[StBernard] Road Home recipients likely to get tax relief, key House leader says
Westley at da-parish.com
Wed Apr 30 11:30:36 EDT 2008
I just don't get it. How is Landrieu helping us? So we don't get thrown
into a higher tax bracket but we have to pay back the income tax refund from
2005 along with one year of interest. In some cases, this amount could be
larger than calculating it the original way.
Road Home recipients likely to get tax relief, key House leader says
by Bill Walsh, The Times-Picayune
Friday April 25, 2008, 7:04 AM
WASHINGTON -- An influential member of the House of Representatives
expressed optimism Thursday that Congress would approve income tax relief
for recipients of hurricane rebuilding grants.
Rep. Barney Frank, D-Mass., chairman of the Financial Services Committee,
said he expected the House to approve a Senate-passed measure exempting Road
Home grant recipients from being thrust into high tax brackets because of
the government assistance they received.
On Capitol Hill, Frank conducted his second day of hearings on broad
legislation designed to ease the mortgage crisis triggered by a wave of
foreclosures in the sub-prime market. He said he expected the $1 billion
assistance for Gulf Coast homeowners would be included in a final deal.
"I think that will be accepted," Frank said at a breakfast meeting with
reporters. "I think that will happen."
After Hurricane Katrina, thousands of taxpayers claimed a casualty loss on
their 2005 taxes in order to get a refund and put money in their pockets
quickly to rebuild or pay for day-to-day living expenses. When they
subsequently received government rebuilding grants, many who took the
earlier tax deduction were surprised to find out that the Internal Revenue
Service insisted they count the grant money as taxable income, thrusting
them into higher-than-normal tax brackets.
As part of its own mortgage bailout earlier this month, the Senate passed a
measure that would allow taxpayers to amend their earlier return, repay the
IRS with one year of interest and get their Road Home grant tax-free.
In a letter to House leaders on Wednesday, Sens. Mary Landrieu, D-La., and
David Vitter, R-La., along with their Mississippi counterparts, urged the
House to follow the Senate's lead.
They said if a family took a $75,000 casualty loss deduction in 2005 and
received a similarly sized grant, its taxable income in 2007 would increase
by $75,000. The effect would be that instead of paying $7,000 in taxes, it
would pay $25,000.
"The IRS decision has a devastating impact upon families still struggling to
recover from the 2005 hurricanes," the four senators wrote to Speaker Rep.
Nancy Pelosi, D-Calif., and Minority Leader Rep. John Boehner, R-Ohio.
Frank said he expects the House to wrap up its work on a housing bill
sometime in May. The next step will be to go to a conference committee where
House and Senate leaders will work to negotiate a compromise that can pass
each chamber, as well as win approval from the White House.
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