Tax Policy and Disaster Recovery

August 9, 2019 – September 3, 2021 R45864

Tax Policy and Disaster Recovery
September 3, 2021
The Internal Revenue Code (IRC) contains a number of provisions intended to provide disaster
relief. Following certain disasters, Congress has passed legislation with temporary and targeted
Molly F. Sherlock
tax relief policies. At other times, Congress has passed legislation providing tax relief to those
Specialist in Public Finance
affected by all federally declared major disasters (disasters with Stafford Act declarations)

occurring during a set time period. In addition, several disaster tax relief provisions are
permanent features of the IRC.
Jennifer Teefy
Senior Research Librarian
This report discusses the following permanent provisions:

 disaster casualty loss deductions;

 deferral of gain from involuntary conversions of property destroyed by a disaster;
 disaster relief for owners of low-income housing tax credit properties;
 income exclusion for disaster relief payments to individuals;
 income exclusion for certain insurance living expense payments; and
 IRS administrative relief in the form of extended deadlines and waiving of certain penalties.
Congress began enacting tax legislation generally intended to assist victims of specific disasters in 2002 in the wake of the
September 11, 2001, terrorist attacks. Some laws targeting specific disasters contained provisions that were temporary in
nature. Other laws provided more general, but still temporary, relief for any federally declared disaster occurring during
designated time periods. 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;
 The Food, Conservation, and Energy Act of 2008 (2008 Farm Bill; P.L. 110-234), which provided tax relief
intended to assist those affected by severe storms and tornadoes in Kansas in 2007;
 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 summer 2008 and Hurricane Ike (this act
also included general disaster tax relief provisions that applied to federally declared disasters occurring
before January 1, 2010);
 The Disaster Tax Relief and Airport and Airway Extension Act of 2017 (P.L. 115-63), which provided tax
relief to those affected by Hurricanes Harvey, Irma, and Maria in 2017;
 The 2017 tax act (P.L. 115-97, commonly referred to using the title of the bill as passed in the House, the
“Tax Cuts and Jobs Act”) responded to major disasters occurring in 2016;
 The Bipartisan Budget Act of 2018 (BBA18; P.L. 115-123), which provided relief to those affected by the
2017 California wildfires;
 The Taxpayer Certainty and Disaster Tax Relief Act of 2019 (Division Q of the Further Consolidated
Appropriations Act, 2020; P.L. 116-94), which provided relief for major disasters generally occurring in
2018 and 2019; and
 The Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Division EE of the Consolidated
Appropriations Act, 2021; P.L. 116-260), which provided relief for major disasters generally occurring in
2020.
This report provides a basic overview of existing, permanent disaster tax provisions, as well as past, targeted legislative
responses to specific disasters. The report also includes a discussion of economic and policy considerations related to
providing disaster tax relief to individuals and businesses, and encouraging charitable giving to support disaster relief.
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Tax Policy and Disaster Recovery

ax policy is one of several policy tools that can be used for disaster relief.1 At various
points in time, Congress has passed legislation to provide tax relief and to support
T recovery following disaster incidents. Permanent tax relief provisions may take effect
following qualifying disaster events. Targeted, temporary tax relief provisions can be designed to
respond to specific disaster events.
The Internal Revenue Code (IRC) contains a number of permanent disaster-related tax provisions.
These include provisions providing that qualified disaster relief payments and certain insurance
payments are excluded from income, and thus not subject to tax. Taxpayers are also able to
deduct casualty losses and defer gain on involuntary conversions (an involuntary conversion
occurs when property or money is received in payment for destroyed property). The Internal
Revenue Service (IRS) can also provide administrative relief to taxpayers affected by disasters by
delaying filing and payment deadlines, waiving underpayment of tax penalties, and waiving the
60-day requirement for retirement plan rollovers. For disasters declared after December 20, 2019,
the IRS is required to postpone federal tax deadlines for 60 days. The availability of certain tax
benefits is triggered by a federal disaster declaration.2 Before 2017, casualty losses were
general y deductible. However, changes made in the 2017 tax revision (commonly referred to as
the “Tax Cuts and Jobs Act” [TCJA]; P.L. 115-97) restrict casualty loss deductions to federal y
declared disasters.
Temporary tax-related disaster relief measures were enacted following a number of major
disasters that occurred between 2001 and 2020.3 The following measures addressed specific
disasters:
 The Job Creation and Worker Assistance Act of 2002 (Job Creation Act; P.L. 107-
147) responded to the terrorist attacks of September 11, 2001.
 The Katrina Emergency Tax Relief Act of 2005 (KETRA; P.L. 109-73)
responded to Hurricane Katrina.
 The Gulf Opportunity Zone Act of 2005 (GO Zone Act; P.L. 109-135) responded
to Hurricanes Katrina, Rita, and Wilma.
 The Food, Conservation, and Energy Act of 2008 (2008 Farm Bil ; P.L. 110-246)
responded to severe storms and tornadoes in Kansas in 2007.
 The Heartland Disaster Tax Relief Act of 2008, enacted as Title VII of Division C
of P.L. 110-343 (the Heartland Act), and other provisions in P.L. 110-343
responded to severe Midwest storms in summer 2008 and Hurricane Ike and
provided general disaster relief for events occurring before January 1, 2010.
 The Disaster Tax Relief and Airport and Airway Extension Act of 2017 (Disaster
Tax Relief Act of 2017; P.L. 115-63) responded to Hurricanes Harvey, Irma, and
Maria.

1 For general information on disaster response, see CRS Report R41981, Congressional Primer on Responding to and
Recovering from Major Disasters and Em ergencies, by Bruce R. Lindsay and Elizabeth M. Webster.
2 For purposes of the Internal Revenue Code (IRC), federally declared disasters generally refer to disasters declared
pursuant to the Robert T . Stafford Disaster Relief and Emergency Assistance Act. For more information on the
declaration process, see CRS Report R43784, FEMA’s Disaster Declaration Process: A Prim er, by Bruce R. Lindsay.
3 Congress did not pass legislation responding to all disaster events that occurred in this time frame. Legislation with
disaster tax benefits was not passed following Hurricane Irene in 2011 or Hurricane Sandy in 2012 , for example.
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 The 2017 tax act (P.L. 115-97; commonly referred to using the title of the bil as
passed in the House, the “Tax Cuts and Jobs Act”) responded to disasters
occurring in 2016.
 The Bipartisan Budget Act of 2018 (BBA18; P.L. 115-123) responded to the
2017 California wildfires.4
 The Taxpayer Certainty and Disaster Tax Relief Act of 2019 (Division Q of the
Further Consolidated Appropriations Act, 2020; P.L. 116-94) provided relief for
major disasters that general y occurred in 2018 or 2019.5
 The Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Division EE of the
Consolidated Appropriations Act, 2021; P.L. 116-260), which provided relief for
major disasters general y occurring in 2020.6
This report provides an overview of permanent and temporary disaster tax provisions that have
been enacted in response to specific disaster events, including information on which types of
temporary provisions have been used to respond to different disaster events. The focus of this
report is on relief for natural disasters, separate from relief provided in response to the COVID-19
pandemic.7 Policy considerations related to business, individual, and charitable disaster relief are
also addressed.
Disaster Tax Relief for 2020 Disasters

The Taxpayer Certainty and Disaster Relief Act of 2020, enacted as Division EE of the Consolidated
Appropriations Act, 2021 (P.L. 116-260), included various types of disaster relief for those affected by a non-
COVID-19 federal y declared major disaster in 2020 (so long as the incident period of the disaster began on or
before December 27, 2020). This disaster relief was for disasters other than the COVID-19 pandemic. Specifical y,
disaster relief in this legislation included (1) enhanced access to retirement funds; (2) an employee retention tax
credit; (3) increased limits for corporate charitable giving for disaster relief; (4) an increased personal casualty loss
deduction; (5) additional low-income housing tax credit (LIHTC) al ocations; and (6) payments to U.S. possessions
(territories) for any losses associated with these disaster tax relief provisions. Taken together, these provisions
are estimated to reduce federal tax revenue by $9.6 bil ion during the FY2021-FY2030 budget window (see Table
1).8

