President Bush has signed into law H.R. 1134, exempting qualified disaster mitigation payments from tax.

These are payments from the Federal Emergency Management Agency under the Hazard Mitigation Grant Program, the Pre-Disaster Mitigation Program, and the Flood Mitigation Assistance Program. 

Taxpayers who included these payments in income on prior-year returns may file amended returns to take advantage of the exclusion.

"It's important to note that the law is retroactive, and therefore applies to disaster mitigation grants that taxpayers may have received before the bill was passed.  People who have paid tax on these grants may file an amended tax return to get a refund," noted IRS Commissioner Mark W. Everson.

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