WASHINGTON, DC – November 23, 2009 – (RealEstateRama) — Sen. Chuck Grassley of Iowa has introduced legislation giving Midwestern disaster victims more time to benefit from tax relief intended to help them repair or replace their devastated homes.
“Because of delays in federal funding and tighter credit conditions, many homeowners affected by the 2008 floods and storms will be unable to meet the deadline for the tax relief intended to help with recovery,” Grassley said. “It’s only fair to extend the deadline and give these homeowners the chance to recover and rebuild. A lot of people are still trying to fix their ruined homes or move on to new housing. A house is ruined in a few minutes, but banks and governments can take what seems like an eternity.”
Last year, Grassley wrote the Heartland Disaster Tax Relief Act of 2008, signed into law on October 3, 2008. The measure gave temporary tax relief to people in the Midwestern disaster area, which experienced severe floods and tornadoes in spring 2008. The tax relief is similar to what Congress provided for people impacted by Hurricane Katrina in 2005.
Key tax provisions from last year’s disaster tax relief bill expire after Dec. 31, 2009. Federal funds to help homeowners repair or replace their damaged homes are moving forward, but hundreds of households in Iowa alone will not be able to close on their new homes before Dec. 31, 2009. These households will lose the tax relief that was drafted to benefit them because of the timing of the acquisition of their flood-damaged principal residence, Grassley said. These deadlines need to be extended to provide taxpayers who do not yet have permanent housing or are waiting to have their damaged home purchased by their local government the same tax benefit as those taxpayers whose flood-impacted principal residence will be acquired before the end of 2009, Grassley said.
In the coming weeks, Grassley plans to introduce legislation extending a series of provisions from last year’s tax relief package for disaster victims in the Midwest, including Iowa, and nationwide, also benefiting Iowa.
The Grassley bill introduced on Friday contains the following:
- A one-year extension of the provision allowing disaster victims with damage to their primary residence to use their own assets to buy a new home or repair their existing home by withdrawing money from their retirement plan without tax penalties.
- A one-year extension of the provision allowing disaster victims who have borrowed from their retirement account for disaster recovery to repay their own account without penalty.
- A one-year extension of the provision allowing disaster victims whose banks cancel mortgage debt to not have the cancelled debt counted as taxable income.
Grassley was instrumental in securing help for Midwestern disaster victims. Last year’s legislation included a $4.6 billion disaster tax relief package exclusively to help Iowa and nine other Midwestern states recover and rebuild from the spring 2008 floods and tornadoes. The measured included another $3.5 billion for general disaster tax relief for other disasters nationwide, including those in Iowa. The tax relief is in addition to and separate from disaster recovery funds provided through the appropriations process.
The tax provisions for the Midwest were modeled on what Congress passed for Hurricane Katrina victims in 2005. They were enacted after Grassley kept the pressure on congressional leaders to take similar action for natural disaster victims in Iowa and throughout the Midwest. In 2005, while Grassley was chairman of the tax-writing committee in the Senate, a major individual tax relief package was signed into law within three weeks of the Katrina disaster. A few months later, Congress followed up with an infrastructure and business relief tax package.
Grassley is ranking member and former chairman of the Committee on Finance, with exclusive Senate jurisdiction over tax policy.