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Katrina Emergency Tax Relief Act of 2005, October 24, 2005 1 (October 24, 2005)

handle is hein.tera/crstax0099 and id is 1 raw text is: Order Code RS22269 Updated October 24, 2005 ACRS Report for Congress Katrina Emergency Tax Relief Act of 2005 Erika Lunder Legislative Attorney American Law Division Summary On September 23, 2005, President Bush signed the Katrina Emergency Tax Relief Act of 2005 (KETRA; H.R. 3768) into law, P.L. 109-73. It primarily contains temporary tax relief intended to directly and indirectly assist individuals in recovering from Hurricane Katrina. The provisions cover a variety of areas, including work credits, charitable giving, and casualty losses. This report summarizes the act. The Katrina Emergency Tax Relief Act of 2005, P.L. 109-73, provides tax relief that is intended to assist the victims of Hurricane Katrina.' Some of its provisions distinguish between the Hurricane Katrina disaster area, which is the presidentially declared disaster area, and the core disaster area, which is the portion of the disaster area determined by President Bush to warrant individual or individual and public assistance under the Stafford Act. Title I - Use of Retirement Funds for Hurricane Katrina Relief Section 101 waives the 10% penalty tax that would otherwise apply on an early withdrawal from a retirement plan2 if the individual's principal place of abode on August 28, 2005, was in the Hurricane Katrina disaster area and the individual sustained an economic loss due to the Hurricane. The section applies to distributions made between August 24, 2005, and January 1, 2007, and the maximum amount that be withdrawn without penalty is $100,000. The funds may be re-contributed to a qualified plan over a three-year period and receive tax-free rollover treatment. Additionally, with respect to the taxable portion of the distribution, the individual may include one third of such amount in his or her income for three years rather than the entire amount in the year of distribution. Section 501 is the act's sole provision that does not deal with tax relief. It designates any part of the act that has an effect on receipts, budget authority, or outlays to be an emergency requirement pursuant to section 402 of H.Con.Res. 95. 2 IRC § 72(t). Congressional Research Service -f-! The Library of Congress Prepared for Members and Commitees of Congress

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