displaced
individuals regarding their income qualifications so long as the tenancy began within six months
of the displacement.60
56 GO Zone Act, P.L. 109-135, Title I, §103 (codified at 26 U.S.C. §1400P).
57 GO Zone Act, P.L. 109-135, Title I, §101(a) (codified at 26 U.S.C. §1400N(a)); Heartland Act, P.L. 110-343, Div. C,
Title VII, Subtitle A, §702(a)(1). The Heartland Act also allowed states affected by Hurricane Ike (Texas and
Louisiana) to issue bonds, capped at $2,000 multiplied by the portion of the state’s population in specified counties.
P.L. 110-343, Div. C, Title VII, Subtitle A, §704.
58 Job Creation Act, P.L. 107-147, Title III, §301(a) (codified at 26 U.S.C. §1400L(d)).
59 Job Creation Act, P.L. 107-147, Title III, §301(a) (codified at 26 U.S.C. §1400L(e)); GO Zone Act, P.L. 109-135, Title I,
§101(a) (codified at 26 U.S.C. §1400N(b)).
60 GO Zone Act, P.L. 109-135, Title I, §101(a) (codified at 26 U.S.C. §1400N(n)); Heartland Act, P.L. 110-343, Div.
C, Title VII, Subtitle A, §702(a)(1).
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Tax Credit Bonds
Both the GO Zone Act and the Heartland Act permitted affected states to issue tax credit bonds to
pay the principal, interest, or premiums on qualified governmental bonds or to make loans to
political subdivisions to make such payments.61 Bondholders may claim a credit based on the
product of a credit rate and the bonds’ outstanding face amount. The bonds were required to be
issued within a certain time period and could not have a maturity date beyond two years, among
other requirements. Further, each state was capped in the amount of bonds it could be issued—for
example, under the Heartland Act, the maximum amount of bonds that could be issued by states
with disaster area populations of at least 2 million was $100 million; the cap was $50 million for
states with disaster area populations between 1 million and 2 million; and the other states could
not issue any bonds. Bonds could not be used for certain activities (e.g., golf courses).
Gulf Coast Recovery Bonds
The GO Zone stated that it was the sense of Congress that the Treasury Secretary designate at
least one series of bonds as Gulf Coast Recovery Bonds.62
Charitable Giving Incentives
Limits on Charitable Deductions
Taxpayers are generally permitted to deduct contributions made to 501(c)(3) charitable
organizations, subject to various limitations.63 Individuals may not claim a charitable deduction
that exceeds 50% of their “contribution base” (adjusted gross income with certain adjustments)
and corporations may not claim a deduction that exceeds 10% of their taxable income with
certain adjustments. Any excess contributions may generally be carried forward for five years.
KETRA and the GO Zone Act temporarily suspended the 50% and 10% limitations for cash
contributions.64 For individuals, the deduction could not exceed the amount that the contribution
base exceeded other charitable contributions. For corporations, the deduction was only allowed
for contributions used for hurricane relief efforts and could not exceed the amount that taxable
income exceeded other contributions. The acts also suspended the overall limitation on itemized
deductions. The Heartland Act provided similar rules for donations for Midwest disaster relief.65
61 GO Zone Act, P.L. 109-135, Title I, §101(a) (codified at 26 U.S.C. §1400N(l)); Heartland Act, P.L. 110-343, Div. C,
Title VII, Subtitle A, §702(d)(7). For information on tax credit bonds, see CRS Report R40523, Tax Credit Bonds:
Overview and Analysis, by Steven Maguire.
62 GO Zone Act, P.L. 109-135, Title III, §301.
63 26 U.S.C. §170.
64 KETRA, P.L. 109-73, Title III, §301; GO Zone Act, P.L. 109-135, Title II, §201(a) (at 26 U.S.C. §1400S(a)).
65 Heartland Act, P.L. 110-343, Div. C, Title VII, Subtitle A, §702(d)(12).
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Housing Exemption
Both KETRA66 and the Heartland Act67 provided tax relief to those who provided free housing to
those who had been displaced by the storms. Individuals could claim additional personal
exemptions of $500 each for up to four displaced people who they housed for at least 60
consecutive days. These exemptions could be claimed in both the year of the disaster and the next
year; however, no person could qualify the taxpayer for the exemption in both years. Among
other requirements, the displaced person must have had a principal place of abode in the disaster
area; if the home was not in the core disaster area, then the person must have been displaced due
to either storm damage to the home or evacuation caused by the storm.