4 T he 2017 California wildfire disaster area is the area that received a major disaster declaration by reason of wildfires
in California bet ween January 1, 2017, and January 18, 2018.
5 T he T axpayer Certainty and Disaster T ax Relief Act of 2019 (P.L. 116-94) applies to major disasters declared during
the period beginning on January 1, 2018, and ending 60 days after the date of enactment (which was December 20,
2019), if the incident period of the disaster began on or before the date of enactment. T he qualified disaster area in P.L.
116-94 does not include the California wildfire disaster area, as disaster tax relief to this area was provided in the
Bipartisan Budget Act of 2018 (P.L. 115-123).
6 Disaster relief for non-COVID-19-related disasters in the T axpayer and Disaster T ax Relief Act of 2020 (P.L. 116-
260) applies to major disasters declared during the period beginning on January 1, 2020, if the incident period of the
disaster began on or after the date of enactment. T he act also includes tax relief for COVID -19, as described in CRS
Report R46649, The COVID-Related Tax Relief Act of 2020 and Other COVID-Related Tax Provisions in P.L. 116-
260, by Molly F. Sherlock et al.
7 Information on tax relief in response to the COVID-19 pandemic can be found in CRS Report R46279, The
Coronavirus Aid, Relief, and Econom ic Security (CARES) Act—Tax Relief for Individuals and Businesses, coordinated
by Molly F. Sherlock; CRS Report R46649, The COVID-Related Tax Relief Act of 2020 and Other COVID-Related
Tax Provisions in P.L. 116-260, by Molly F. Sherlock et al.; and CRS Report R46680, The Am erican Rescue Plan Act
of 2021 (ARPA; P.L. 117-2): Title IX, Subtitle G—Tax Provisions Related to Prom oting Econom ic Security, by Molly
F. Sherlock, Margot L. Crandall-Hollick, and Jane G. Gravelle.
8 Joint Committee on T axation, Estimated Budget Effects Of The Revenue Provisions Contained In Rules Committee
Print 116-68, The “Consolidated Appropriations Act, 2021 ,” JCX-24-20, December 21, 2020, at
https://www.jct.gov/publications/2020/jcx-24-20/.
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Table 1. Cost of Disaster Tax Relief in P.L. 116-260, FY2021-FY2030
(in mil ions of dol ars)
Provision
Revenue Loss
Enhanced access to retirement funds
$77
Employee retention tax credit
$315
Increased casualty loss deduction
$8,300
Special rules for disaster relief corporate charitable contributions
$38
Low-income housing tax credit
$887
Treatment of U.S. possessions
Included in estimate of other provisions
Total Disaster Tax Relief
$9,617
Source: Joint Committee on Taxation.
Other provisions that were previously used to provide disaster relief were made general y available for 2020 in
P.L. 116-260. Specifical y, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 provided that for al
taxpayers, for purposes of the refundable child tax credit and the earned income credit, if a taxpayer’s 2020
earned income is less than the taxpayer’s 2019 earned income, the taxpayer may elect to determine the
refundable child tax credit and earned income tax credit by substituting 2019 earned income for 2020 earned
income (this is sometimes referred to as the “lookback” provision). Additional y, for 2020 and 2021, the limitation
for deductible cash contributions to a public charity is increased from 60% to 100%.
Permanent Disaster Tax Relief Provisions
There are several permanent disaster tax relief provisions. In some cases, these provisions apply
to any property that is destroyed or damaged due to casualty or theft. In other cases, relief is
limited to property lost as a result of federal y declared disasters or for disasters for which the IRS
undertakes administrative actions. Additional y, as discussed further below, there are instances
where these permanent relief provisions have been temporarily enhanced in response to specific
disaster events.
Disaster Casualty Losses
Taxpayers may be able to deduct casualty losses resulting from damage to or destruction of
personal property (property not connected to a trade or business).9 For tax years 2018 through
2025, the casualty loss deduction is limited to losses attributable to federal y declared disasters.
After 2025, under current law, the deduction is to be available to losses arising from any fire,
storm, shipwreck, or other casualty or theft. Casualty losses are an itemized deduction. Each
casualty is subject to a $100 floor, meaning that only losses in excess of $100 are deductible for
each casualty. Additional y, casualty losses are deductible only to the extent that aggregate losses
exceed 10% of the taxpayer’s adjusted gross income (AGI). Only casualty losses not
compensated for by insurance or otherwise can be deducted.

9 Internal Revenue Code (IRC) §165.
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Involuntary Conversions
An involuntary conversion occurs when property is destroyed, stolen, condemned, or disposed of
under threat of condemnation, and the owner of the property receives money or payment for the
property, such as an insurance payment. An involuntary conversion can also be viewed as a
forced sale of property. The IRC al ows taxpayers to defer recognizing a gain on property that is
involuntarily converted.10 The replacement period—the time within which a taxpayer must
replace converted property to receive complete deferral—is two years (three years for condemned
business property). For a taxpayer’s principal residence and its contents, the replacement period
for an involuntary conversion stemming from a federal y declared disaster is four years.11
Taxpayers whose principal residence or any of its contents are involuntarily converted as a result
of a federal y declared disaster qualify for additional special rules. 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.
If a taxpayer’s business property is involuntarily converted as a result of a federal y 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 stil held for a type of business purpose.
Disaster Relief for Low-Income Housing Credit
The low-income housing tax credit al ows 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.12 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.13
Owners must be al ocated this credit by a state. Each state is limited in the amount of credits it
may al ocate to the greater of $2,000,000 or $1.75 multiplied by the state’s population (both
figures are adjusted for inflation and are $3,166,875 and $2.75625, respectively, for 2019), with
adjustments.
Owners of low-income housing tax credit (LIHTC) properties are eligible for relief from certain
requirements of the program if the property is located in a major disaster area.14 Specifical y,

10 IRC §1033.
11 T axpayers may also be able to exclude gains on their personal residence under another section of the IRC. Under
IRC §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
experienced 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.
12 IRC §42. For more information, see CRS Report RS22389, An Introduction to the Low-Income Housing Tax Credit,
by Mark P. Keightley.
13 Difficult development areas are designated as such by the Secretary of Housing and Urban Development, within
certain constraints.
14 IRS Revenue Procedure, Rev. Proc. 2014-49.
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property owners are provided relief from credit recapture, carryover al ocation rules, and income
certifications for displaced households temporarily housed in an LIHTC unit. Property owners
may also qualify for additional credits for rehabilitation expenditures, and, for severely damaged
buildings in the first year of the credit period, the al ocation of credits may either be treated as
having been returned, or the first year of the credit period can be extended. State LIHTC
al ocating agencies are eligible for relief from compliance monitoring under the same IRS
guidance. Additional y, households are eligible to occupy an LIHTC unit without being subject to
the program’s income limits if their principal residence was located in a major disaster area.
Exclusion for Disaster Assistance Payments to Individuals
Taxpayers can exclude from income qualified disaster relief and disaster mitigation payments.15
Excludable relief payments include payments for expenses that are not compensated for by
insurance (or otherwise compensated). Excludable relief payments can include personal, family,
living, or funeral expenses incurred as a result of the disaster; payments for home repairs or to
replace damaged and destroyed contents; payments by a transportation provider for injuries or
deaths resulting from a disaster; and payments from governments (or similar entities) for general
welfare when disaster relief is warranted. Qualified disaster mitigation payments include amounts
paid under the Robert T. Stafford Disaster Relief and Emergency Assistance Act or the National
Flood Insurance Act (as in effect on April 15, 2005) for hazard mitigation.
Exclusion for Insurance Living Expense Payments
Taxpayers whose principal residence is damaged in a disaster (including a fire, storm, or other
casualty) can exclude insurance reimbursements for living expenses while temporarily occupying
another residence from income.16 This exclusion also applies to taxpayers who are denied access
to their home by government authorities due to the threat of casualty or disaster.
IRS Administrative Relief
The IRS is authorized to postpone any federal tax deadline, including deadlines for filing returns,
paying taxes, or claiming refunds, for up to one year for taxpayers affected by federal y declared
disasters.17 The IRS may also postpone certain Individual Retirement Account (IRA) deadlines.
Specifical y, the IRS can extend the 60-day period for plan participants to deposit rollover
retirement plan distributions to another qualified plan or IRA.18 Additional y, the IRS may extend
the time for a qualified plan to make a required minimum distribution.
The IRS is required to postpone federal tax deadlines for 60 days for disasters declared after
December 20, 2019.19 Taxpayers for whom deadlines are automatical y postponed include (1)
those whose principal residence is in a disaster area; (2) those whose principal place of business is

