RIA is reporting:
Late on Tuesday, September 20, House and Senate negotiators reached agreement on H.R. 3768, the “Katrina Emergency Tax Relief Act of 2005” (KETRA). On Wednesday, September 21, the House approved the measure by a unanimous vote, and late in the evening of Wednesday, September 21, the Senate passed it by unanimous consent. The President is expected to sign the measure into law.
Summary of Employment and Benefits-Related Provisions Taken from the Committee on Ways and Means Summary of the House-Senate Agreement:
Waives 10-percent tax on early distributions from IRAs and pensions for individuals affected by the hurricane. In general, distributions from IRAs and pensions are subject to a 10-percent penalty if they are made before a certain age. The penalty is intended to discourage individuals from withdrawing funds that are needed for retirement. To ease the financial burden faced by many families in the disaster area, the proposal allows eligible individuals to withdraw a maximum of $100,000 from their IRAs and pensions without paying the 10-percent penalty. Individuals eligible for the waiver may pay income tax on the distribution over three years. Income tax is not due if the distribution is repaid to the account within three years. The proposal also increases the limit on loans from pension plans from $50,000 to $100,000.
Provides an Employee Retention Tax Credit. Small employers located in a disaster area that is eligible for individual and public assistance under the Stafford Act may claim a tax credit through the end of the 2005 calendar year if they retain an eligible employee on their payroll. The tax credit equals 40 percent of the first $6,000 of wages paid to the employee between August 28, 2005 and January 1, 2006. The credit is available to small employers (i.e., an average of 200 or fewer employees in the taxable year) whose business is inoperable as a result of damage sustained by Hurricane Katrina. The credit is not affected if the employee reports to work at another location while the business is inoperable.
Extends deadlines for paying excise and employment taxes. The IRS has taken administrative action to extend the deadlines for filing tax returns and making tax payments until January 3, 2006. These extensions apply to income, estate and gift taxes for those affected by Hurricane Katrina. The proposal extends the deadline until February 28, 2006. The proposal also applies this extension to excise taxes and employment taxes, in addition to income, estate and gift taxes.
Comment: The text of the legislation provides that Section 72(t) of the Code shall not apply to any “qualified Hurricane Katrina distribution” not exceeding $100,000. A ‘‘qualified Hurricane Katrina distribution’’ is defined as “any distribution from an eligible retirement plan made on or after August 25, 2005, and before January 1, 2007, to an individual whose principal place of abode on August 28, 2005, is located in the Hurricane Katrina disaster area and who has sustained an economic loss by reason of Hurricane Katrina.” “Eligible retirement plan” is defined in section 402(c)(8)(B) of the Code (which includes qualified plans, IRAs, 403(b)’s, and 457 plans).
You can access the text of the legislation here: Legislative Text of House-Senate Agreement on H.R. 3768 (September 21, 2005).