Mileage Rate and Reimbursement
Generally, individuals who use their personal vehicles for charitable purposes may claim a
deduction based on the number of miles driven. The amount is set by statute at 14 cents per
mile.68
KETRA and the Heartland Act each temporarily increase the charitable mileage rate to 70% of
the standard business mileage rate if the vehicle was used for hurricane or Midwest disaster
relief.69 The standard business mileage rate is periodically set by the IRS and is 55.5 cents per
mile for 201270 and 56.5 cents per mile for 2013.71
Additionally, both acts provided a temporary exclusion from a charitable volunteer’s gross
income for any qualifying mileage reimbursements received from the charity for the operating
expenses of the volunteer’s passenger automobile for such disaster relief.72
Leasehold Improvements
For purposes of depreciation, the Job Creation Act generally shortened the recovery period for
leasehold improvement property to five years for qualifying property located in the New York
disaster zone.73
Credit Computations
KETRA, the GO Zone Act, and the Heartland Act permitted qualifying disaster victims to elect to
use their earned income from the year prior to the disaster for computing the child tax credit and
66 KETRA, P.L. 109-73, Title III, §302.
67 Heartland Act, P.L. 110-343, Div. C, Title VII, Subtitle A, §702(a)(2) (extending certain benefits included in
KETRA to the Midwestern disaster area).
68 26 U.S.C. §170(i).
69 KETRA, P.L. 109-73, Title III, §303; Heartland Act, P.L. 110-343, Div. C, Title VII, Subtitle A, §702(e)(2).
70 IRS News Release IR 2011-116 (Dec. 9, 2011).
71 IRS News Release IR 2012-95 (Nov. 21, 2012).
72 KETRA, P.L. 109-73, Title III, §304; Heartland Act, P.L. 110-343, Div. C, Title VII, Subtitle A, §702(e)(3).
73 Job Creation Act, P.L. 107-147, Title III, §301(a) (codified at 26 U.S.C. §1400L(c)).
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Tax Provisions to Assist with Disaster Recovery
the earned income tax credit instead of the income from the year of the disaster.74 This may have
benefited taxpayers whose income was reduced in the year of the disaster. In general, taxpayers
qualified only if the disaster caused them to be displaced from their principal place of abode.
Treasury Authority to Make Adjustments Relating to Status
KETRA, the GO Zone Act, and the Heartland Act all contained similar provisions that authorized
the Treasury Secretary to make adjustments in the application of the tax laws for the tax years of
the disaster and the immediate subsequent year so that temporary relocations due to the disaster
did not cause taxpayers to lose any deduction or credit or to experience a change of filing status.75
Education Credits
Individuals with eligible tuition and related expenses may claim the Hope Scholarship or Lifetime
Learning credit.76 Under the law existing when KETRA, the GO Zone Act, and the Heartland Act
were enacted, the Hope credit was 100% of the first $1,000 of eligible expenses plus 50% of the
next $1,000 of eligible expenses, both adjusted for inflation. The maximum Lifetime Learning
credit is and was 20% of up to $10,000 of eligible expenses. Beginning in 2009, the partially
refundable American Opportunity Tax Credit (AOTC)77 temporarily increased the Hope credit,
allowing 100% of eligible expenses up to $2,000 plus 25% of the next $2,000 of eligible
expenses.78 Currently, 2012 is the last year in which taxpayers can claim the AOTC.
For individuals attending school in the GO Zone for 2005 and 2006, the GO Zone Act allowed
certain non-tuition expenses (e.g., books, equipment, and room and board) to qualify for the Hope
and Lifetime Learning credits; doubled the $1,000 limitations in the Hope credit to $2,000; and
increased the 20% limitation in the Lifetime Learning credit to 40%.79 The Heartland Act
provided similar rules for students attending school in a Midwestern disaster area during 2008 or
2009.80 However, to take advantage of this provision for 2009, taxpayers were required to waive
application of the AOTC provisions.81
74 KETRA, P.L. 109-73, Title IV, §406; GO Zone Act, P.L. 109-135, Title II, §201(a) (codified at 26 U.S.C.
§1400S(d)); P.L. 110-343, Div. C, Title VII, Subtitle A, §702(d). The credits are found in IRC §§24 and 32. For
discussion of them, see CRS Report R41873, The Child Tax Credit: Current Law and Legislative History , by Margot
L. Crandall-Hollick; CRS Report RL31768, The Earned Income Tax Credit (EITC): An Overview, by Christine Scott.
75 KETRA, P.L. 109-73, Title IV, §407; GO Zone Act, P.L. 109-135, §201(a) (codified at 26 U.S.C. §1400S(e)).
76 26 U.S.C. §25A. For information, see CRS Report R41967, Higher Education Tax Benefits: Brief Overview and
Budgetary Effects, by Margot L. Crandall-Hollick.