15 IRC §139. IRC §139 was established by the Victims of T errorism Relief Act of 2001 (P.L. 107-139).
16 IRC §123.
17 IRC §7508A. For a full list of the time-sensitive requirements that can be postponed under IRC §7508A, see IRS
Revenue Procedure, Rev. P roc. 2018-58. The IRS must publish a notice or issue guidance for taxpayers to be entitled to
any postponement under IRC §7508A. T his provision was enacted in the Victims of T errorism T ax Relief Act of 2001
(P.L. 107-134) and applies to federally declared disasters occurring on or after September 11, 2001.
18 IRC §§402(c)(3)(B) and 408(d)(3)(I).
19 IRC §7508A(d). T his provision was added in the T axpayer Certainty and Disaster T ax Relief Act of 2019 (P.L. 116-
94).
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in a disaster area; (3) individuals who are relief workers assisting in a disaster area; (4)
individuals whose tax records are maintained in a disaster area; (5) any individual visiting a
disaster area who was kil ed or injured as a result of the disaster; or (6) spouses filing a joint
return with any person described in (1) to (5). The IRS is also authorized to waive underpayment
penalties when a casualty, disaster, or other unusual circumstances have made it such that the
imposition of a penalty would be against equity and good conscience.20
Past Temporary Disaster-Relief Provisions
At times, Congress has chosen to use tax policy to provide temporary relief and support following
disaster incidents or for disasters occurring in certain time periods. Temporary and event-specific
disaster tax policy has been enacted following many major disaster events in recent years.
However, temporary or targeted tax relief has not been enacted following al major disaster
events. For example, no temporary or targeted disaster tax relief was enacted in response to
Hurricane Irene in 2011 or Hurricane Sandy in 2012. Most recently, temporary disaster tax relief
has been extended to al disasters occurring during a specified period of time.
The specific tax relief provisions enacted to respond to past disaster events are summarized in
Table 2 and Table 3. The following discussion provides additional information on these
provisions. Tax provisions that have been used to respond to disasters most recently are discussed
first.
Temporary Provisions Enacted to Respond to Recent Disasters
The disaster tax relief packages enacted in 2017 in response to Hurricanes Harvey, Irma, and
Maria; in 2018 in response to the 2017 California wildfires; in 2019 in response to disasters that
occurred in 2018 and 2019; and in 2020 in response to disasters that occurred in 2020 general y
contained the following provisions (see Table 2): (1) an enhanced casualty loss deduction; (2)
expanded access to retirement plan funds; (3) increased limits on charitable deductions; (4)
employee retention tax credits; and (5) EITC/CTC credit computation look-back rules.
Additional y, disaster tax relief for 2018, 2019, and 2020 disasters is available in U.S.
possessions.
Enhanced Casualty Loss Deduction
An enhanced casualty loss deduction has been made available for losses attributable to certain
disasters or for losses occurring during certain periods of time. Most recently, an enhanced
casualty loss deduction was provided for 2020 disasters in the Taxpayer Certainty and Disaster
Tax Relief Act of 2020 (Division EE of P.L. 116-260). Before that, an enhanced casualty loss
deduction was provided for 2018 and 2019 disasters in the Taxpayer Certainty and Disaster Tax
Relief Act of 2019 (Division Q of P.L. 116-94); for California wildfires in the Bipartisan Budget
Act of 2018 (BBA18; P.L. 115-123); for any disaster-related casualty loss in calendar years 2016
or 2017 in the 2017 tax act, commonly cal ed the “Tax Cuts and Jobs Act” (TCJA; P.L. 115-97);
and for Hurricanes Harvey, Irma, and Maria in the Disaster Tax Relief and Airport and Airway
Extension Act of 2017 (P.L. 115-63). The enhancements (1) waive the 10% of AGI floor; (2)
increase the $100 floor for each casualty to $500; and (3) al ow taxpayers not itemizing
deductions to add the deduction to their standard deduction. General y, casualty loss deductions
are claimed in the year of the loss. However, a loss in a federal y declared disaster area may be

20 IRC §6654(e)(3)(A).
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deducted on the prior year’s tax return. A similar provision was enacted in response to several
previous disasters (see “Temporary Tax Provisions Used to Respond to Disasters Before 2010”
and Table 3).
Retirement Plan Distributions
The Disaster Tax Relief Act of 2020, the Disaster Tax Relief Act of 2019, BBA18, TCJA, and the
Disaster Tax Relief Act of 2017 al provided tax 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 plan21 if the individual’s principal place of abode was in the disaster
area and the individual sustained an economic loss due to the disaster. The distributions were
required to occur within a specified time frame, and the maximum amount that could be
withdrawn without penalty was $100,000 or 100% of the present value of the plan participant’s
benefits (but not less than $10,000). Funds could be recontributed to a qualified plan over a three-
year period and receive tax-free rollover treatment. Additional y, with respect to any taxable
portion of the distribution, the individual could include one-third of such amount in gross income
each year over the course of three tax years rather than including the entire amount on the tax
return for the year of distribution.
The acts increased the amount disaster victims could borrow from their retirement plans without
immediate tax consequences.22 Under current law, the maximum amount that may be borrowed
without being treated as a taxable distribution is the lesser of (1) $50,000, reduced by certain
outstanding loans, or (2) the greater of $10,000 or 50% of the present value of the employee’s
vested 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 vested benefits, as wel as extending certain loan repayment
dates by one year. A similar provision was enacted in response to several previous disasters (see
“Temporary Tax Provisions Used to Respond to Disasters Before 2010” and Table 3).
Increased Limits on Charitable Deductions
Taxpayers are general y permitted to deduct contributions made to 501(c)(3) charitable
organizations, subject to various limitations.23 Individuals may not claim a charitable deduction
that exceeds 50% (temporarily increased to 60% for cash contributions beginning in 2018 through
2025) 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 general y be carried forward for five years.
The Disaster Tax Relief Act of 2020 extended an above-the-line charitable deduction and
increased charitable contribution limits that had previously been enacted for 2020 in the
Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136).24 Specifical y, for
2020 the CARES Act (1) provided an above-the-line deduction for cash donations for
nonitemizers of up to $300; (2) eliminated (by increasing to 100%) the limit on cash gifts of
individuals to public charities; and (3) increased the limit on charitable contributions from
corporations (including food inventory) and individual contributions of food inventory to 25% of

21 IRC §72(t).
22 IRC §72(p).
23 IRC §170. For more information, see CRS In Focus IF11022, The Charitable Deduction for Individuals, by Margot
L. Crandall-Hollick and Molly F. Sherlock.
24 For more information, see CRS Insight IN11420, Temporary Enhancements to Charitable Contributions Deductions
in the CARES Act, by Jane G. Gravelle.
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taxable income. Division EE of P.L. 116-260 extended the nonitemizer deduction for 2021, and
increased it to $600 for married taxpayers filing joint returns. The 100% limit for individual cash
contributions to public charities was also extended through 2021. Additional y, the Disaster Tax
Relief Act of 2020 provided that corporations could deduct up to 100% of taxable income for
qualified disaster-related charitable contributions.
The Disaster Tax Relief Act of 2019, BBA18, and the Disaster Tax Relief Act of 2017 also
temporarily suspended the 50% and 10% limitations for qualified contributions made for disaster
relief efforts. An additional deduction was al owed for amounts by which the taxpayer’s
charitable contribution base exceeded the amount of al other al owable charitable contributions
in the tax year. For individuals, the deduction could not exceed the amount by which the
charitable contribution base exceeded other charitable contributions. For individuals, the earlier
acts also suspended the overal limitation on itemized deductions for qualified contributions that
was in effect through 2017. A similar provision was enacted in response to several previous
disasters (see “Temporary Tax Provisions Used to Respond to Disasters Before 2010” and Table
3).
Employee Retention Credit
The Disaster Tax Relief Act of 2020, the Disaster Tax Relief Act of 2019, BBA18, and the
Disaster Tax Relief Act of 2017 provided a temporary retention credit for disaster-damaged
businesses that continued to pay wages to their employees who were unable to work after the
disaster rendered the business inoperable.25 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).
Wages can be those paid even if the employee provides no services for the employer, or for wages
paid for services performed at a different location or before significant operations resume. This
employee retention may not be for an employee during any period that the employer claims a
work opportunity credit for the employee. A similar provision was enacted in response to several
previous disasters (see “Temporary Tax Provisions Used to Respond to Disasters Before 2010”
and Table 3).
EITC/CTC Credit Computation Look-Back
The Disaster Tax Relief Act of 2019 and BBA18 permitted individuals affected by 2018 and 2019
disasters or California wildfires in 2017 to elect to use their earned inc ome from the previous year
for computing the Child Tax Credit (CTC)26 and the Earned Income Tax Credit (EITC),27 instead
of their disaster-year income, if previous-year income was greater than disaster-year income.28
The Disaster Tax Relief Act of 2020 extended this provision, providing all taxpayers in 2020 the
option to use 2019 earned income to compute these refundable tax credits (not just taxpayers
affected by natural disasters). The Disaster Tax Relief Act of 2017 also included this provision for

