LegiStorm

Summary:

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 tax relief policies. At other times, Congress has passed legislation providing tax relief to those 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. 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. Laws targeting specific disasters contained provisions that were temporary in nature. Three acts, however—the Heartland Disaster Tax Relief Act of 2008 (P.L. 110-343), the 2017 tax act (P.L. 115-97), and the Taxpayer Certainty and Disaster Tax Relief Act of 2019 (P.L. 116-94)—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; and 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. 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.