House and Senate Pass Hurricane Katrina Tax Relief

The House and Senate on September 15, 2005 both passed legislation offering tax relief to victims of Hurricane Katrina. The House suspended its rules and passed the Katrina Emergency Tax Relief Bill of 2005 (HR 3768). The $5.3 billion measure would provide tax relief for individuals affected by the hurricane and incentives to promote charitable donations for victims. The Senate, meanwhile, approved its measure, the Hurricane Katrina Tax Relief Bill of 2005 (Sen 1696) by unanimous consent. The Senate's bill is a $6.2 billion hurricane tax relief package.

Both measures would:

• Extend the replacement period to replace converted property;

• Allow full deductibility of personal casualty losses;

• Extend the work opportunity tax credit to employers that hire displaced storm victims;

• Provide an additional exemption of $500 for each Hurricane Katrina displaced individual; 

• Allow individuals to calculate their earned income credit and refundable child credit for the tax year including August 28, 2005, using their earned income from the prior tax year; and

• Waive the first time homebuyer requirement, through 2007, to allow individuals whose homes were damaged or destroyed by Hurricane Katrina to qualify for mortgages with low-interest rates.

Although the two measures differ slightly, the Senate bill includes additional charitable donation incentives, lawmakers are expected to resolve the differences quickly and pass a final version early next week.