Tax News

CCH (cch.taxgroup.com) reports:

  The IRS has adopted final regulations relating to the reduction in taxable income under section 302 of the Katrina Emergency Tax Relief Act of 2005 (KETRA) (P.L. 109-73) and section 702 of the Heartland Disaster Tax Relief Act of 2008 (HDTRA) (Title VII of Division C of P.L. 110-343). The regulations finalize 2006 temporary regulations that affected taxpayers who provide housing in their principal residences to individuals displaced by Hurricane Katrina. The reach of the final regulations has been expanded to also cover taxpayers who provide housing in their principal residences to individuals displaced due to a 2008 Midwestern disaster.

  Section 702 of HDTRA, enacted on October 3, 2008, applied section 302 of KETRA to the Midwestern disaster. The Midwestern disaster area is an area with respect to which a major disaster was declared by the president under section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (P.L. 100-707) by reason of severe storms, tornadoes or flooding on or after May 20, 2008, and before August 1, 2008, in the following states: Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska and Wisconsin. The applicable disaster date for each state in the Midwestern disaster area is the date of the severe storm, tornado, or flooding giving rise to the presidential declaration for that state. The reduction in taxable income for providing housing to a displaced individual in a Midwestern disaster area applies to tax years beginning in 2008 or 2009.

  The final regulations, in addition to expanding the scope of the temporary regulations to include taxpayers who provide housing in their principal residences to Midwestern disaster displaced individuals, clarify that the limitations on the reduction in taxable income apply separately to the Hurricane Katrina disaster area and the Midwestern disaster area. As a result, a taxpayer who, for example, provides housing to both Hurricane Katrina and Midwestern disaster displaced individuals may reduce taxable income by up to $2,000 for providing housing to Midwestern disaster displaced individuals, even though the taxpayer reduced taxable income for providing housing to Hurricane Katrina displaced individuals.

  The temporary regulations provided that the maximum dollar limitation for a married individual who files separately is $1,000. The final regulations provide that the maximum dollar limitation is $2,000 for married taxpayers filing jointly or separately. Married taxpayers filing separately may allocate the $2,000 between both returns.

  The final regulations authorize the IRS to apply these rules in additional guidance of general applicability if Congress extends relief under section 302 of KETRA to other future disaster areas.

  The final regulations apply to tax years ending after December 11, 2006. Taxpayers who, after filing their tax returns for 2006 or 2008 as married filing separately, want to apply the rule allowing them to allocate the $2,000 maximum limitation between them may do so by filing amended returns, so long as the period of limitations on credit or refund under Code Sec. 6511 has not expired.

T.D. 9474, 2009FED ¶47,042

Other References:

 
Code Sec. 151

  CCH Reference - 2009FED ¶8004M

  Tax Research Consultant

  CCH Reference - TRC FILEIND: 6,050