77 For information on the AOTC, see CRS Report R42561, The American Opportunity Tax Credit: Overview, Analysis,
and Policy Options, by Margot L. Crandall-Hollick.
78 26 U.S.C. §25A(i)(1).
79 GO Zone Act, P.L. 109-135, Title I, §102 (codified at 26 U.S.C. §1400O).
80 Heartland Act, P.L. 110-343, Div. C, Title VII, Subtitle A, §702(d)(8).
81 26 U.S.C. §25A(i)(7).
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Low-Income Housing Tax Credit
The low-income housing tax credit allows owners of qualified residential rental property to claim
a credit over a 10-year period that is based on the costs of constructing, rehabilitating, or
acquiring the building attributable to low-income units.82 Owners may claim a credit based on
130% of the project’s costs if the housing is in a low-income or difficult development area.
Owners must be allocated the credit by a state. Each state is limited in the amount of credits it
may allocate to the greater of $2,000,000 or $1.75 times the state’s population (both are adjusted
for inflation and are $2,525,000 and $2.20 for 2012),83 with adjustments.
The GO Zone Act temporarily increased the credits available to Alabama, Louisiana, and
Mississippi for use in the GO Zone by up to $18.00 multiplied by the state’s population that was
located in the GO Zone prior to the date of Hurricane Katrina.84 It also temporarily treated the
disaster zones as difficult development areas and used an alternate test for determining whether
certain GO Zone projects qualified as low-income housing.85 The Heartland Act permitted
affected states to allocate additional amounts for use in the disaster area of up to $8.00 multiplied
by the state’s disaster area population.86
Rehabilitation Credit
Taxpayers may claim a credit equal to 10% of the qualifying expenditures to rehabilitate a
qualified building or 20% of such expenditures for a certified historic structure.87
Both the GO Zone Act and the Heartland Act temporarily increased these percentages to 13% and
26% for rehabilitating qualifying buildings and structures damaged by the applicable disasters.88
New Markets Tax Credit
Under the new markets tax credit, taxpayers are allocated a credit for investments made in
qualified community development entities.89 The credit is claimed over a period of seven years
and equals the amount of the investment multiplied by a percentage: 5% for the first three years
and 6% for the next four years. The credit was capped at $2 billion for 2005 and $3.5 billion for
2006 and 2007. The most recent year for which it was allocated was 2011, when it was capped at
$3.5 million. There is no allocation for 2012.
82 26 U.S.C. §42. For more information, see CRS Report RL33904, The Low-Income Housing Tax Credit: A
Framework for Evaluation, by Pamela J. Jackson.
83 Rev. Proc. 2011-52, 2011-2 C.B. 701. For 2013, the amounts will be increased to $2,590,000 and $2.25. Rev. Proc.
2012-41, 2012 IRB LEXIS 505 (Oct. 18, 2012).
84 It also increased the credits available to Florida and Texas in 2006 by $3,500,000 for each state.
85 GO Zone Act, P.L. 109-135, Title I, §101(a) (codified at 26 U.S.C. §1400N(c)).
86 Heartland Act, P.L. 110-343, Div. C, Title VII, Subtitle A, §702(d)(2). The act also provided an additional allocation
for Texas and Louisiana, which had been affected by Hurricane Act, equal to $16.00 multiplied by the state’s
population located in the specified counties.
87 26 U.S.C. §47.
88 GO Zone Act, P.L. 109-135, Title I, §101(a) (codified at 26 U.S.C. §1400N(h)); Heartland Act, P.L. 110-343, Div.
C, Title VII, Subtitle A, §702(a)(1).
89 26 U.S.C. §45D.
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The GO Zone Act increased the cap by $300 million for 2005 and 2006 and by $400 million for
2007, and it allocated these amounts to entities making low-income community investments in
the GO Zone.90
Small Timber Producers
Under IRC Section 194, taxpayers may expense up to $10,000 of qualifying reforestation
expenditures. Under IRC Section 172, the general rule is that taxpayers may carry net operating
losses back for two years.
The GO Zone Act created two special rules for timber producers with less than 501 acres of
timber property: it (1) increased the Section 194 limit by up to $10,000 for expenditures made for
qualified timber property in the applicable disaster zones; and (2) increased the Section 172 carry
back period to five years for certain losses attributable to timber property in those zones.91
Public Utility Losses
Under IRC Section 172, certain net operating losses, called specified liability losses, may be
carried back for 10 years. Under IRC Section 165(i), certain disaster losses may be deducted in
the year prior to the disaster.
