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Committee on Ways and Means

For Immediate Release
Contact: Press Office 202-225-8933
January 23, 2002

President Bush Signs Victims' Tax Relief Bill

WASHINGTON -- Families suffering the loss of a loved one on September 11 were given a helping hand with President Bush's signature on the "Victims' Tax Relief Act."

"It is a small, but important gesture for families who have lost so much," said Ways and Means Committee Chairman Bill Thomas (R-CA). 

Thomas, who introduced the legislation just 48 hours after the attack on America, also finalized negotiations between the House and Senate on December 21.  

"The families were counting on us to pass this bill before Christmas and we did," Thomas said.  "We had made a commitment to them, and failure to deliver was never an option.  A bipartisan, bicameral compromise was ultimately achieved, and the President's signature today secures our promise."

A summary of the legislation, H.R. 2884, follows.

Summary of Victims’ Tax Relief Act

• 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.