Sens Norm Coleman, Chuck Grassley, Tom Harkin, Dick Durbin, Claire McCaskill, Kit Bond, Richard Lugar, Amy Klobuchar and Evan Bayh have filed an amendment to proposed housing legislation in the Senate. It is a tax relief measure to help people and communities in the Midwest that have been hit by floods and tornados this spring.
The Midwestern Disaster Tax Relief bill is modeled after tax legislation that Congress passed to help victims of the tornado in Kiowa County, Kansas in 2007, and Hurricanes Katrina, Rita and Wilma in 2005. The proposal contains provisions that would let disaster victims withdraw money from retirement plans without tax penalties, suspend limits on tax incentives for charitable contributions, create tax-exempt bond authority to help rebuild infrastructure, remove limitations on deducting casualty losses due to natural disaster, and allow additional depreciation and increased amounts for expensing property to help businesses.
"Families have endured a great deal of suffering in the Midwest as result of extreme weather. Some have lost family members, many others have seen their homes, businesses and neighborhoods ravaged," said Coleman. "These folks are in serious need of our help, and providing them with targeted tax relief during this difficult time will help them rebuild their communities and lives."
Provisions in the bill include:
- Tax Favored Early Withdrawals, which permits individuals in disaster areas to take distributions of up to $100,000 without being subject to the normal 10 percent penalty
- Loans from Qualified Plans - raises the limits on the amount individuals can take out of their qualified retirement plan in the form of a loan to $100,000 or 100 percent of the individual's account balance (whichever is less) for victims with homes in the disaster areas.
- Exclusion for Certain Cancellations of Indebtedness -- permits victims to exclude from income cancellation of nonbusiness debts secured by property in the disaster areas.
- Suspension of Personal Casualty Loss Limits - removes two limitations on personal casualty losses
- Expansion of Hope Scholarship and Lifetime Learning Credit - expands credits for students attending eligible institutions in the disaster areas