The GO Zone Act treated public utility casualty losses as a Section 172 loss and allowed GO
Zone public utility disaster losses to be deducted in the fifth taxable year preceding the disaster.92
90 GO Zone Act, P.L. 109-135, Title I, §101(a) (codified at 26 U.S.C. §1400N(m)).
91 GO Zone Act, P.L. 109-135, Title I, §101(a) (codified at 26 U.S.C. §1400N(i)).
92 GO Zone Act, P.L. 109-135, Title I, §101(a) (codified at 26 U.S.C. §1400N(j)).
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Appendix. Comparison Among Laws
Table A-1. Comparison of Temporary Provisions Contained in Prior Acts
(Note the provisions are not necessarily identical; see discussion in report)
Job Creation
Katrina
and Worker
Emergency
Heartland Disaster Tax
Assistance
Tax Relief Act
GO Zone
Relief Act of 2008 and other
Act of 2002
of 2005
Act of 2005
provisions in P.L. 110-343
Provision
Terrorist
Hurricanes
2007
Disasters
(links to relevant part
attacks of
Hurricane
Katrina, Rita,
Midwest
between
in report)
9/11/2011
Katrina
and Wilma
storms
2007-2009
Casualty Losses
Yes
Yes
Yes
Yes
Expensing Yes
Yes
Yes
Yes
Net Operating Losses
Yes
Yes
Yes
Bonus Depreciation
Yes
Yes
Yes
Mortgage Revenue
Yes
Yes Yes
Bonds
Yesa
Yes
Expensing of
(but not limited
Environmental
to those
Remediation Costs
disasters)a
Charitable
Yes
Yes
Contributions of
(but not limited
(but not limited
Inventory
to disasters)b
to disasters)b
Involuntary
Yes
Yes
Yes
Conversions
Discharge of
Yes Yes
Indebtedness
Retirement Plan
Yes
Yes
Yes
Distributions
Work Opportunity
Yes Yes
Tax Credit
Retention Credit
Yes
Yes
Yes
Employer-Provided
Yes
Yes
Housing
Tax-Exempt Bonds
Yes
Yes
Yes
Tax Credit Bonds
Yes
Yes
Gulf Coast Recovery
Yes
Bonds
Limits on Charitable
Yes
Yes
Yes
Deductions
Housing Exemption
Yes
Yes
Mileage Rate and
Yes Yes
Reimbursement
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Job Creation
Katrina
and Worker
Emergency
Heartland Disaster Tax
Assistance
Tax Relief Act
GO Zone
Relief Act of 2008 and other
Act of 2002
of 2005
Act of 2005
provisions in P.L. 110-343
Provision
Terrorist
Hurricanes
2007
Disasters
(links to relevant part
attacks of
Hurricane
Katrina, Rita,
Midwest
between
in report)
9/11/2011
Katrina
and Wilma
storms
2007-2009
Leasehold
Yes
Improvements
Credit Computations
Yes
Yes
Yes
Treasury Authority to
Yes
Yes
Yes
Make Adjustments
Relating to Status
Education Credits
Yes
Yes
Low-Income Housing
Yes
Yes
Tax Credit
Rehabilitation Credit
Yes
Yes
New Markets Tax
Yes
Credit
Small Timber
Yes
Producers
Public Utility Losses
Yes
Source: Congressional Research Service
Notes:
a. The remediation expensing provision (IRC Section 198) is not limited to federal y declared disasters or
specific disasters. It was temporary when enacted and was extended several times, but has now expired.
The Heartland Act was among those laws that extended Section198. Heartland Act, P.L. 110-343, Div. C,
Title III, §318. The GO Zone Act had also extended it, but only for those costs for contaminated sites in the
GO Zone, as wel as treating petroleum products as a hazardous substance. GO Zone Act, P.L. 109-135,
Title I, §101(a) (codified at 26 U.S.C. §1400N(g)).
b. KETRA provided special rules regarding donations of food and book inventory, neither of which was limited
to donations related to the hurricane, but both of which were original y set to expire on December 31,
2005. The provisions have been extended several times since then, including by the Heartland Act (as part
of its tax extenders package, rather than its disaster relief provisions). Heartland Act, P.L. 110-343, Div. C,
Title III, §§323, 324. Most recently, both provisions were extended through December 31, 2011. P.L. 111-
312 (“Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010”), Subtitle C,
§§740(a), 741(a).
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Author Contact Information
Erika K. Lunder
Jennifer Teefy
Legislative Attorney
Information Research Specialist
elunder@crs.loc.gov, 7-4538
jteefy@crs.loc.gov, 7-7625
Carol A. Pettit
Legislative Attorney
cpettit@crs.loc.gov, 7-9496
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