Tax Planning

Hurricane Harvey Relief Information

From Bloomberg BNA


Federal and State Tax Relief to Residents of the Gulf States

The destruction caused by Hurricane Harvey has prompted certain federal and state tax relief to residents of the Gulf States that are similar to tax relief offered in previous natural disasters such as the Louisiana flood and Hurricane Matthew.

The IRS issued guidance providing for extended filing deadlines, allowing 401(k) plans and similar employer-sponsored retirement plans to make loans and hardship withdrawals to victims and waiving the penalty applicable to dyed diesel fuel sold for use or used on highways.

The President declared Hurricane Harvey as a qualified natural disaster under §401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, which allows individual or individual and public assistance from the federal government under that Act for damages attributable to the natural disaster.

The following relief is available from the IRS: Filing Deadlines* –

Hurricane Harvey victims in parts of Texas have until January 31, 2018, to file certain individual and business tax returns and make certain tax payments

o Postpones various tax filing and payment deadlines that occurred starting on August 23, 2017

o Includes an additional filing extension for taxpayers with valid extensions that run out on October 16, and businesses with extensions that run out on September 15

o Includes the September 15, 2017, and January 16, 2018, deadlines for making quarterly estimated tax payments

o Includes a variety of business tax deadlines, including:

The October 31 deadline for quarterly payroll and excise tax returns

The late-deposit penalties for federal payroll and excise tax deposits normally due on or after August 23 and before September 7, if the deposits are made by September 7, 2017

o Does NOT include 2016 individual return tax payments because the payments were originally due on April 18, 2017, Loans and Hardship Distributions From 401(k) Plans and Other Employer-Sponsored Retirement Plans** –

Streamlines procedures for participant documentation to receive loans and hardship distributions from 401(k) plans, 403(b) tax-sheltered annuities, and governmental 457(b) plans

Applies to loans and hardship distributions made between August 23, 2017, and January 31, 2018

Plans do not have to currently permit loans or hardships; however, such plans must be amended to include loans and/or hardships no later than the end of the 2018 plan year

Retirement plans can provide this relief to employees and certain members of their families who live or work in disaster area localities affected by Hurricane Harvey and designated for individual assistance by the Federal Emergency Management Agency (FEMA)

The 6-month ban on 401(k) and 403(b) contributions that normally affects employees who take hardship distributions will not apply

Plans can go beyond the safe-harbor reasons for hardship distributions, thus allowing them, for example, to be used for food and shelter

IRA owners may not take loans but may be eligible to receive distributions with reduced documentation requirements Waiving Penalty For Dyed Diesel Fuel Sold for Use or Used on Highways*** –

Available to any person that sells or uses dyed fuel for highway use beginning August 25, 2017, through September 15, 2017

Operator of the vehicle in which the dyed fuel is used must pay the $0.244 per gallon tax normally applied to diesel fuel sold for highway use

No imposition of penalties for failure to make semimonthly deposits of tax Leave Based Donation Programs –

Employees may forgo their vacation, sick, or personal leave in exchange for cash payments the employer makes, before January 1, 2019, to charitable organizations providing relief for victims

Donated leave will not be included in the income or wages of the employees

Employers will be permitted to deduct the cash payments as business expenses

Details are provided in Notice 2017-48 The IRS also issued a warning about possible fake charity scams emerging due to Hurricane Harvey and encouraged taxpayers to seek out recognized charitable groups for their donations. In addition, several states, including Texas and Alabama, are offering tax relief similar to relief offered by the IRS, providing individual and business tax filing and payment extensions.

Out-of-state businesses performing disaster relief assistance in Texas may qualify for exemptions from sales and use and other business taxes.

Texas also suspended collection of state and local hotel taxes through September 6, 2017, has lifted state restrictions on the taxable sale and use of dyed diesel fuel for highway use in state declared disaster areas through September 15, 2017, and has waived International Fuel Tax Agreement (IFTA) requirements through September 30, 2017. *Includes most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns), that have either an original or extended due date occurring on or after Aug. 23, 2017, and before Jan. 31, 2018 for the counties designed by FEMA. A list is available at https://www.fema.gov/disaster/4332



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