WASHINGTON — A bill introduced in the Senate that would provide tax relief for major disaster areas designated as such in 2012 and 2013 has several bond provisions, including one that would allow state and local governments to issue qualified disaster area recovery bonds.
The National Disaster Tax Relief Act of 2014, S. 2233, was introduced on April 9 and has been referred to the Senate Finance Committee.
The legislation was sponsored by Sen. Chuck Schumer, D-N.Y. and has several cosponsors. Schumer had proposed that a disaster tax relief amendment be included in the Senate Finance Committee's tax extenders bill, but the amendment was not voted on during the April 3 meeting where the committee passed the extenders package.
The disaster tax relief bill is similar to others Congress passed in the wake of the Sept. 11, 2001 terrorist attacks, hurricanes in 2005, and other recent major disasters, according to a release from bill cosponsors Michael Bennet and Mark Udall, both Colorado Democrats.
"Colorado has endured hell and high water over the past two years. I have been proud to champion our state's rebuilding effort, but we need to provide additional tax relief for disaster victims and business owners who are still working to rebuild in the wake of 2012 and 2013's wildfires and flood," Udall said. "The National Disaster Tax Relief Act ensures we provide the same helping hand to Coloradans that Congress has extended to Americans in the wake of other major disasters."
One section of the bill would create a new section of the Internal Revenue Code for the qualified disaster bonds, which would be treated as exempt-facility bonds. The bonds could be issued by states or other political subdivisions that are in areas affected by federally declared disasters that occurred in 2012 and 2013. At least 95% of the net proceeds of a bond issue would have to be used for the acquisition, construction or renovation of residential rental property, nonresidential real property, docks and wharves, mass commuting facilities or public utility property that was destroyed by a federally declared disaster.
The bonds would have to be issued before Jan. 1, 2016. They would not fall under state private-activity bond volume caps, but each state could not designate more than $10 billion of these bonds.
Bonds used to current refund the qualified disaster bonds would not count toward the $10 billion as long as the average maturity date of the refunding bond issue was not later than the average maturity date of the original bonds, and as long as the amount of the refunding bonds was not more than the amount of the bonds being refunded.
The bill would also allow one additional advance refunding for governmental bonds or one advance refunding of private-activity bonds for airports and docks and wharves if the issuer is in a state with a disaster area and the bonds being refunded were outstanding on the date the disaster occurred. Advance refundings would have to be done before Jan. 1, 2017. A maximum of $4.5 billion of these advance refunding bonds could be issued in each state.
Another section of the bill would allow certain mortgage revenue bond requirements to be relaxed if they serve people whose homes were destroyed or damaged during disasters occurring in 2012 and 2013.
The proceeds of MRBs can be used to finance mortgage loans and provide rehabilitation loans.
Normally, MRBs serve those who have not owned a home for at least three years, and the purchase prices of the homes financed have to be no more than 90% of the average area prices. But the bill would allow these bonds to be used for anyone whose principal home was destroyed or who was relocated because of a disaster in 2012 and 2013, and the purchase price could exceed 110% of the average area purchase price.
For those whose principal homes were damaged during a disaster, the bonds could be used to finance loans up to the cost of the rehabilitation or $150,000, whichever is smaller.
