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New Markets Tax Credit: Hurricane Sandy Legislation


Key Takeaways

  • Proposed legislation would create a $250,000,000 allocation pool to be used in the Hurricane Sandy federal disaster area
  • CDEs with a history of successful development efforts within the disaster areas would be given priority over other CDEs

August 2013

The following was distributed as part of the New Markets Tax Credit Connection - Summer 2013 newsletter.

In the wake of delays to provide a federal aid package for the Hurricane Sandy relief effort, a bipartisan coalition from the House of Representatives introduced legislation to provide additional tax relief to those affected by the second costliest hurricane in United States history. Modeled after legislation passed in the aftermath of Hurricane Katrina, the bill would allow for, among other things, a special allocation of $250,000,000 of new market tax credit (NMTC) investment authority to be used in Hurricane Sandy disaster areas. The Hurricane Sandy Tax Relief Act of 2013 (H.R. 2137) was introduced on May 23, 2013 by Representative Bill Pascrell, Jr. (D-NJ) with co-sponsors from New Jersey, New York , Connecticut, Rhode Island, and Georgia.

As a whole, the bill provides tax relief for both individuals and businesses located in designated Federal Disaster Areas in the hopes of spurring and enhancing recovery efforts.  Community development entities (CDEs) with a proven track record of successfully providing capital or technical assistance to businesses or communities within the disaster area would be given priority over other CDEs.  The proposed effective date for the increased NMTC allocation is for calendar years beginning after 2011.

Other highlights of the bill include:

  • an exemption from the gross income limitation for deducting casualty losses attributable to Hurricane Sandy;
  • expensing allowances for Hurricane Sandy disaster expenses, disaster assistance property, and environmental remediation expenses;
  • treatment of losses attributable to Hurricane Sandy as net operating losses;
  • an increased charitable tax deduction for Hurricane Sandy disaster relief contribution;
  • a work opportunity tax credit for hiring employees residing in the Hurricane Sandy disaster area;
  • an additional allocation of low-income housing credits in states affected by Hurricane Sandy; and
  • an exemption from the 10% penalty for premature distributions from a retirement plan to individuals residing in the Hurricane Sandy disaster area.
     

No major actions have been taken on the bill and it is currently sitting with the House Committee on Ways and Means.

Contact:

For more information, please visit the CohnReznick New Markets Tax Credit webpage and contact David Norton, Partner and Editor, at 410-895-7827 or Kevin Beattie, Senior Manager, at 410-783-6208.


Circular 230 Notice: In compliance with U.S. Treasury Regulations, the information included herein (or in any attachment) is not intended or written to be used, and it cannot be used, by any taxpayer for the purpose of i) avoiding penalties the IRS and others may impose on the taxpayer or ii) promoting, marketing, or recommending to another party any tax related matters.

This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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