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House and Senate Introduce Hurricane Katrina Tax Relief Legislation

(Sept. 19, 2005) Congress has introduced Hurricane Katrina tax relief packages that include direct grants to help those affected by the tragedy, as well as tax incentives to encourage charitable giving.

On Thursday, Sept. 15, the Senate passed the Hurricane Katrina Tax Relief Act of 2005 (S. 1696), and the House approved its own version, the Katrina Emergency Tax Relief Act of 2005 (H.R. 3768).

The Senate version includes the IRA rollover tax incentive provision that AFP has strongly supported for several years. The caveat is that it would expire at the end of this year (Dec. 31, 2005), greatly diminishing its effectiveness. Also included are tax incentives to encourage gifts of food and books and a proposal to raise the permitted cash contribution level for individuals from 50 percent to 60 percent of adjusted gross income for tax years ending on or before December 31, 2005.

The Senate package also includes a charitable reform provision that allows the IRS to share information about tax-exempt organizations with state charity officials. AFP has opposed this provision in the past.

The House bill, in comparison, contains niether the IRA, food or book gift provisions, nor the proposal regarding IRS information sharing with the states. Like the Senate package, it would raise the annual permitted cash contribution level for individuals to 60 percent. In addition, the 10-percent income limitation for corporations would be waived for cash donations related to Hurricane Katrina if made before January 2006.

Because their bills are significantly different, the House and Senate will have to meet in a conference committee to fashion a workable compromise that can pass both chambers. AFP will work with the House and Senate to try to ensure that the IRA Rollover provision stays in the bill.

'We applaud the House and Senate for recognizing that charities are a frontline response to disasters such as Hurricane Katrina,' said AFP President and CEO Paulette Maehara, CFRE, CAE. 'By enacting tax incentives that will encourage giving, Congress will exponentially enhance the efforts of charities as they help the Gulf Coast recover from this horrific event.'

Summaries of both bills are included in the Attachments section below.

Attachments

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