25 T he employee retention credit increases a taxpayer’s general business credit (IRC §38). T he disaster-related
employee retention credit is separate from the employee retention credit provided to support employers during the
COVID-19 pandemic. For more on the COVID-related employee retention credit, see CRS In Focus IF11721, The
Em ployee Retention and Em ployee Retention and Rehiring Tax Credits, by Molly F. Sherlock.
26 IRC §24.
27 IRC §32.
28 For more information on the CT C and EIT C in 2020, see CRS Report R41873, The Child Tax Credit: How It Works
and Who Receives It, by Margot L. Crandall-Hollick and CRS Report R43805, The Earned Incom e Tax Credit (EITC):
How It Works and Who Receives It, by Margot L. Crandall-Hollick, Gene Falk, and Conor F. Boyle.
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those affected by Hurricanes Harvey, Irma, and Maria. For some taxpayers, this provision
provides benefits when income is reduced in the year of the disaster. In years when this provision
was provided as disaster relief, taxpayers general y qualified only if they lived in the disaster zone
or lived in the disaster area and the disaster caused them to be displaced from their principal place
of abode. A similar provision was enacted in response to several previous disasters (see
“Temporary Tax Provisions Used to Respond to Disasters Before 2010” and Table 3).
Low -Income Housing Tax Credit
The Disaster Tax Relief Act of 2020 increased, for calendar years 2021 and 2022, the credit
al ocation authority for buildings located in any qualified disaster area. For 2021 the increase is
equal to the lesser of $3.50 multiplied by the population residing in a qualified disaster zone, and
65% of the state’s overal credit al ocation authority for calendar year 2020. For 2022, the
increase is equal to any unused increased credit al ocation authority from 2021 (i.e., 2021
increased credit al ocation authority may be carried over to 2022). Buildings impacted by this
provision wil also be granted a one-year extension of the placed in service deadline and the so-
cal ed 10% test.29
The Disaster Tax Relief Act of 2019 increased credits available to California in 2020.
Specifical y, for certain areas of California that were affected by natural disasters in 2017 and
2018, the act increased California’s 2020 LIHTC al ocation by the lesser of the state’s 2020
LIHTC al ocations to buildings located in qualified 2017 and 2018 California disaster areas, or
50% of the state’s combined 2017 and 2018 total LIHTC al ocations.
Other past disaster relief legislation has provided additional LIHTC al ocations to disaster-
affected areas. 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. 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. The Heartland
Act permitted affected states to al ocate additional amounts for use in the disaster area of up to
$8.00 multiplied by the state’s disaster area population.
Treatment of Certain U.S. Possessions
Puerto Rico, Guam, the U.S. Virgin Islands, American Samoa, and the Commonwealth of the
Northern Mariana Islands are U.S. territories. Each has a local tax system with features that help
determine the territory’s local public finances.30 Guam, the U.S. Virgin Islands, and the Northern
Mariana Islands are mirror code possessions, meaning these territories use the Internal Revenue
Code as their territorial tax law. Puerto Rico and American Samoa are non-mirror code
possessions. These two possessions have their own tax laws.
The Disaster Tax Relief Act of 2020 and the Disaster Tax Relief Act of 2019 require payments
from the U.S. Treasury to possessions for the temporary tax relief provided in the bil s. Mirror
code possessions wil receive an amount equal to the loss in revenue by reason of the temporary
disaster-related tax relief provided in the legislation. Non-mirror code possessions may receive a
similar payment (a payment equal to the amount of temporary disaster tax relief that would have

29 For more information, see CRS Report RS22389, An Introduction to the Low-Income Housing Tax Credit, by Mark
P. Keightley.
30 See CRS Report R44651, Tax Policy and U.S. Territories: Overview and Issues for Congress, by Sean Lowry.
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been provided if a mirror code had been in effect) if the possession has an approved plan for
prompt distribution of payments.
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Table 2. Temporary Disaster-Related Tax Provisions, 2010-Present
Taxpayer Certainty
Taxpayer Certainty
Disaster Tax Relief and
and Disaster Tax Relief
and Disaster Tax Relief
Bipartisan Budget Act
Airport and Airway

Act of 2020
Act of 2019
of 2018
2017 Tax Act
Extension Act of 2017
2018 and 2019
2017 California
Hurricanes Harvey,
2020 Disastersa
Provision
Disastersb
Wildfires
2016 Disasters
Irma, and Maria
Enhanced Casualty Loss
Yes
Yes
Yes
Yesc
Yes
Deduction
Retirement Plan
Yes
Yes
Yes
Yes
Yes
Distributions
Increased Limits on
Yesd
Yes
Yes
—
Yes
Charitable Deductions
Employee Retention
Yes
Yes
Yes
—
Yes
Credit
EITC/CTC Credit
Yese
Yes
Yes
—
Yes
Computation Look-Back
Low-Income Housing
Yes
Yesf
—
—
—
Tax Credit
Treatment of Certain
Yes
Yes
—
—
—
Possessions
Source: Congressional Research Service.
Notes: Provisions enacted in response to specific disasters are not necessarily identical. Provisions that are highly similar are grouped here to facilitate comparison
across disaster events.
a. 2020 non-COVID-19-related disasters qualify so long as the incident period began on or before December 27, 2020.
b. 2019 disasters qualify so long as the incident period of the disaster began on or before December 20, 2019.
c. The special casualty loss deduction applies to disaster losses occurring in 2016 and 2017.
d. Disaster-specific relief provided that corporations could deduct disaster-related contributions for amounts up to 100% of their taxable income. As discussed in the
text, provisions al owing for an above-the-line charitable deduction and enhanced charitable giving limits were made general y available for 2020 and 2021.
e. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 al owed this provision for al taxpayers in 2020, as opposed to specifical y for disaster victims.
f.
Provides additional 2020 LIHTC al ocations to qualified 2017 and 2018 California disaster areas.
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Temporary Tax Provisions Used to Respond to Disasters Before
2010
Provisions used to respond to 2016, 2017, 2018, 2019, and 2020 disasters were also used to
respond to some disasters before 2010. Additional y, a number of other temporary tax provisions
were used to respond to these pre-2010 disasters. The first time a temporary disaster tax relief
package was enacted was in response to the September 11 terrorist attacks. The following
sections summarize the various provisions included in temporary disaster tax relief legislation
before 2010.
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.31 After 2018, the maximum
expensing al owance is $1 mil ion, with an investment limitation of $2.5 mil ion (both amounts
are adjusted for inflation). In the past, these thresholds have been lower. For example, in 2007,
the maximum expensing al owance under Section 179 was $125,000, and the deduction decreased
dollar-for-dollar as the total cost of al property the business placed in service during the year
exceeded $500,000. The Heartland Act increased the Section 179 limitations by up to $100,000
and $600,000 for qualified disaster area property for federal y declared disasters occurring prior
to January 1, 2010. Increased expensing al owances were enacted in response to several disasters
before 2007 as wel .
The Heartland Act also added IRC Section 198A, which permitted full expensing (subject to
depreciation recapture) of qualified expenditures for the abatement or control of hazardous
substances released on account of a federal y 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. This provision applied only to
federal y declared disasters occurring prior to January 1, 2010.
Net Operating Loss Carryback
Under current law, a business’s net operating loss (NOL) can be carried forward indefinitely.32
General y, NOLs are limited to 80% of taxable income and there is general y no carryback of
NOLs.33 This treatment was enacted in the 2017 tax act (P.L. 115-97).34 Before 2018, in general, a
taxpayer’s net operating loss (NOL) could 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.
Additional y, before 2018, the carryback was extended to three years for individuals who had a

