Disaster Tax Relief, Airport, and Airway Extension Act of 2017 (HR 3823)

| November 15, 2017
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Congress Approves Bill and President Trump Signs Bill the Day After

The White House explained that the above act will “provide targeted tax relief for taxpayers impacted by Hurricanes Harvey, Irma, and Maria. In addition to supporting these tax relief measures, the administration will submit further requests to Congress for supplemental funding in the near future and looks forward to working with Congress to enact these recovery measures into law.”

To be eligible for these benefits, damage must have been suffered according to the specified dates below and in a FEMA declared area:

  • Hurricane Irma Disaster Area on or after September 4th, 2017
  • Hurricane Maria Disaster Area on or after September 16th, 2017
  • Hurricane Harvey Disaster Area on or after August 23rd, 2017
  1. Eased Casualty Loss Rules “Net Disaster Loss”
  • Current law. You may deduct casualty losses minus any insurance proceeds received that exceed, first, $100 then must exceed 10% of your Adjusted Gross Income and the taxpayer must itemize.
  • New LAW:  You may deduct casualty losses minus any insurance proceeds that exceed $500, not subject to the 10% AGI limitation and even if you do not itemize the casualty loss amount will increase your standard deduction, dollar for dollar. AMT taxpayers, do not worry they have eliminated the AMT limitations.
  1. Eased Access to Retirement Funds “Qualified Hurricane Distribution”
  • Current Law: Loans from a qualified employer plan is normally treated as a distribution unless (and among other things) the loan amount does not exceed the lesser of $50,000 or 50% of the present FMV of the non- forfeitable accrued benefit under the plan and the loan is required to be paid back within 5 years. Early withdrawals are subject to the 10% penalty.
  • New law: You may receive a loan of the lesser of $100,000 or 100% of the present FMV, will generally not be subject to withholding rules, and is not subject to 10% penalty for early withdrawal. You will still be subject to regular tax, but you could spread the income over 3 years. Amounts re-contributed to the plan during that span will be treated as rollovers, and tax paid on those amounts can be recovered.
  1. Charitable Contribution Limitations Temporarily “Suspended”
  • Current Law: An individual who itemizes can deduct charitable contributions up to 50%, 30% or 20% of AGI, depending on the type of property contributed and the type of donee. Amounts that exceed the AGI limitations can be carried forward for 5 years (Subject to other limitations and ordering rules)
  • New Law: “Qualifying” charitable contributions that are associated with the “Qualified Hurricane Relief Act” have temporarily suspended the 50% AGI limitations and eased the rules that are governing the treatment of “excess” contributions. Be sure to make these contributions before the end of the year and ensure they are considered “qualified contributions.”
  1. Employee Retention Tax Credit
  • For eligible employers who continued to pay eligible employees during a period of inoperability as result of Hurricane Harvey, Irma or Maria will receive a 40% credit up to $6,000 in qualified wages per employee.
    • ELGIBLE “EMPLOYER” - Must have conducted an active trade or business in the disaster area of each storm and been inoperable for any days after the storm and before January 1, 2018 as a direct result of the storm
    • ELIGIBLE “EMPLOYEE” – Principle place of employment on the date of the storm was in the hurricane disaster area
    • “QUALIFIED WAGES” - Wages paid by an eligible employer to an eligible employee on or after the date of the respective storm and before January 1, 2018.
    • WHAT DOES “INOPERABLE” MEAN? – The IRS does not define “inoperable” or “resumed significant operations.” Every business is different and should consult with their tax advisor to determine the amount of credits they are eligible for, if any. The damage need not be to the employer’s place of business. For example, a business could be considered inoperable if, because of the disaster, the business is physically inaccessible to employees, raw materials, utilities, or customers.
    • Even if you did not pay your employees during the “inoperable” period directly resulting from the hurricanes, consult with a tax advisor before year-end to see if you can still qualify for the tax credit.
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