Tom Rice (R) of South Carolina introduced the Disaster Tax Relief Act of 2019 (H.R. 2145) in the United States House of Representatives. The purpose of this proposed legislation is to provide tax-related relief to victims of presidentially declared disasters that occurred after January 1, 2018 and before the enactment date this Act.
Tax relief specific to retirement savings arrangements include the following and applies to distributions taken from IRAs and tax-qualified employer-sponsored retirement plans.
- Qualified disaster distributions would include amounts not to exceed the excess (if any) of $100,000, over the aggregate of any qualified disaster distributions received by the individual in all prior taxable years, received by an individual whose principal residence was located in a qualified disaster area and who suffered economic loss as a result.
- Qualified distributions would include those taken on or after the date the qualified disaster incident began and on or before December 31 of the year after the year in which the qualified disaster incident began.
- The 10 percent excise tax for early distributions would not apply to qualified disaster distributions.
- Such distributions could be repaid over a three-year period, beginning on the day after the distribution was received.
- Qualified disaster distributions from employer plans would not be subject to mandatory 20 percent withholding.
- Inclusion in income of qualified disaster distributions would be done ratably over a three-year period, unless a taxpayer chose otherwise.
- Certain retirement plan distributions taken for purchase of a principal residence, but not used due to disaster events, could be recontributed.
- Loan amounts up to $100,000 could be taken from an eligible employer retirement plan.
- Plan loan repayments following disaster events could be delayed up to a year; this delay would not alter loan amortization (in effect, lengthening a five-year amortization period).
- A plan amendment necessary to comply with these provisions could be made up to and including the last day of the 2020 plan year, or a later date if prescribed by the Secretary of the Treasury (governmental plans two years later).
The bill was referred to the House Committee on Ways and Means following its introduction. The prospect of enactment is unclear at this time. Watch the news at ascensus.com for progress of this legislation, as warranted.