Congress Passes Tax Legislation Focused on Gulf Coast Recovery

The Senate, on December 16, 2005, by unanimous consent, passed the Gulf Opportunity Zone Act of 2005 (HR 4440) after substituting language to include a significant technical corrections package, a few expiring provisions, and a few changes in the Gulf Coast recovery provisions, including a controversial change to cut back somewhat on the House-passed restrictions on tax relief to casinos, liquor stores, and massage parlors. The House then passed the legislation without amendment so that the legislation could proceed directly to the President to be signed before year-end.

Among the provisions included related to Gulf Coast recovery are:

1) Creation of a Gulf Opportunity Zone related to areas affected by Hurricanes Katrina, Rita, and Wilma;

2) 50 percent bonus depreciation related to rebuilding in the zone;

3) Expanded Code Sec. 179 expensing for investments in the zone;

4) Five-year net operating loss carryback for investments in the zone;

5) Enhancements of the low-income housing and rehabilitation credits within the zone;

6) Increase in the new markets tax credits available in the zone; and

7) Expanded tax-exempt bond limits within the zone.

The legislation also expands many of the provisions of the previously enacted Katrina Emergency Tax Relief Act of 2005 to apply to victims of Hurricanes Rita and Wilma.

As this was likely to be the last tax legislation to pass in 2005, the Senate added in some noncontroversial provisions that might otherwise have languished. A package of expiring provisions extended includes defining combat pay as earned income for purposes of the earned income credit, authority for certain undercover operations, and disclosures of certain tax return information.

Technical corrections are included for ten tax acts going back as far as 1987 and include a number of amendments related to the American Jobs Creation Act of 2004.

The overall ten-year cost of the legislation is estimated at around $8 billion. President Bush is expected to sign the legislation.