Disaster Relief Bill With Bond Provisions Introduced in the House

WASHINGTON — Rep. Tom Reed, R-N.Y., earlier this month introduced a disaster tax relief bill in the House that includes several bond provisions and is similar to legislation pending in the Senate.

The bill in the House, The National Disaster Tax Relief Act of 2014, or H.R. 5082, has been referred to the House Ways and Means Committee. It is nearly identical to a bill with the same name that was introduced in the Senate in April by Sen. Chuck Schumer, D-N.Y.

The main difference between the bills is that Reed's would provide relief for major disaster areas declared in 2012, 2013, 2014, while Schumer's, S. 2233, focuses on areas declared disasters by the federal government in only the first two of those years.

The bills would create a new section of the Internal Revenue Code for qualified disaster bonds, which would be treated as exempt-facility bonds. In both bills, the bonds could be issued by states or other political subdivisions that are in areas affected by federally-declared disasters that occurred within the specified years.

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 issue 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 bills also would 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 bills would allow certain mortgage revenue bond requirements to be relaxed if they serve people whose homes were destroyed or damaged during disasters occurring in certain years. In the bill in the Senate, the rules are eased for homes hurt by 2012 and 2013 disasters, and in the bill in the House, the rules are also relaxed for homes hurt by 2014 disasters.

MRBs are private-activity bonds whose proceeds can be used to finance mortgage loans and provide rehabilitation loans. Normally, MRBs finance the mortgages of those who have not owned a home for at least three years, and the purchase prices of the residences being bought have to be no more than 90% of the average area prices.

But the bills would allow proceeds of these bonds to be used by any person whose principal home was rendered unsafe or destroyed or who was relocated because of a disaster occurring in the specified years. The purchase price of homes bought by these people could exceed 110% of the average area purchase price.

For those whose principal homes were damaged during a disaster in the specified years, MRBs could be used to finance loans up to the cost of the rehabilitation or $150,000, whichever is smaller.

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