[StBernard] Governor Blanco, LRA Call on President Bush and Congress to Address IRS Ruling Regarding Casualty Lo

[Westley Annis]

Governor Blanco, LRA Call on President Bush and Congress to Address IRS Ruling Regarding Casualty Losses and Road Home Grants

BATON ROUGE, La. (November 30, 2006) - Based on a recent issuance by the Internal Revenue Service (IRS) regarding Road Home grants, Governor Blanco and the Louisiana Recovery Authority (LRA) are calling on President Bush and the U.S. Congress to address the IRS's intentions regarding the taxability of Road Home grants. According to the IRS, and consistent with guidance provided by the U.S. Department of Housing and Urban Development (HUD), homeowners who receive grant payments from the Road Home program will not be required to include the grant proceeds in gross income.

However, the IRS is requiring Road Home grant recipients who filed a casualty loss to reduce the loss deduction they received. In addition, the recipient must reduce his or her tax basis in the damaged or destroyed primary residence by the amount of the Road Home grant as well as by the amount of the allowable casualty loss deduction attributable to the damaged or destroyed primary residence. 

"When the question of taxability first arose several months ago, I immediately reached out to HUD and contacted the IRS to be certain Road Home grants are not taxable," Governor Blanco said. "I continue to be told they are not taxable. But I will make clarification of the matter of casualty losses a top priority. I do not believe this untenable situation was envisioned when Louisiana citizens were allowed to claim these casualty losses without the normal limitations. Our citizens cannot be penalized by the federal tax code for their losses, they have suffered enough."

"We have been assured by the IRS that Road Home awards will not be counted as income for tax purposes. But there are other ways we fear homeowners may be penalized," said LRA Housing Task Force Chairman Walter Leger. "Our homeowners suffered an immeasurable loss and they shouldn't have to go through the headache of amending previous filings. If the IRS is requiring we amend last year's returns, we call on President Bush and Congress to address this with them and change the policy immediately."

"The Department of Revenue will not ask taxpayers to pay taxes on their Road Home grants - period," said Louisiana Department of Revenue Secretary Cynthia Bridges. "If the IRS requires homeowners that claimed a loss to amend their returns, this could have consequences on their state taxes. Despite our best efforts to make sure this doesn't happen, I too call on the IRS to change their policy immediately." 

Hurricanes Katrina and Rita devastated South Louisiana, claiming 1,464 lives, destroying more than 200,000 homes and 18,000 businesses and inflicting about $25 billion in insured losses. The Louisiana Recovery Authority (LRA) is the planning and coordinating body that was created in the aftermath of these storms by Governor Kathleen Babineaux Blanco to lead one of the most extensive rebuilding efforts in the world. The LRA is a 33-member body which is coordinating across jurisdictions, supporting community recovery and resurgence, ensuring integrity and effectiveness, and planning for the recovery and rebuilding of Louisiana.

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