Victims’ Tax Relief Bill En Route to President Bush

Chairman Thomas Delivers on Promise to Complete It by Christmas

WASHINGTON – Families who lost a loved one on September 11 received a helping hand today from lawmakers.

A bipartisan, bicameral agreement was reached in Congress on legislation to provide tax relief for victims’ families. The House and Senate both passed H.R. 2884 this afternoon and the President is expected to sign it in short order.

“Christmas is an especially difficult time of year when you’ve lost someone. Our hearts go out to the parents, children, family and friends of the victims,” Ways and Means Chairman Bill Thomas said.

“I want to note that the final act of both the House and the Senate in 2001 is a small but important gesture to the victims of terrorism—an act that fundamentally changed lives on September 11. As we close this Congress for the holiday season, we want this to be a gesture, small though it may be, to the victims of September 11,” Thomas said.

A summary of the legislation, H.R. 2884, will follow.

Victims’ Tax Relief Act, Summary of H.R. 2884

Provides tax relief for victims of September 11, Oklahoma City bombing and anthrax attacks.

Income tax relief - Waives income tax liability for the year of death and the year prior to death for victims. A special rule would provide a minimum benefit of $10,000 to each victim. Include (but improve) Senate language that limits opportunities for tax avoidance.

Estate tax relief - Provide a new estate tax rate structure that would effectively shield the first $8.5 million of the estate from Federal estate tax and the first $3 million of the estate from State estate tax.

Exclusion for special death benefits - Provide tax-free treatment of death benefits paid by an employer to an employee solely because the employee died as a result of the September 11, Oklahoma City bombing or anthrax attacks.

Charitable organizations and private foundations - Allow charitable organizations to make pro rata payments prospectively to families of victims without demonstrating financial need. Allow employers to set up private foundations for the purpose of making payments to families of employees who died.

Discharge of indebtedness - Provides that income resulting from the discharge of indebtedness in 2001 is tax-free.

Provides general tax relief provisions for victims of terrorist/military actions, Presidentially-declared disasters, and certain other disasters.

Clarifies that disaster relief payments (including payments made from the Victims Compensation Fund) are tax-free.

Expands IRS, DOL and PBGC authority to postpone tax-related and pension-related deadlines for taxpayers affected by these disasters.

Protects victims who sell structured settlements. Creates a 40 percent excise tax on transactions in which structured settlement payments are sold for a lump sum unless the transaction is approved by a court as being in the victim’s best interest.

Reduces the taxation of disability trusts. Increases the exemption amount for disability trusts from $100/$300 to $3,000.

Expands IRS disclosure rules. Allows the IRS to share tax return and taxpayer information with Federal law enforcement agencies investigating terrorist attacks. The new rules would sunset after three years.

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