As previously reported, Troy K. Lewis, chair of the Tax Executive Committee of the AICPA, spoke to a Senate panel on Tuesday, urging Congress to pass legislation that would give natural disaster victims access to permanent and prompt tax relief.
“Our current system provides inconsistent tax relief,” Lewis testified at a hearing of the Senate Finance Subcommittee on Taxation and IRS Oversight. “In the past, Congress has considered each disaster as an isolated event and restricted any special tax relief to the individual event.”
This results in similar taxpayers receiving different tax benefits for comparable losses, Lewis explained. “It is important that all victims regardless of the state in which they reside or the type of disaster they endure receive comparable relief.”
Lewis urged that tax relief should be enacted as soon as a federal disaster declaration is issued in the future: “By having a trigger mechanism in place," he explained, "Congress allows the IRS to promptly issue notice of the available relief to the public and enables the IRS to program its systems appropriately.”
“Under the current system,” he continued, “individuals and small business owners do not know what tax relief they will receive until Congress enacts legislation sometimes months or even years after the event. The uncertainty surrounding such delayed relief impedes recovery.”
Lewis went on to outline 10 permanent recommendations that the AICPA believes should be activated when a taxpayer (or their business) resides in a disaster declaration area, including:
- Waive individual casualty loss minimums
- Waive the penalty for early retirement withdrawal
- Exclude non-business discharge of indebtedness from taxable income
- Extend the net operating loss carryback to five years
- Increase the property replacement period to five years
For the full written testimony, head to the AICPA's site here.