President Signs Disaster Relief Exclusion Legislation

The President on April 15, 2005, signed legislation (H.R. 1134) designed to create a federal income tax exclusion for disaster relief mitigation payments. The new law also treats certain dispositions of property under hazard mitigation programs as involuntary conversions. The law applies with retroactive effect and would be available to taxpayers with respect to any tax years still open under the statute of limitations. The legislation was primarily designed to reverse a ruling from the IRS in June, 2004 that determined grants from the Federal Emergency Management Agency (FEMA) were taxable income.