HR 3823 Provides Special Assistance to those Affected by Hurricanes
Both businesses and individuals will likely qualify for some benefit related to HR 3823, the “Disaster Tax Relief and Airport and Airway Extension Act of 2017.” Recent storms Harvey, Irma and Maria created significant challenges both physical and economic for individuals and businesses located within the Federally Declared Disaster Zones. In addition to the expanded casualty loss rules, the bill gives additional assistance for individuals and businesses.
HR 3823: INDIVIDUAL ASSISTANCE
Retirement Distributions: In general, when a distribution is made out of a retirement plan before the recipient reaches 59 ½ years old, the taxpayer is subject to a 10% penalty on the distribution. However, under this relief, the penalty is waived as the distribution is considered a “qualified hurricane distribution.” Also in addition to the elimination of the penalty, the taxpayer may spread the income over a 3 year period for tax purposes rather than including it all in the year of distribution. The bill also eases other rules related to retirement distributions to include: increasing the amount available for qualified employer plan loans, increased recontribution periods and the elimination of withholding requirements.
Charitable Deductions: Under the relief, “Qualified Contributions” related to relief efforts of Hurricanes Harvey, Irma and Maria will not be subject to the normal charitable contribution AGI limits. In addition, those contributions are exempt from the overall limitation on itemized deductions.
HR 3823: BUSINESS ASSISTANCE
Employer Retention Credit: Hurricanes Harvey, Irma and Maria caused a significant disruption in many businesses throughout the Disaster Zones but many employers continued to pay their employees during the disruption. The relief provides a credit to employers for these payments as long as both the employer and employee qualify. The credit can be as much as $2,400 per employee during the business interruption, calculated as 40% of up to $6,000 of qualified wages. To qualify the following tests must be met:
- The employee is one whose principal place of employment with the employer was in one of the Hurricane Harvey, Irma or Maria disaster zones as of August 23, September 4 and September 16, respectively and is not a related party to the employer as defined by the IRC.
- Qualified wages are wages paid from the date specified above and before January 1, 2018, beginning the date the employer’s business first became inoperable and ending on the date on which the business has resumed significant operations at the principal place of employment. These wages include wages paid without regard to whether the employee performs no services, performs services at a different place of employment other than the principal place of employment or performs services at such principal place of employment before significant operations have returned.
After reviewing the information set forth above related to Hurricanes Harvey, Irma and Maria, you may find you are eligible to utilize one or more of the savings opportunities set forth above. In some cases, you may even have opportunities available to you related to retirement distributions to make necessary repairs that you had previously not considered because of potential penalty assessments. If you would like additional information regarding the expanded casualty loss rules or any of the programs laid out above or if you simply have questions about how these apply to you or your business, please reach out to our team at Withum by filling out the form below.
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|Chanda Horne, CPA, Senior Manager
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