31 For more information, see CRS Report RL31852, The Section 179 and Section 168(k) Expensing Allowances:
Current Law and Econom ic Effects, by Gary Guenther.
32 IRC §172.
33 T he CARES Act made a number of temporary changes to permanent law regarding NOLs. First, the act allowed for
NOLs generated in taxable years beginning after December 31, 2017, and before January 1, 2021, to be carried back for
up to five years. Second, the act suspended the limit to 80% of taxable income for taxable years beginning before
January 1, 2021. T hird, the CARES Act suspended the $250,000/$500,000 limitations on noncorporate taxpayers for
taxable years beginning before January 1, 2021. For more information, see CRS Report R46377, The Tax Treatm ent
and Econom ics of Net Operating Losses, by Mark P. Keightley.
34 CRS Insight IN10846, P.L. 115-97: Net Operating Losses, by Mark P. Keightley.
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loss of property arising from a casualty or theft. A three-year period also applied for smal
businesses and farmers for NOLs attributable to federal y declared disasters.
The Heartland Act provided for a five-year carryback period for qualified losses from any
federal y declared disaster occurring prior to January 1, 2010.35 For such disasters, it also
suspended the alternative minimum tax (AMT) provision that general y limits NOL deductions to
90% of alternative minimum taxable income. The corporate AMT was repealed in the 2017 tax
act.
Bonus Depreciation
For eligible property acquired and placed in service after September 27, 2017, and before January
1, 2023, businesses may claim a 100% expensing (or bonus depreciation) al owance under
Section 168(k).36 Like expensing limitations, the bonus depreciation al owance has changed over
time. The Heartland Act provided a 50% bonus depreciation provision for qualified disaster
assistance property from a federal y declared disaster occurring prior to January 1, 2010.37
However, since other legislation provided 50% bonus depreciation during this time period, the
provision was probably not meaningful.38 With 100% bonus depreciation in effect through 2022,
providing additional bonus depreciation is not currently a policy option.
Mortgage Revenue Bonds
Mortgage revenue bonds are tax-exempt bonds used to finance below-market-rate mortgages for
low- and moderate-income homebuyers.39 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 in chronic economic
distress, the three-year restriction does not apply, and the purchase price limitation is increased to
110%.
For individuals whose homes were declared unsafe or ordered to be demolished or relocated due
to a federal y 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%.40 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 general y limited to $15,000), which had the effect of waiving the three-
year requirement for such financing. The GO Zone Act and KETRA contained similar provisions.

35 T he GO Zone Act and the 2008 Farm Bill had allowed net operating losses (NOLs) from the disasters to be carried
back for five years.
36 For more information, see CRS Report RL31852, The Section 179 and Section 168(k) Expensing Allowances:
Current Law and Econom ic Effects, by Gary Guenther.
37 GO Zone Act and the 2008 Farm Bill also provided a 50% bonus depreciation provision for qualified pro perty, 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.
38 See CRS Report RL31852, The Section 179 and Section 168(k) Expensing Allowances: Current Law and Economic
Effects, by Gary Guenther.
39 IRC §143. For more information, see CRS In Focus IF10739, Disaster Assistance and Federal Subsidies for
Municipal Bonds, by Grant A. Driessen and Joseph S. Hughes.
40 KET RA 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.
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In the Heartland Act, the maximum amount of bonds each state could issue was $1,000 multiplied
by that state’s population in the disaster area, and need-based prioritization for state al ocations
was established. The GO Zone Act also expanded qualified private activity bond issuances for
mortgage revenue bonds in disaster areas. The Go Zone Act added $2,500 per person in the
federal y declared Katrina disaster areas in which the residents qualify for individual and public
assistance. The increased capacity added approximately $2.2 bil ion for Alabama, $7.8 bil ion for
Louisiana, and $4.8 bil ion for Mississippi in aggregate bonds over the subsequent five years
through 2010.41
Expensing of Environmental Remediation Costs (“Brownfields”)
Capital expenditures must general y be added to the property’s basis rather than being expensed
(i.e., deducted in the current year). IRC Section 198 provided an exception by al owing 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 provisions discussed in this report, Section 198 is not limited to federal y
declared disasters or specific disasters. The provision was enacted as a temporary one in the
Taxpayer Relief Act of 1997 (P.L. 105-34) and was extended a number of times before expiring at
the end of 2011.
The Heartland Act was among those laws that temporarily extended Section 198. The GO Zone
Act had also extended the provision, but only for those costs for contaminated sites in the GO
Zone, and treated petroleum products as a hazardous substance for the purposes of environmental
remediation.
Charitable Contributions of Inventory
Before 2005, donors of food inventory that were not C corporations could only claim a charitable
deduction equal to their basis in the inventory (typical y, its cost).42 C corporations were al owed
an enhanced deduction, which was the lesser of (1) the basis plus 50% of the property’s
appreciated value, or (2) two times basis.
KETRA provided special rules that al owed al donors of wholesome food43 inventory to benefit
from the enhanced deduction and al owed C corporations to claim an enhanced deduction for
donations of book inventory to public schools. Neither provision was limited to donations related
to the hurricane, but both 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). The enhanced deduction for
charitable contributions of food inventory was made permanent in the Protecting Americans from
Tax Hikes Act of 2015, enacted as Division Q in the Consolidated Appropriations Act, 2016 (P.L.
114-113).44 The enhanced deduction for book inventory expired as scheduled at the end of 2011.

41 For more informat ion, see CRS Report RL31457, Private Activity Bonds: An Introduction, by Steven Maguire and
Joseph S. Hughes.
42 IRC §170(e). For more information on the charitable contribution deduction, CRS Report R45922, Tax Issues
Relating to Charitable Contributions and Organizations, by Jane G. Gravelle, Donald J. Marples, and Molly F.
Sherlock.
43 Wholesome food means food that meets all quality and labeling standards imposed by federal, state, and local laws or
regulations, even though the food may not be readily marketable due to appearance, age, freshness, grade, surplus, or
other condition. See 42 U.S.C. §1791.
44 For more information, see CRS Report R43517, Recently Expired Charitable Tax Provisions (“Tax Extenders”): In
Brief, by Jane G. Gravelle and Molly F. Sherlock .
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Involuntary Conversions
In addition to the general treatment of involuntary conversions (discussed above), the Job
Creation Act, KETRA, the 2008 Farm Bil , 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 substantial y al of the use of the replacement property occurred in such area.
Discharge of Indebtedness
When al or part of a debt is forgiven, the amount of the cancel ation is ordinarily included in the
income of the taxpayer receiving the benefit of the discharge.45 However, there are several
exceptions to this general rule. For example, no amount of the discharge is included in income if
the cancel ation is intended to be a gift or is from the discharge of student loans for the
performance of qualifying services.46 The Mortgage Forgiveness Debt Relief Act of 2007 (P.L.
110-142) temporarily excluded qualified canceled mortgage debt income that is associated with a
primary residence from taxation (this provision has been extended multiple times, and is currently
set to expire at the end of 2025).47 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
legal y insolvent.48 Both KETRA and the Heartland Act included provisions that al owed victims
to exclude nonbusiness debt forgiveness from income in certain conditions.
Victims of Hurricane Katrina were al owed to exclude nonbusiness 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. 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.49 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 cancel ed 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.
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 al owed the employer to
claim a credit equal to 30% of that amount. Among other requirements, the employee must have
had a principal residence in the applicable disaster area and have performed substantial y al

45 IRC §61(a)(12).
46 IRC §§102 and 108.
47 For more information, see CRS Report R46772, Temporary Individual Tax Provisions (“Tax Extenders”),
coordinated by Molly F. Sherlock and Jane G. Gravelle.
48 IRC §108(a).
49 In KET RA, the Hurricane Katrina Disaster Area is the area that received a federal disaster declaration. T he core
disaster area is the portion of the Hurricane Katrina Disaster Area determined to warrant individual or individual and
public assistance. For background on individual and public assistance, see CRS Report R43784, FEMA’s Disaster
Declaration Process: A Prim er, by Bruce R. Lindsay; and CRS Report R43139, Federal Disaster Assistance After
Hurricanes Katrina, Rita, Wilm a, Gustav, and Ike, coordinated by Bruce R. Lindsay and Jared C. Nagel.
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employment services for that employer in that area. The employer must have had a trade or
business located within the applicable disaster area.
Tax-Exempt Bonds
Both the GO Zone Act and the Heartland Act temporarily al owed 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. Under the GO Zone Act, the
maximum amount of bonds that each state could issue was $2,500 multiplied by that state’s
population 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, al owed New York to
issue up to $8 bil ion (divided equal y 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. The Job Creation Act and the GO Zone
Act also al owed one additional advance refunding of qualifying bonds that were issued by those
states.
The GO Zone Act, the 2008 Farm Bil , and the Heartland Act al owed 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.
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.50 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 issue—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 mil ion was $100 mil ion; the cap was $50 mil ion for
states with disaster area populations between 1 mil ion and 2 mil ion; and the other states could
not issue any bonds. Bonds could not be used for certain activities.51
Housing Exemption
Both KETRA and the Heartland Act provided tax relief to those who provided free housing to
those displaced by the storms. Individuals could claim additional personal exemptions of $500
each for up to four displaced people whom 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

