[Congressional Record Volume 150, Number 123 (Monday, October 4, 2004)]
[Senate]
[Page S10368]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BOND:
  S. 2886. A bill to amend the Internal Revenue Code of 1986 to exclude 
from gross income certain hazard mitigation assistance; to the 
Committee on Finance.
  Mr. BOND. Mr. President, I rise today to introduce legislation 
concerning a critical issue this year--disaster assistance. This has 
been one of the worst hurricane seasons that Florida has seen in recent 
years. The Sunshine State has been battered by four hurricanes in the 
past six weeks. I extend my deepest sympathies to the residents of 
Florida where some have had to evacuate more than three times during 
this hurricane season only to return home and find their homes leveled, 
their crops uprooted, their neighborhoods flooded, and their dreams 
shattered.
  In my home State of Missouri, we are no strangers to natural 
disasters. Located smack in the middle of Tornado Alley, Missouri has 
been hit by some of the largest storms in U.S. in history. In May of 
2003, a string of tornadoes ripped through the western part of the 
State causing major damage and devastation.
  With two rivers--the Mississippi and the Missouri--we have also seen 
our fair share of flooding through the years. I will never forget when 
the Mississippi River breached its banks in 1993--one of the most 
devastating floods in U.S. history. Of the nine Midwestern States 
affected, the State of Missouri was the hardest hit and State officials 
estimate that damages totaled $3 billion.
  While both the Mississippi and Missouri Rivers have made the State of 
Missouri susceptible to riverine flooding, the State is also 
susceptible to flash flooding. A case in point is the city of Union, 
located about 45 minutes from St. Louis, which suffered tremendous 
damage from a severe flash flood in May of 2000.
  I mention the city of Union as a specific example of the benefits 
that a disaster mitigation program can hold in flash-flood situations. 
After the flood, the City of Union applied to the State of Missouri 
Emergency Management Agency to seek help in a demolition and 
acquisition project. With the mitigation grant money, 17 properties 
were acquired in residential areas with substantial damage. These 
properties are now dead restricted for ``open space,'' which will 
prevent future development and the potential for flash flood related 
deaths in that area because many of the homes and people will no longer 
be in harm's way. This is an excellent example of the value of disaster 
and mitigation money invested by the federal, state and local 
governments.
  Over the years, the State of Missouri has worked with the Federal 
Emergency Management Agency (FEMA) to build structures that prevent 
flooding and other damage from occurring when natural disasters strike. 
Time and time again, FEMA has come to the rescue by establishing 
funding for disaster relief and mitigation activities within the State 
of Missouri and in other States across the country.
  Having served as the Chairman of the Senate Appropriations 
Subcommittee on VA, HUD, and Independent Agencies, which until recently 
oversaw FEMA, I know first hand the value of the agency's disaster 
mitigation grant programs--the Hazards Mitigation Grant Program (HGMP), 
the Pre-Disaster Mitigation program (PDM), and the Flood Mitigation 
Assistance (FMA) program. Designed to manage future emergencies, these 
programs have been essential to countless communities, and without 
them, thousands of lives would be in jeopardy.
  Recently, some very disturbing news was brought to my attention. 
According to a June 2004 legal memorandum issued by the Internal 
Revenue Service (IRS), FEMA mitigation grants may be subject to income 
taxation. While some may argue that this is merely the IRS's 
interpretation of the statute, it is clearly the position the IRS 
intends to take against American taxpayers whose only recourse will be 
to fight the agency in court.
  I must say that I am absolutely stunned by this determination by the 
IRS!! How in the world could the IRS possibly think that Congress 
intended to tax these types of grants to prevent natural disasters, 
especially when we went out of our way to ensure that disaster-relief 
payments to individuals recovering from a hurricane, flood, tornado or 
other natural disaster are not subject to income taxes?
  Today, I am offering a bill that will stop the IRS in its tracks and 
prevent the taxation of disaster mitigation grants. This language will 
ensure that any Federal grants, as well as state grants indirectly 
associated with this program, will not be deemed to be income by the 
IRS's tortured reasoning. This bill will be effective as of the 
beginning of this year to ensure that any grants currently out there, 
especially in light of the current hurricanes that have happened, are 
not subject to tax. In addition, there should be no inference by this 
legislation that Congress intended such grants to be taxable prior to 
the effective date of this legislation.
  Why is this important? Why am I out here today? Because the Missouri 
and Mississippi Rivers rise, because tornadoes will ravage through the 
state once again, and because flash flooding can decimate an entire 
community. The last thing Americans who are working to prevent such 
potential destruction need is for government-grant funding to be 
subject to tax. My bill ensures that such taxes do not see the light of 
day.
  I urge my colleagues to support this important legislation, and I ask 
unanimous consent that the text of the bill be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record as follows:

                                S. 2886

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. EXCLUSION FROM GROSS INCOME FOR CERTAIN DISASTER 
                   MITIGATION PAYMENTS.

       (a) In General.--Section 139 of the Internal Revenue Code 
     of 1986 (relating to disaster relief payments) is amended by 
     adding at the end the following new subsection:
       ``(g) Certain Disaster Mitigation Payments.--Gross income 
     shall not include the value of any amount received directly 
     or indirectly as payment or benefit by the owner of any 
     property for hazard mitigation with respect to the property 
     pursuant to the Robert T. Stafford Disaster Relief and 
     Emergency Assistance Act or the National Flood Insurance 
     Act.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years ending on or after December 31, 
     2004.

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