Highlights of the Katrina Emergency Tax Relief Act of 2005

Just two days after it passed Congress, the President signed the Katrina Emergency Tax Relief Act of 2005 (KETRA) into law on Sept. 23, 2005 as PL 109-73. KETRA is the first of two planned legislative initiatives dealing with the aftermath of Katrina and features provisions designed to provide immediate relief to individuals and businesses. The second initiative, to be taken up soon by Congress, will include stimulus provisions, such as accelerated depreciation and enhanced expensing, to encourage rebuilding of the vast area decimated by Katrina.

Use this link to an RIA Special Study that summarizes how KETRA provides relief for taxpayers impacted by Hurricane Katrina, and encourages charitable giving by individuals and businesses.

The link will take you to an overview of that act that discusses:

• Who's entitled to relief under the Katrina Emergency Tax Relief Act of 2005?

• Liberalized rules for qualified retirement plan and IRA distributions including:
  • Penalty-free retirement plan withdrawals for disaster victims.
  • Repayments of qualified Hurricane Katrina distributions.
  • Income averaging allowed for qualified Hurricane Katrina distributions.
  • Recontributions of withdrawals for home purchases canceled due to Hurricane Katrina.
  • Plan loan limits to victims of Hurricane Katrina increased and payments postponed.
  • Retroactive retirement plan and IRA amendments allowed.
    
• Work opportunity tax credit made available for Hurricane Katrina employees.
  
• New employee retention credit for employers affected by Hurricane Katrina.
  
• Liberalized Rules for Charitable Giving
  • Temporary enhanced charitable deduction for contributions of food inventories.
  • Temporary enhanced charitable deduction for C corporation contributions of book inventories.
  • New limited exemption for housing Katrina victims.
  • Charitable standard mileage rate for Katrina relief increased to 70% of business mileage rate.
  • Volunteers for charities may exclude from income mileage reimbursements for operating a passenger car for the charity's benefit.
    
• Other Tax Relief Provisions
  • Katrina casualty losses are deductible without $100 minimum or 10% of AGI floor.
  • Discharge of debt related to Katrina is excluded from income
  • Replacement period for Katrina-related involuntary conversions is extended to 5 years.
  • Look-back election provided for earned income credit and the refundable child credit.
  • IRS may adjust rules to ameliorate effect of Katrina relocations.
  • >Employment and excise taxes may be deferred for disasters, combat zone service, or terroristic or military actions.
  • Hurricane Katrina filing and payment relief period extended to Feb. 28, 2006.