50 T he authority to issue all tax credit bonds was eliminated beginning in tax year 2018 as part of T CJA. For more
information, see CRS Report R40523, Tax Credit Bonds: Overview and Analysis, by Grant A. Driessen.
51 Bonds could not be used to provide private or commercial golf courses, country clubs, massage parlors, hot tub
facilities, suntan facilities, racetrack or other facilities used for gambling, or any store the principal purpose of which is
the sale of alcoholic beverages.
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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
General y, 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.52
KETRA and the Heartland Act each temporarily increased the charitable mileage rate to 70% of
the standard business mileage rate if the vehicle was used for hurricane or Midwest disaster relief.
The standard business mileage rate is periodical y set by the IRS. In 2019, the standard mileage
rate is 56 cents per mile.53
Additional y, 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 a volunteer’s passenger automobile, when used for disaster relief.
Treasury Authority to Make Adjustments Relating to Status
KETRA, the GO Zone Act, and the Heartland Act al 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.
Education Credits
Individuals with eligible tuition and related expenses may claim certain higher education tax
credits.54 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 partial y refundable
American Opportunity Tax Credit (AOTC)55 temporarily increased the Hope credit, al owing
100% of eligible expenses up to $2,000 plus 25% of the next $2,000 of eligible expenses. The
Protecting Americans from Tax Hikes (PATH) Act (Division Q of P.L. 114-113) made the AOTC
permanent, effectively eliminating the Hope credit.
For individuals attending school in the GO Zone for 2005 and 2006, the GO Zone Act al owed
certain nontuition 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%. The Heartland Act provided
similar rules for students attending school in a Midwestern disaster area during 2008 or 2009.

52 IRC §170(i).
53 IRS Notice 2019-2.
54 IRC §25A. For more information, see CRS Report R41967, Higher Education Tax Benefits: Brief Overview and
Budgetary Effects, by Margot L. Crandall-Hollick.
55 For information on the AOT C, see CRS Report R42561, The American Opportunity Tax Credit: Overview, Analysis,
and Policy Options, by Margot L. Crandall-Hollick.
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However, to take advantage of this provision for 2009, taxpayers were required to waive
application of the AOTC provisions.
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.56 Both the GO
Zone Act and the Heartland Act temporarily increased these percentages to 13% and 26%,
respectively, for rehabilitating qualifying buildings and structures damaged by the applicable
disasters.
Public Utility Losses
Under IRC Section 172, certain net operating losses, cal ed 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. The GO Zone Act and the 2008 Farm Bil al owed public utility disaster losses to be
deducted in the fifth taxable year preceding the disaster.
Gulf Coast Recovery Bonds
The GO Zone included provisions to encourage the Treasury Secretary to designate at least one
series of bonds as Gulf Coast Recovery Bonds. The Treasury designated Series I inflation-
indexed savings bonds purchased through financial institutions as “Gulf Coast Recovery
Bonds.”57
New Markets Tax Credit
Under the new markets tax credit, taxpayers are al ocated a credit for investments made in
qualified community development entities.58 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 bil ion for 2005 and $3.5 bil ion for
2006 and 2007. The GO Zone Act increased the cap by $300 mil ion for 2005 and 2006 and by
$400 mil ion for 2007, and it al ocated these amounts to entities making low -income community
investments in the GO Zone.
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)

56 IRC §47.
57 U.S. Department of the T reasury, “Treasury Designates Series I Savings Bonds as Gulf Coast Recovery Bonds,”
press release, March 29, 2006, at https://www.treasury.gov/press-center/press-releases/Pages/js4140.aspx.
58 IRC §45D. For more information, see CRS Report RL34402, New Markets Tax Credit: An Introduction, by Donald
J. Marples and Sean Lowry.
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increased the Section 172 carry back period to five years for certain losses attributable to timber
property in those zones.
Work Opportunity Tax Credit
General y, 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.59 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.
KETRA al owed businesses to claim the work opportunity credit on wages paid to certain
employees hired after Hurricane Katrina. 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
hired after August 27, 2005, and before January 1, 2006. Congress later extended the WOTC’s
expiration from August 28, 2007, to August 28, 2009, for firms who hire “Hurricane Katrina
employees” to work in the core disaster area (see the Tax Extenders and Alternative Minimum
Tax Relief Act of 2008 in P.L. 110-343). The Job Creation Act provided similar treatment for
New York Liberty Zone business employees and certain employees outside the zone.
Leasehold Improvements
For purposes of depreciation, the Job Creation Act general y shortened the recovery period for
leasehold improvement property to five years for qualifying property located in the New York
disaster zone.

59 IRC §51. For more information, see CRS Report R43729, The Work Opportunity Tax Credit, by Benjamin Collins
and Sarah A. Donovan.
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Table 3. Temporary Disaster-Related Tax Provisions, Pre-2010
Food,
Katrina
Job Creation
Heartland Disaster Tax Relief
Conservation,
Emergency
and Worker
Act of 2008 and Other
and Energy Act
GO Zone Act
Tax Relief Act
Assistance Act

Provisions in P.L. 110-343
of 2008
of 2005
of 2005
of 2002
Disasters
Hurricanes
2008 Midwest
Between 2007-
2007 Storms in
Katrina, Rita,
Hurricane
Terrorist Attacks
Provision
Storms
2009
Kansas
and Wilma
Katrina
of Sept. 11, 2001
Enhanced Casualty Loss Deduction
Yes
Yes
Yes
Yes
Yes
—
Retirement Plan Distributions
Yes
—
Yes
Yes
Yes
—
Increased Limits on Charitable Deductions
Yes
—
—
Yes
Yes
—
Employee Retention Credit
Yes
—
Yes
Yes
Yes
—
EITC/CTC Credit Computation Look-Back
Yes
—
—
Yes
Yes
—
Expensing
Yes
Yes
Yes
Yes
—
Yes
Net Operating Loss Carryback
Yes
Yes
Yes
Yes
—
—
Bonus Depreciation
—
Yes
Yes
Yes
—
Yes
Mortgage Revenue Bonds
—
Yes
—
Yes
Yes
—
Expensing of Environmental Remediation
—
Yes
—
Yesa
—
—
Costs (“Brownfields”)
(but not limited
to disasters)a
Charitable Contributions of Inventory
—
Yes
—
—
Yes
—
(but not limited
(but not limited
to disasters)b
to disasters)b
Involuntary Conversions
Yes
—
Yes
Yes
Yes
—
Discharge of Indebtedness
Yes
—
—
—
Yes
—
Employer-Provided Housing
Yes
—
—
Yes
—
—
Tax-Exempt Bonds
Yes
—
—
Yes
—
Yes
Tax Credit Bonds
Yes
—
—
Yes
—
—
CRS-20

Food,
Katrina
Job Creation
Heartland Disaster Tax Relief
Conservation,
Emergency
and Worker
Act of 2008 and Other
and Energy Act
GO Zone Act
Tax Relief Act
Assistance Act

Provisions in P.L. 110-343
of 2008
of 2005
of 2005
of 2002
Disasters
Hurricanes
2008 Midwest
Between 2007-
2007 Storms in
Katrina, Rita,
Hurricane
Terrorist Attacks
Provision
Storms
2009
Kansas
and Wilma
Katrina
of Sept. 11, 2001
Housing Exemption
Yes
—
—
—
Yes
—
Mileage Rate and Reimbursement
Yes
—
—
—
Yes
—
Treasury Authority to Make Adjustments
Yes
—
—
Yes
Yes
—
Relating to Status
Education Credits
Yes
—
—
Yes
—
—
Low-Income Housing Tax Credit
Yes
—
Yes
Yes
—
—
(but limited to
representation
provision)
Rehabilitation Credit
Yes
—
—
Yes
—
—
Public Utility Losses
—
—
Yes
Yes
—
—
Gulf Coast Recovery Bonds
—
—
—
Yes
—
—
New Markets Tax Credit
—
—
—
Yes
—
—
Smal Timber Producers
—
—
—
Yes
—
—
Work Opportunity Tax Credit
—
—
—
—
Yes
Yes
Leasehold Improvements
—
—
—
—
—
Yes
Source: Congressional Research Service.
Notes: Provisions enacted in response to specific disasters are not necessarily identical. Provisions that are highly similar are grouped here to facilitate comparison
across disaster events.
a. The remediation expensing provision (IRC §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 Section 198. 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.
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
CRS-21

its tax extenders package, rather than its disaster relief provisions). The enhanced deduction for book inventory expired at the end of 2011, while the special rules
for donations of food inventory were made permanent in the Protecting Americans from Tax Hikes Act of 2015, enacted as Division Q in the Consolidated
Appropriations Act, 2016 (P.L. 114-113).

