The tax-writing House Ways and Means Committee unanimously approved five bipartisan tax-related bills last week aimed at helping natural disaster victims, sexual assault survivors, pre-school teachers, taxpayers in general and tax fraud whistleblowers.
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The Survivor Justice Tax Prevention Act (H.R. 2347), co-sponsored by Rep. Lloyd Smucker, R-Pennsylvania, and Gwen Moore, D-Wisconsin, would exclude from gross income all compensatory damages awarded to sexual assault victims, regardless of proof of physical injury. The exclusion would apply to all compensatory damages and settlements attributable to a sexual act or sexual contact. The bill aims to make it easier for victims to prove to the IRS that a sexual assault occurred by allowing a victim to present a court decision or settlement agreement as presumptive evidence. Victims would not be forced to relitigate their case with the IRS if the claim is audited. The IRS would be prohibited from requiring a sexual assault victim to provide medical records in order to substantiate the claim. The bill passed unanimously with a 41-0 vote.
The Doug LaMalfa Federal Disaster Tax Relief Certainty Act (H.R. 5366), named after a now deceased lawmaker who introduced it and co-sponsored by Rep. Greg Steube, R-Florida, Mike Thompson, D-California, and Jimmy Panetta, D-California, would extend a more generous treatment of personal casualty losses to disasters that occurred prior to Jan. 1, 2027. Under current law, taxpayers can deduct personal casualty losses, subject only to minor limitations, for disasters that occurred between Dec. 28, 2019, and July 4, 2025. However, this rule expires for disasters after July 4, 2025, so fewer disaster victims are currently eligible for a deduction when they suffer disaster-related losses. The bill would exclude wildfire relief payments from taxable income regardless of when they are received, so long as the wildfire disaster declaration occurs after Dec. 31, 2014, and before Jan. 1, 2027. As a result, more taxpayers who have been harmed by disasters and wildfires would be eligible for these tax benefits. This bill also passed unanimously with a 43-0 vote.
The Supporting Early-childhood Educators' Deductions Act (SEED Act) (H.R. 5334), co-sponsored by Rep. Jimmy Panetta, D-California, and Brian Fitzpatrick, R-Pennsylvania, would expand the definition of "eligible educators" to include early childhood educators, including early childhood teachers, instructors, counselors, principals and aides. As a result, individuals who teach or care for children ages zero to five would be able to deduct out-of-pocket professional expenses, including expenditures for participation in professional development courses, and supplementary education materials used in the classroom, such as books, supplies and equipment. The deduction would be available for up to $350 of expenses per year for taxpayers who take the standard deduction. In addition, taxpayers that itemize deductions could also deduct expenses above $350. Under current law, eligible educators who teach kindergarten through grade 12 are permitted to deduct certain professional expenses, including expenditures for participation in professional development courses, and supplementary education materials used in the classroom, such as books, supplies and equipment. However, early childhood educators who teach or care for children who are not yet in kindergarten are not eligible for this deduction. This bill also passed unanimously with a vote of 43-0.
The Taxpayer Experience Improvement Act (H.R. 7971), co-sponsored by Rep. David Schweikert, R-Arizona, and Don Beyer, D-Virginia, would require the IRS to establish a user-friendly real-time dashboard on IRS.gov to provide taxpayers with information on call volume, backlogs, wait times, and the availability of callbacks. It would require upgrades to the IRS's "Where's my Refund?" tool, "Where's my Amended Return?" tool, and individual online accounts. The IRS would need to provide more individualized information to taxpayers about the status of their refunds, reducing taxpayer questions and confusion. The bill would expand online accounts so taxpayers would be able to view their balance due, tax transcript and certain returns, and allow them to make payments and see whether certain notices were issued. The bill would also clarify that by 2028 the IRS should provide taxpayers with the option to receive a callback when calls are not answered within five minutes. The bill passed by a unanimous 43-0 vote.
The IRS Whistleblower Program Improvement Act (H.R. 7959), co-sponsored by Rep. Mike Kelly, R-Pennsylvania, and Mike Thompson, D-California, would provide a more favorable standard of review in whistleblower appeals before the U.S. Tax Court, allowing new evidence to be admitted to the record. The bill would protect whistleblowers from being compelled to identify themselves publicly when pursuing appeals before the court, allowing them to proceed anonymously when challenging an IRS action. It would encourage timely award payments to whistleblowers by imposing interest if the IRS fails to issue a preliminary award recommendation within 12 months. The bill would also align the tax treatment of attorney's fees for IRS whistleblowers with the standard applied under other federal whistleblower programs. The bill passed the committee by a unanimous 41-0 vote.
"The Ways and Means Committee continues to champion bipartisan solutions to address key challenges facing the American people," said committee chairman Jason Smith, R-Missouri, in a statement last Wednesday. "Whether it is ending the unfair tax treatment of sexual assault survivors, supporting early-childhood educators, or helping victims of natural disasters have more resources to rebuild, the committee has taken important steps to support Americans most in need of assistance. At the same time, reforms to the IRS Whistleblower Program will help maintain the integrity of our tax code and combat fraud, a key priority of this committee. Customer service upgrades and more online access to information will go a long way toward modernizing the IRS and providing the type of experience American taxpayers deserve. I commend my colleagues for working across the aisle to find common cause on these critical reforms."
