September 20,2005

House-Senate agreement on short-term Katrina tax relief bill

Today Sen. Chuck Grassley, chairman of the Committee on Finance, and Sen. Max Baucus,ranking member, met with Rep. Bill Thomas, chairman of the House Ways and Means Committee,and Rep. Charles Rangel, ranking member. They reached an agreement on a short-term HurricaneKatrina relief bill.

Senator Grassley comment:

“Tax relief was valuable for families and businesses directly hit by 9-11. It’s sure to be keyin helping individuals and communities recover from Hurricane Katrina. Our emergency tax reliefbill focuses on food, shelter and jobs. It also protects Katrina victims from any undeserved IRS hitsand simplifies tax relief for low-income individuals and families. Our longer term Katrina tax reliefbill will help rejuvenate the region. We also need to make sure the national economy stays strongin light of high energy prices and other uncertainties. Also, with many of the charitable provisionsin the tax bill, our goal is to encourage charitable giving outside of Katrina relief to prevent the restof the nation’s charities from seeing a downturn in giving as they did after Sept. 11. I hope we’llhave this bill on the President’s desk as soon as possible.”

Senator Baucus comment:

“After traveling down to the Gulf Coast region last week, I saw firsthand the extensivedamage wreaked by Hurricane Katrina. I am pleased we were able to forge a deal that will sendimmediate tax relief to the victims. Now that this initial tax relief has been agreed on, we need toquickly act on the health package as well. In the coming weeks, I plan on working with mycolleagues to draft legislation that will rebuild homes and businesses, pump money into localeconomies and help the working poor.”

Here are the elements of the changes in the House and Senate bill agreed upon today:The $500 personal exemption for housing Katrina evacuees will not be available to familymembers (as in the House bill)

On the Work Opportunity Tax Credit: The provision will follow the House bill on thefollowing issues (1) certification will not be required, (2) the credit will be available to employerswho hire someone who was unemployed before Katrina. The Senate requirement that the individualmust have lost his/her job because of Katrina is being dropped.

The WOTC credit will be available to employers who hire people within the core disasterarea for 2 years (as in the House and Senate bills). It will be available to employers who hiresomeone outside the disaster area through the end of the 2005 calendar year.

Food donations: Current law treatment C corporation treatment will be extended to passthroughentities, including sole proprietors. The provision applies to food donations made anywherein the country. It expires at the end of the 2005 calendar year. No inflated adjustment in the value.

Book donations: Current law treatment will be extended to educational books donated toschool districts anywhere in the country. Agreement uses the Senate language for an “educationalbook.” It expires at the end of the 2005 calendar year. No inflated adjustment in the value.

The retention credit will be available to employers in the disaster area who have fewer than200 employees (uses the same definition as the 9/11 bill for the WOTC credit). It expires at the endof the 2005 calendar year. It will be revisited in the future.