Extended Tax Relief for Flood and Tornado Victims

Because of delays in federal funding and tighter credit conditions, many homeowners affected by the floods and storms in Iowa last year will be unable to meet the deadline for the tax relief that’s supposed to help with recovery.

On Friday, I introduced legislation to give Midwest disaster victims more time to benefit from tax relief to help them repair or replace their devastated homes.    It’s only fair to extend the deadline and give these homeowners the chance to recover and rebuild.   A house is ruined in a few minutes when a flood or tornado strikes, but banks and governments can take what seems like an eternity when it comes to recovery. 

The tax relief I want to extend was established in the Heartland Disaster Tax Relief Act of 2008 that I wrote and got signed into law last year.  It was along the lines of what Congress did for Hurricane Katrina victims, but I had to fight Speaker Pelosi and others in Congress to get a response for the Midwest that was equitable.

Key tax provisions from this tax relief bill expire after Dec. 31, 2009.  Federal funds to help homeowners repair or replace their damaged homes are moving forward, but hundreds of households in Iowa alone will not be able to close on their new homes before Dec. 31, 2009.  These households will lose the tax relief that was drafted to benefit them because of the timing of the acquisition of their flood-damaged principal residence.

These deadlines need to be extended to provide taxpayers who do not yet have permanent housing or are waiting to have their damaged home purchased by their local government the same tax benefit as those taxpayers whose flood-impacted principal residence will be acquired before the end of 2009.

So, my bill contains the following:

- A one-year extension of the provision allowing disaster victims with damage to their primary residence to use their own assets to buy a new home or repair their existing home by withdrawing money from their retirement plan without tax penalties. 

- A one-year extension of the provision allowing disaster victims who have borrowed from their retirement account for disaster recovery to repay their own account without penalty.

- A one-year extension of the provision allowing disaster victims whose banks cancel mortgage debt to not have the cancelled debt counted as taxable income. 

I want to extend other tax relief for Iowa flood and tornado victims, as well, and I’ll be introducing legislation to do that when Congress returns after Thanksgiving.