Congressman Dave Loebsack (D-IA) introduced legislation giving Midwesterners more time to utilize tax relief measures enacted to provide critical relief and assistance to Iowans and other Midwesterners affected by last year’s floods, tornados, and severe storms. Senator Chuck Grassley of Iowa has introduced similar legislation in the Senate.

“With the floods of last summer and the current economic downturn, Iowans are still struggling to rebuild their homes. Far too many Iowans are at a standstill, waiting for their housing situation to be resolved as they strive to put their lives back together,” said Congressman Loebsack. “By extending these tax relief measures, we will continue to provide Iowans with the tools to help homeowners recover and build a stronger, better Iowa.”

“This tax relief was meant for disaster victims. Through no fault of their own, many people haven’t been in a position to use it,” Senator Grassley said.  “It’s only fair to extend the tax relief and give these homeowners the chance to recover and rebuild. Having legislation filed in both the Senate and House should strengthen the argument for prompt action by Congress. We’re still extending tax relief for Katrina recovery efforts, and the victims of floods and severe weather in the Midwest last year deserve equitable treatment.”

Last year, Congressman Loebsack helped craft the Heartland Disaster Tax Relief Act of 2008, which was signed into law on October 3, 2008. The bill gave temporary tax relief to Iowans, and other Midwesterners.  

Several tax provisions from last year’s disaster tax relief bill will expire after Dec. 31, 2009. The extender bill will extend the following provisions:

•    Removes IRA and Retirement Withdrawal Penalties: A one year extension that will allow taxpayers to use their IRA or retirement accounts to continue repairs on their homes or purchase a new primary residence. There are hundreds of taxpayers who are in rental situations or temporary housing waiting to have confirmation on their buyout proceeds before they make offers on permanent housing. They may find that they do not have the financial resources to find a replacement home. This bill would amend the original legislation to give taxpayers an additional year to use their retirement plans to help them rebuild.

•    One-year Suspension of Retirement Loan Repayments: A one year extension that will provide disaster victims who have borrowed from their retirement account for disaster recovery an additional year to repay their own account without penalty. Without an extension, many taxpayers will have to begin paying back their loans before receiving their net proceeds, be penalized by their plan, or face default.

•    Exclusion of Certain Indebtedness: A one-year extension of the provision allowing disaster victims whose banks cancel their mortgage debt to not have that cancelled debt counted as taxable income. This bill will allow taxpayers whose acquisitions occur in 2010 and who are able to have their debt cancelled, to avoid having that cancellation counted as taxable income.  

Congressman Loebsack has been instrumental in securing help for Midwestern disaster victims.  The original Heartland Disaster Tax Relief legislation was a $4.6 billion disaster tax relief package exclusively to help Iowa and nine other Midwestern states recover and rebuild from the spring 2008 floods and tornadoes. The measured included an additional $3.5 billion for general disaster tax relief for other disasters nationwide, including those in Iowa. Congressman Boswell, Congressman Braley, Congressman Latham, and Congressman King are original co-sponsors of the extension bill.