CRS-22

Tax Policy and Disaster Recovery

Economic and Policy Considerations60
Tax policy for disaster relief might be motivated by multiple objectives. One objective could be
distributional or relief-oriented. Tax policy could be designed to provide additional resources to
businesses or individuals who experienced an uncompensated disaster loss. This relief could be
targeted toward the low-income, although there are limitations when using tax policy to address
low-income individuals and businesses.
Tax policy can also be used to encourage investment in disaster-affected areas. Absent
government intervention, some level of private rebuilding wil occur. A policy question, however,
is whether this private building is sufficient, or if there are other barriers to investment in the
disaster-affected region that cal for government intervention. When investment subsidies are
provided, there is the question of how much new investment is supported relative to how much
investment is subsidized that would have occurred absent the subsidy.
There are also chal enges associated with identifying the disaster area for the purposes of
providing tax relief. In some cases, relief has been provided to a certain geographic area. In other
cases, relief has been tied to a federal disaster declaration or provided only when individual
assistance or individual and public assistance is provided.61 Narrowly defined geographic areas
can limit tax benefits to those most likely to be harmed by the disaster, but can exclude some
disaster victims.
The following sections discuss considerations by examining instances in which disaster relief was
provided through the tax code for businesses and individuals, as wel as through tax policy
designed to support disaster-related charitable giving.
Providing Disaster Tax Relief to Businesses
For businesses, hurricanes like Katrina, Maria, Irma, and Harvey caused unprecedented property
and earnings losses. Employee displacement can create labor market chal enges that persist over
time. Further, longer-term supply chain disruptions can make it difficult for businesses to resume
operations after initial clean-up efforts are complete.
In the past, tax policy has been used to reduce the cost of business investment in cleanup and
repairs. Bonus depreciation and enhanced expensing were used to provide disaster tax relief to
businesses following several disasters before 2010. However, at present, with bonus depreciation
at 100% (100% bonus depreciation is expensing), this policy tool is not readily available.62
Expensing al owances are higher than they have been historical y, but could, if deemed necessary
and under certain circumstances, be expanded further to provide additional expensing al owances
in disaster areas. For instance, this could be a policy option should bonus depreciation be set at a
rate of less than 100%, or eliminated altogether. An expansion to expensing for disaster-relief

60 A similar discussion can be found in CRS In Focus IF10730, Tax Policy and Disaster Recovery, by Molly F.
Sherlock.
61 For background, see CRS Report R44977, Preliminary Damage Assessments for Major Disasters: Overview,
Analysis, and Policy Observations, by Bruce R. Lindsay. In the case of recent disaster events, disaster areas have been
defined as those with major disaster declarations. Disaster zones have been identified as the portion of the disaster area
being provided individual or individual and public assistance.
62 For more information, see CRS Report RL31852, The Section 179 and Section 168(k) Expensing Allowances:
Current Law and Econom ic Effects, by Gary Guenther.
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Tax Policy and Disaster Recovery

purposes could be accomplished through raising the expensing limit; expensing is currently
al owed for investments up to $1,050,000.63
Expansions to net operating loss (NOL) carrybacks and lengthening of replacement periods for
involuntary conversions have also been used to provide tax relief following past disasters. Under
current law, there is no carryback of NOLs. Al owing an NOL carryback for disaster-related
losses could provide relief for taxpayers experiencing losses who had positive tax liability in a
recent tax year. Expanding the replacement period for involuntary conversions could provide
more flexibility to taxpayers looking to rebuild or reestablish businesses in the disaster area.
Tax policy can also be used to encourage businesses to provide employment and housing
following disaster events. Employee retention credits encourage employers to continue paying
employees in circumstances where the disaster affects business operations. Targeted hiring
credits, such as the WOTC, can be used to provide an incentive to hire workers who were
displaced by a disaster. With respect to housing, tax policy has been used to encourage employers
to provide housing to their employees, as wel as to support more low -income housing
development in disaster-affected areas.
Disaster recovery and rebuilding has also been supported following certain disasters by providing
targeted tax benefits to disaster-impacted geographic zones. The New York Liberty Zone was
established following the September 11 terrorist attacks. The Gulf Opportunity Zone was
established following the 2005 Gulf Coast hurricanes.64 These zones can receive additional
al ocations of al ocated tax credits, such as the NMTC or the LIHTC. Past disaster tax relief has
also provided additional al ocations of tax-exempt or tax-credit bonds in disaster-affected zones.65
Some have questioned the effectiveness of tax-exempt private activity bonds as a tool for disaster
relief, noting that in the case of the GO Zone, areas with the most damage were less likely to have
access to bonds to help finance recovery and rebuilding.66 Should special bond al ocations be
deployed in response to future disasters, there may be ways to improve the bond al ocation
process to better target smal businesses or heavily impacted areas.
Other provisions might be designed to support specific industries or sectors affected by the
disaster. For example, tax provisions for smal timber producers and public utilities have been
included in past disaster tax legislation. Narrowly targeted tax benefits, however, might leave out
disaster-affected taxpayers that suffered losses yet have business activities that differ from the
sector targeted for relief.
One consideration related to tax relief provisions for business is timing. The tax code is not wel -
suited to provide capital for cleanup, rebuilding, or recovery in the short term. Reduced tax
liabilities provide a future financial benefit, but past disaster tax relief has not been designed to
provide immediate access to capital that may be needed following a disaster.
Another consideration related to business disaster tax relief is the potential scope of the benefit.
For many business-related provisions, the benefit is limited to businesses with positive taxable

63 T his amount is for 2021. T he expensing limit is $1 million, adjusted for inflation after 2018.
64 One empirical analysis found that certain GO Zone counties experienced more rapid per capita personal income
growth than comparable non-Go Zone counties several years after the tax relief was provided. T his same study did not,
however, find that GO Zone counties had stronger employment or population growth. See James M. Williamson and
John L. Pender, “Economic Stimulus and the T ax Code: T he Impact of the Gulf Opportunity Zone,” Public Finance
Review, vol. 44, no. 4 (July 2016), pp. 415 -445.
65 T he T CJA (P.L. 115-97) repealed all authority to issue tax credit bonds after December 31, 2017.
66 Kevin Fox Gotham, “Dilemmas of Disaster Zones: T ax Incentives and Business Reinvestment in the Gulf Coast after
Hurricanes Katrina and Rita,” City & Community, vol. 12, no. 4 (December 2013), pp. 291-308.
Congressional Research Service

