[Congressional Record Volume 150, Number 135 (Saturday, November 20, 2004)]
[Senate]
[Pages S11797-S11798]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




  TAXATION OF FEDERAL EMERGENCY MANAGEMENT ADMINISTRATION MITIGATION 
                                 GRANTS

 Mr. NELSON of Florida. Mr. President, in these final days of 
the 108th Congress, I would like to call attention to an issue of great 
consequence to the people of Florida and to other States that recently 
have been victimized by natural disasters.
  This year, four hurricanes wrought a path of damage and destruction 
across Florida and other areas. The U.S. Congress was quick to provide 
Federal relief for victims of the storms, and we are grateful for this. 
Yet a June Internal Revenue Service ruling determines that this 
assistance ought to be taxed.
  This means that if a homeowner accepts a $25,000 Federal grant to 
elevate their flood prone home, the grant would be included in their 
taxable income. This unexpected tax liability could be financially 
devastating to a retiree living on a fixed income after already having 
faced the costs of hurricane cleanup. It also creates a strong 
disincentive for homeowners to participate in Federal mitigation 
programs,

[[Page S11798]]

increasing the risk of damage and expense in future disasters. The IRS 
policy runs counter to good public policy and common sense.
  Senator Kit Bond and Representative Mark Foley have introduced S. 
2886 and H.R. 5206, respectively, identical bills that would fix this 
problem by exempting mitigation grants from being included as taxable 
income. These bills have drawn support from both sides of the aisle and 
a large number of the Florida Congressional delegation. I am 
disappointed that we will not have an opportunity to pass these bills 
before Congress adjourns. If we fail to act early on in the 109th 
Congress, come April, some homeowners could be in for a rude awakening 
in the form of a higher tax bill from the IRS.
  To help ease the minds of Floridians and other Americans living in 
disaster prone areas of the country, I joined Senator Landrieu in 
sending a letter to Finance Committee Chairman Grassley and Ranking 
Member Baucus asking them to direct the Treasury and the IRS to delay 
implementing this policy until Congress has the opportunity to act.
  I will continue to work with my colleagues in the Senate to find a 
solution to this problem.

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