Relief after a natural or man-made disaster may come from what many
might consider an unlikely source: the Internal Revenue Code (IRC).
The IRC includes several tax relief provisions that apply to
affected taxpayers. Some of these provisions are permanent. The
following are among the permanent provisions discussed in this
report: casualty loss deductions, IRC Section 165; exemption from
taxation for disaster relief payments to individuals, IRC Section
139; exemption from taxation for certain insurance payments, IRC
Section 123; and deferral of gain from the involuntary conversion
of homes destroyed or damaged by a disaster, IRC Section 1033. In
recent years, Congress has enacted tax legislation generally
intended to assist victims of specific disasters; as a result,
these laws were temporary in nature. One act, however, provided
more general, but still temporary, relief for any federally
declared disaster occurring prior to January 1, 2010. The acts
providing temporary relief include the following: The Job Creation
and Worker Assistance Act of 2002, P.L. 107-147, which provided tax
benefits for areas of New York City damaged by the terrorist
attacks of September 11, 2001; The Katrina Emergency Tax Relief Act
of 2005 (KETRA), P.L. 109-73, which provided tax relief to assist
the victims of Hurricane Katrina in 2005; The Gulf Opportunity Zone
(GO Zone) Act of 2005, P.L. 109-135, which provided tax relief to
those affected by Hurricanes Katrina, Rita, and Wilma in 2005; and
The Heartland Disaster Tax Relief Act of 2008, P.L. 110-343, which
provided tax relief to assist recovery from both the severe weather
that affected the Midwest during the summer of 2008 and Hurricane
Ike. This act also included general disaster tax relief provisions
that applied to federally declared disasters occurring before
January 1, 2010. This publication provides a basic overview of
existing, permanent provisions that benefit victims of disasters,
as well as past, targeted legislative responses to particular
disasters. The relief is discussed without examining either the
qualifications for or the limitation on claiming the provisions'
benefits. In light of Hurricane Sandy, this publication is designed
to help Congress identify previous legislative responses to recent
disasters.
General
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