24

Tax Policy and Disaster Recovery

income. Accelerated cost recovery, special deductions, and nonrefundable income tax credits
provide limited benefits to businesses with little profit or no tax liability.67 Businesses with
limited current income or tax liability may, however, benefit from expanded NOL carrybacks.
One policy question is whether certain disaster-related tax benefits are necessary or effective in
achieving intended policy goals, given that much of the tax relief accrues to taxpayers who would
have rebuilt without incentives. This critique raises the question of whether disaster-related tax
benefits are intended to encourage certain behavior (rebuilding, for example), or primarily
provide financial relief for businesses affected by the disaster.
Providing Disaster Tax Relief to Individuals
Tax provisions might be used to provide financial relief to individuals who have lost property,
income, or both following a disaster. To provide relief for taxpayers experiencing a loss of
property, Congress has enacted legislation following certain past disasters to expand the
deduction for casualty losses (beyond what is available under the permanent provision). Relief
has been provided to taxpayers experiencing a loss of income by providing enhanced access to
retirement plan funds or by using look-back rules for computing refundable tax credits. Several
past disaster relief packages have also included provisions to support providing housing to
affected individuals.
There are limits to using tax policy to provide disaster relief to low - and moderate-income
taxpayers. Many low- and moderate-income individuals have zero individual income tax liability.
For these individuals, additional exclusions from income or deductions wil provide little or no
relief, as there is no tax burden to eliminate. Further, low- and moderate-income individuals may
have limited wealth. Tax provisions designed to enhance access to certain forms of savings (e.g.,
retirement accounts) also provide limited relief to the least wel -off. Al owing refundable tax
credits—the EITC and CTC—to be computed using the previous year’s income is one form of
individual disaster tax relief that is targeted at low- and moderate-income taxpayers.
Tax policy is general y better suited for providing relief to taxpayers higher in the inc ome
distribution. These taxpayers tend to have a positive tax liability that can be offset with various
forms of tax reductions. Additional y, taxpayers in higher tax brackets receive a larger tax benefit
from additional deductions (a deduction of $100 is worth $35 to someone in the 35% tax bracket,
but worth $12 to someone in the 12% tax bracket, for example). Empirical evidence suggests
access to savings via retirement account withdrawals helped some taxpayers replace lost income
or destroyed assets following Hurricane Katrina.68 Thus, policies that reduce penalties associated
with early withdrawals from retirement accounts or otherwise enhance access to this form of
savings is one option for providing relief to taxpayers that have such resources to draw on.
There are also timing concerns in using the tax code to provide individuals relief following a
disaster. As was noted for businesses, the tax code does not typical y lend itself to providing
immediate relief.
Another question regarding individual disaster tax relief is whether relief should be contingent on
an individual having suffered losses due to a federal y declared disaster, as opposed to some other
disaster event. Through 2025, the casualty loss deduction is limited to federal y declared
disasters. However, after 2025, individuals may be able to claim a deduction for casualty losses

67 Payroll tax credits may provide assistance to nonprofits and businesses without an income tax liability.
68 T atyana Deryugina, Laura Kawano, and Steven Levitt, “The Economic Impact of Hurricane Katrina on Its Victims:
Evidence from Individual T ax Returns,” American Economic Journal: Applied Economics, vol. 10, no. 2 (April 2018),
pp. 202-233.
Congressional Research Service

25

Tax Policy and Disaster Recovery

arising from a fire, storm, shipwreck, or other casualty, regardless of whether the casualty was
caused by an event with a federal disaster declaration. Is there something about having one’s
personal property destroyed in a federal y declared disaster that merits special relief, different
from what is provided when property is destroyed from a disaster without a federal disaster
declaration? As it stands, disaster tax policy is inconsistently applied across different types of
disaster events (e.g., federal y declared versus non-federal y declared disasters; disaster areas
receiving or not receiving individual or individual and public assistance).69
Disaster tax policy can also be designed to prevent taxpayers from facing a tax burden triggered
by receipt of disaster relief. The permanent exclusions from income for disaster relief payments
and insurance living expense payments clarify that these items are excluded from inc ome for
income tax purposes, and thus do not result in additional tax liability. In response to past
disasters, temporary provisions have provided that certain forgiven debt would not be treated as
income for income tax purposes.
Charitable Giving to Support Disaster Relief
The charitable sector supports a wide range of activities associated with disaster relief and longer-
term recovery. At times, Congress has acted following a disaster to provide additional tax
incentives to support charitable disaster-related activities.
To encourage charitable giving in the wake of a disaster, Congress has, in the past, relaxed certain
income limitations associated with the deduction for charitable giving. The amount individuals
can deduct for charitable use of a vehicle (the charitable mileage rate) was also temporarily
increased in response to certain past disasters. Qualifying mileage reimbursements have also been
al owed to be excluded from income. Other tax incentives enacted in response to disasters have
encouraged particular types of charitable giving. Provisions designed to encourage charitable
contributions of food inventory and books were enacted following Hurricane Katrina. The
enhanced deduction for contributions of food inventory was later made permanent, while the
enhanced deduction for book inventory expired in 2011. In some instances, Congress has relaxed
charitable giving deadlines to al ow contributions for disaster relief made early in the year to be
deducted on the previous year’s tax return.70
A key question regarding enhanced deductions for charitable giving is how much additional
giving results from the policy change. Is it the tax benefits that drive giving, or individuals’ desire
to aid those affected by the storm? Another question to consider is whether individuals shift their
giving to disaster-related causes at the expense of other charitable activities (i.e., does disaster-
related giving “crowd out” other forms of charitable giving?).71 When evaluating enhanced
charitable giving incentives following a disaster, another question is how much giving is for
disaster-related charitable activities, as opposed to other activities or uses. Charitable giving

69 Christine Manolakas, “T he T ax Law and Policy of Natural Disasters,” Baylor Law Review, vol. 71, no. 1 (2019), pp.
1-62.
70 T his change was made following the 2013 T yphoon Haiyan in the Philippines, the 2010 earthquake in Haiti, and the
2004 Indian Ocean tsunami. For additional background on the policy following the 2010 earthquake in Haiti, see CRS
Report R41036, Charitable Contributions for Haiti’s Earthquake Victim s, by Molly F. Sherlock.
71 One study of disaster-related giving following the 2004 Indian Ocean tsunami found that tsunami-related donations
were not associated with a reduction in other charitable donations. See Sarah Brown, Mark N. Harris, and Karl T ay lor,
“Modelling Charitable Donations to an Unexpected Natural Disaster: Evidence from the U.S. Panel Study of Income
Dynamics,” Journal of Economic Behavior & Organization, vol. 84, no. 1 (September 2012), pp. 97-110.
Congressional Research Service

26

Tax Policy and Disaster Recovery

incentives are often applied broadly, and it can be difficult to target them to a particular event or
geographic region.
Another consideration is who benefits from an enhanced charitable giving deduction. On the
individual side, the value of the tax benefit of the charitable deduction is highly concentrated
among high-income taxpayers.72
Concluding Remarks
Since 2001, a variety of temporary tax policies have been used to respond to various disaster
events. Following some disaster events, tax relief packages providing numerous types of tax relief
were passed by Congress and became law. Following other disaster events, no temporary disaster
relief was enacted. Certain permanent tax provisions provide tax relief to al affected by
qualifying disasters, even in cases where specific or targeted disaster tax relief is not enacted.
Disasters are inevitable. Each disaster is also unique, with damages affecting individuals,
businesses, industries, and other economic sectors differently. This poses a chal enge for
policymakers in determining what type of disaster relief can provide efficient and effective one-
size-fits-al relief. Some disasters may require a targeted and tailored policy response. Some
disasters are especial y catastrophic events that fundamental y change the economy of the
affected region. If disasters cause economic hardships across the region, disaster relief might
include broader economic development measures, ones that go beyond compensating individuals
or businesses for lost income or property.
Disaster tax relief as presently applied combines a base set of permanent disaster tax provisions,
with additional provisions or relief provided for certain disaster events, targeted disaster zones, or
time periods. Conceptual y, this provides policymakers with flexibility regarding relief provided
after certain disaster events. A question to consider is whether the current balance of permanent
and temporary disaster tax relief provides the desired policy response efficiently and effectively.
If temporary tax relief cannot be relied upon to deliver relief that is efficient and effective, one
option could be to expand the set of permanent disaster-triggered tax relief provisions. Tax relief
that is provided broadly, however, may not be particularly efficient, as it is not designed to
provide the specific type of relief needed in the wake of a certain disaster event.

Author Information

Molly F. Sherlock
Jennifer Teefy
Specialist in Public Finance
Senior Research Librarian

Acknowledgments
Portions of this report were adapted from previous CRS reports written by Erika Lunder and Carol Pettit,
formerly Legislative Attorneys with CRS.

72 See CRS In Focus IF11022, The Charitable Deduction for Individuals, by Margot L. Crandall-Hollick and Molly F.
Sherlock; and CRS Report R45922, Tax Issues Relating to Charitable Contributio ns and Organizations, by Jane G.
Gravelle, Donald J. Marples, and Molly F. Sherlock .
Congressional Research Service

27

Tax Policy and Disaster Recovery

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
shared staff to congressional committees and Members of Congress. It operates solely at the behest of and
under the direction of Congress. Information in a CRS Report should n ot be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not
subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in
its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or
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copy or otherwise use copyrighted material.

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