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Committee on Ways and Means

For Immediate Release
Contact: Press Office 202-225-8933
September 9, 2002

Committee Action in Response to 9-11

In an ongoing effort to secure the homeland and help generate economic recovery, the Committee on Ways and Means has acted on legislation to assist victims of terror, help rebuild New York, and help the families of our brave men and women in uniform.

H.R. 2884 - Victims of Terrorism Tax Relief Act of 2001 - PUBLIC LAW

This legislation helps assist the survivors and victims of the tragedies that occurred in Washington, DC and New York City on September 11, 2001.

Reduce Estate Tax
  • Under current law, members of the Armed Forces who were killed while serving in a combat zone or who died as a result of injuries suffered while serving in a combat zone have reduced estate tax liability. This bill extended this estate tax treatment to individuals who died in connection with the September 11th terrorist attack.

Exemption from Income Tax in the Year of Death
  • Federal military and civilian employees are exempt from paying Federal income taxes in the year of their death if they die during (or as a result of injuries suffered in) a military or terrorist act outside of the United States. H.R. 2884 extended this income tax relief to individuals who died in connection with the September 11th terrorist attack.
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    Exempt from Taxation - United Airline Payments to Passengers

  • ·Exempted the $25,000 per passenger payments made by United Airline from Federal income taxes.
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    Exempt from Taxation -Charitable Organizations/Private Foundations Payments

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

    • Exempt from Taxation - FEMA Assistance Payments

  • Exempted FEMA assistance payments from Federal income tax.

    • H.R. 3090 - Job Creation and Worker Assistance Act - PUBLIC LAW

    H.R. 3090 provides much needed relief to displaced workers while helping to stimulate the investment climate for businesses. It includes incentives to bring hope and renewal to the troubled city of New York after the terrorist attacks.

    New York Reconstruction Incentives

  • Authorized $15 billion of tax-exempt bonds over the next three years for financing commercial, residential, rental, and public utility property in the Liberty Zone.

    • Enhanced a 30% bonus depreciation provision by: (1) extending the bonus to real property located in the zone and (2) extending the placed in service date to December 31, 2006 (or December 31, 2009 in the case of buildings.) Property financed with Liberty Bonds also qualifies for the bonus depreciation.

  • Reduced recovery period for leasehold improvements from 15 years to 5 years for leasehold improvements made to commercial buildings located in the Liberty Zone. Sunset for property placed in service after December 31, 2006.

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  • Increased small business expensing for qualifying property used in the Liberty zone by: (1) increasing the amount that may be expensed by an additional $35,000 (for a total of $70,000) and (2) providing that only 50% of the cost of qualifying will be used to determine the phase-out.

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  • Increased time period for reinvesting gains by allowing taxpayers to defer taxes on gains from insurance proceeds as long as the gains are reinvested in New York City within 5 years. Current law provides a 2-year time period in most cases.

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  • Allows certain employers in the Liberty Zone to claim a Work Opportunity Tax Credit for hiring or retaining employees in the Liberty Zone or in New York City if the employer was forced to relocate outside of the Liberty Zone.
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    H.R. 5005 - Homeland Security Act of 2002

    This legislation creates a new cabinet agency, the Department of Homeland Security. Ways and Means passed legislation that transfers the U.S. Customs Service to this new agency to help assist in the defense of the nation.

    Role of the U.S. Customs Service
    • Transfers the Customs Service in its entirety to the Department of Homeland Security Division for Border and Transportation Security.
    • Identifies revenue-related offices and functions within Customs (about 25% of the agency) and prohibits reorganization or decrease in their funding or staff or reductions to Title V pay and benefits levels.
    • Requires that adequate staffing of customs revenue services be maintained, and requires notice to Congress of actions that would reduce such service.
    • Maintains the Commissioner of Customs as Senate-confirmed.
    • Transfers all authority exercised by Customs to Homeland Security with the exception of revenue collecting authority, which would remain at the Treasury Department. Treasury may delegate this authority to Homeland Security.
    • Specifies that a portion of the Customs Merchandise Processing Fee must go to build the new Customs computer, which Governor Ridge has stated will likely be the cornerstone of the new Department’s architecture.

    H.R. 5063 - Armed Services Tax Fairness Act of 2002

    This bill helps members of the Armed Services and their families by offering them tax relief and leveling the playing field to allow those on active duty to take advantage of the existing capital gains tax relief on home sales.

    Tax-Free Death Gratuity Payments

    • Historically, members of the military have received $3,000 gratuity death payments tax-free.

    • In 1991, the gratuity death payment was increased from $3,000 to $6,000. The Tax Code was not adjusted to reflect the increased amount. As a result, only the first $3,000 of the death payment is tax-free under current law, and the rest is taxable.

    • This legislation amends the Tax Code to provide tax-free treatment for the full $6,000 gratuity death payment to members of the Armed Services.

    Tax Relief on Capital Gains of Home Sales

    • Under present law, an individual is not subject to capital gains tax on the first $250,000 ($500,000 for a married couple) of gain on the sale of a home if they have lived in the home for 2 out of the past 5 years.

    • When members of the Armed Forces are transferred, they are often precluded from taking advantage of this tax relief because they are unable to satisfy the 5-year rule.

    • The legislation brings equity to the Tax Code by ignoring time spent away from home when calculating the 5-year period. In essence, the rule places military personnel in the same position they would have been in had they not been transferred.

    Hearing on Response by Charitable Organizations to the Terrorist Attacks

    Over $1 billion was collected by charitable organizations to help the victims of the September 11th tragedy.
    • The Oversight Subcommittee held a hearing on November 8, 2001 to ensure that charitable organizations are meeting their promise to assist victims.

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