Washington (Nov. 3, 2003) -- The Treasury Department and the Internal Revenue Service have confirmed that taxpayers will be able to receive tax-free periodic payments from the September 11th Victim Compensation Fund.
"As part of our continued effort to provide guidance to the victims and survivors of the September 11th terrorist attacks, we are pleased to be able to clarify the tax treatment of the September 11th Victim Compensation Fund payments they receive,” said Treasury Secretary John Snow. “Helping these families is the least we can do.”
In 2001, Congress established the Fund to make payments to victims and survivors of the September 11th terrorist attacks. To receive an award, either as a lump sum or periodic payments, a claimant generally must file a claim with the Fund no later than December 22, 2003.
The Fund, administered by a Special Master of the Department of Justice, initially paid out lump sums (generally at least $250,000 in the case of a deceased victim). In the case of certain survivors, especially children, it appeared that some claimants would prefer to have their compensation spread out over time, in the form of "periodic payments," rather than to receive immediately the entire lump sum. Lump sum compensation for physical injury or death generally is tax-free. Revenue Ruling 2003-115, issued by Treasury and the IRS, clarifies that periodic payments from the Fund also will be tax-free to a claimant as long as the claimant elects periodic payments before his or her claim is substantially complete, in accordance with the application process established by the Fund. The ruling sets forth specific deadlines for claimants in particular situations.
-- WebCPA staff
