Washington—Senators Dianne Feinstein and Kamala D. Harris (both D-Calif.) today joined with Senators Ron Wyden (D-Ore.), Jeff Merkley (D-Ore.) and Patty Murray (D-Wash.) to introduce the Disasters Tax Relief Act, a bill to provide tax relief to individuals, businesses and states affected by catastrophic wildfires and other presidentially-declared disasters.
Representative Earl Blumenauer (D-Ore.) is introducing companion legislation in the House of Representatives.
“California is experiencing the largest wildfire season in the state’s history. With more than 3.3 million acres burned this year and 4,200 homes and buildings destroyed since August, any aid we can offer victims will provide much-needed relief,” Feinstein said. “This bill provides tax relief to wildfire victims and increases funding for low-income housing, which will be critical to help Californians and other victims of natural disasters recover.”
“As Californians continue to be threatened by the ongoing wildfires blazing across the state, it is critical we provide assistance to those affected.” Harris said. “This bill is one step to help bring vital relief to wildfire victims and will help to ensure impacted communities have the support they need to make it through challenging times.”
“The devastation in Oregon is unlike anything I’ve ever seen, with entire communities burned to the ground. Recovering from this unprecedented disaster will require a comprehensive federal response that includes tax relief,” Wyden said. “Our bill is one piece of that puzzle, and would help get cash into the hands of families and small businesses. Oregonians can’t wait for this critical relief, and I’m going to do all I can to get this done in September.”
“Oregonians are facing an unprecedented and destructive wildfire disaster, all in the middle of a pandemic. We know that the road to recovery will be extensive, and our communities need and deserve every bit of help they can get,” Merkley said. “This bill provides much-needed federal flexibility and assistance to help individuals, businesses, and communities get back on their feet.”
“Oregonians have suffered unprecedented destruction from the wildfires, and this disaster is far from over,” Blumenauer said. “With one million acres burned and more than 1,000 homes destroyed, Congress must enact comprehensive tax relief to help affected individuals and businesses in our state. I’m working closely with Senator Wyden on this important issue and will soon introduce similar legislation in the U.S. House to ensure Oregon families and businesses get the necessary aid to overcome this crisis and achieve a strong recovery.”
Summary of the tax relief provided by the legislation:
Special Rules for Use of Retirement Funds
The bill provides an exception to the 10-percent penalty for early withdrawals from retirement plans for qualified disaster distributions (up to $100,000), allows the tax associated with disaster distributions to be paid ratably over three years and allows for re-contribution of withdrawn funds. The provision also provides flexibility for loans from retirement plans for qualified disaster relief.
Employee Retention Credit
The bill provides an income tax credit for 40 percent of wages (up to $6,000 per employee) paid by a disaster-affected employer to an employee from a qualified disaster zone. The credit applies to wages paid without regard to whether services associated with those wages were performed.
Disaster-related Personal Casualty Losses
The bill eliminates the current-law requirements that personal casualty losses must exceed 10 percent of adjusted gross income to qualify for a deduction with respect to uncompensated losses arising in the disaster area. The bill also allows taxpayers to claim their disaster casualty losses as part of their standard deduction.
Special Rule for Earned Income
The bill allows taxpayers in designated disaster areas to refer to earned income from the immediately preceding year for purposes of determining the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) in tax year 2020.
Additional Low Income Housing Credit Allocations
The bill increases the state credit ceiling for the Low Income Housing Tax Credit (LIHTC) for 2021 to provide for additional projects within 2020 disaster areas. The increase is equal to the credits allocated to projects in disaster areas, up to 50 percent of the state’s total 2020 credit allocation.