Overview

Title

To provide tax relief for damages relating to Hurricanes Helene and Milton.

ELI5 AI

H.R. 140 is like a helping hand for people who were caught in big storms named Helene and Milton. It lets them use special money rules, like pretending they earned more money last year to get extra help when they lost some this year, and gives them more freedom to use their savings without penalties.

Summary AI

H.R. 140, also known as the "Hurricane Helene and Milton Tax Relief Act of 2025," aims to provide tax relief to individuals affected by Hurricanes Helene and Milton. It allows eligible people to use their previous year's income to claim the Earned Income Tax Credit and increases the limit on tax-deductible charitable contributions for hurricane relief. The bill also includes special provisions for tax-favored retirement fund withdrawals and loans to help those impacted by the hurricanes. Additionally, it sets rules for recontributing withdrawals that were intended for home purchases but couldn't be used due to the disasters.

Published

2025-01-03
Congress: 119
Session: 1
Chamber: HOUSE
Status: Introduced in House
Date: 2025-01-03
Package ID: BILLS-119hr140ih

Bill Statistics

Size

Sections:
5
Words:
3,773
Pages:
19
Sentences:
64

Language

Nouns: 1,119
Verbs: 250
Adjectives: 278
Adverbs: 19
Numbers: 136
Entities: 170

Complexity

Average Token Length:
4.27
Average Sentence Length:
58.95
Token Entropy:
5.07
Readability (ARI):
31.71

AnalysisAI

The “Hurricane Helene and Milton Tax Relief Act of 2025” is a legislative proposal designed to provide tax breaks and financial relief to individuals and entities affected by two significant hurricanes—Helene and Milton. Introduced by Mr. Buchanan in the House of Representatives, the bill aims to aid those in qualified disaster areas through various tax-related incentives and relief measures, which include adjustments to earned income credits, increased deductions for charitable contributions, and favorable conditions for withdrawing retirement funds.

General Summary

The bill provides a framework for offering tax relief to those impacted by Hurricanes Helene and Milton. Key elements include allowing affected taxpayers to choose which year’s income figures are used for calculating earned income tax credits if their earnings fluctuate due to the disaster. It also increases the limits for deducting charitable contributions linked to hurricane relief efforts. Furthermore, the legislation provides special rules for using retirement funds, making it possible for those affected to withdraw and repay them under favorable conditions. These measures collectively aim to alleviate the financial burdens caused by the hurricanes.

Significant Issues

Several potential issues lie within the bill. A primary concern is that the definition of what constitutes a "qualified hurricane disaster area" hinges on a presidential declaration. This could delay the distribution of aid and might cause inconsistencies if declarations are not timely. Additionally, the focus on only Hurricanes Helene and Milton means any other future storms within the same timeframe are excluded from these benefits.

The ability of taxpayers to elect using prior year earnings for tax credit calculations might open doors for manipulation, potentially leading to fraudulent claims. The absence of a defined concept for "economic loss" could result in unequal judgments about who qualifies for relief, creating disparities.

The provision for larger loan limits from retirement savings could undermine long-term financial security, encouraging risky financial behavior. These provisions may complicate compliance for non-expert individuals trying to navigate the law.

Impact on the Public

Broadly, this bill aims to provide tangible financial relief to those suffering from major hurricane damage, potentially helping affected communities recover more swiftly. By offering tax incentives, the bill supports not just individuals directly but also encourages broader contributions to relief efforts.

However, the complexity of tax code references and conditional relief provisions creates a risk of misunderstanding and misuse. The reliance on presidential declarations to define eligible areas might delay or obstruct urgently needed assistance.

Impact on Stakeholders

For residents in the declared disaster areas, the bill could provide crucial relief. Taxpayers benefiting from prior year income calculations might experience immediate financial support. Meanwhile, charitable organizations could see increased donations, motivated by enhanced deduction benefits.

However, if individuals are encouraged to draw more from retirement funds, they might face greater financial challenges later in life, potentially impacting individual long-term financial planning. On the administrative side, federal agencies might experience challenges ensuring timely and uniform disaster declarations, potentially affecting their relationships with local governments and disaster relief programs.

For accountants and tax preparers, deciphering the intricate details of this bill might increase workload and complexity, potentially leading to increased costs for individuals seeking professional assistance to navigate new rules.

Overall, while the bill is well-intentioned in its support for disaster victims, the specifics of its implementation may present hurdles that need addressing to ensure it serves the public effectively and equitably.

Financial Assessment

The "Hurricane Helene and Milton Tax Relief Act of 2025" aims to provide financial relief to individuals affected by Hurricanes Helene and Milton. This proposed legislation includes several financial allocations and adjustments to the current tax framework, particularly concerning earned income credits, charitable contributions, and retirement funds.

Earned Income Credit Adjustments

The bill allows individuals impacted by the hurricanes to opt for using their previous year's earnings to determine their Earned Income Tax Credit. This adjustment could provide immediate financial relief by potentially increasing the credit amount for those who suffered income losses during the hurricane disaster period. However, this provision could also open avenues for manipulation, as individuals may choose whichever year's income maximizes their credit, introducing the risk of fraudulent claims. Such potential misuse could emerge as an issue, particularly in the absence of stringent verification measures.

Charitable Contributions

For charitable donations directed toward hurricane relief, the bill proposes to increase the limitations on tax-deductible contributions. Both individuals and corporations can benefit from these enhanced limits, as contributions specifically for relief efforts related to Hurricanes Helene and Milton can be deducted beyond the usual constraints.

  • For individuals, contributions made before April 15, 2025, can, under certain conditions, be treated as if made in the previous year, 2024.
  • For corporations, the upper limit is set at 20 percent of taxable income.

While this initiative should incentivize increased donations for relief efforts, the complexity of the tax code references in calculating these deductions could lead to potential confusion. Taxpayers and professionals might struggle to accurately apply these provisions, resulting in errors in filing or calculating deductions.

Retirement Funds and Loans

In acknowledgment of the financial strain disasters impose, specific provisions concerning retirement funds are also included. Notably, individuals can withdraw up to $100,000 from retirement accounts without incurring the typical early withdrawal penalty. Furthermore, these funds can be repaid over a longer timeline, providing more flexibility in financial management post-disaster.

Additionally, the bill increases the limit for loans from qualified retirement plans from $50,000 to $100,000. While these measures can alleviate immediate financial burdens by granting access to needed funds, they may inadvertently encourage larger withdrawals. This could undermine long-term retirement savings, potentially compromising individuals' financial stability long term.

Conclusions

Overall, while the financial measures outlined in the "Hurricane Helene and Milton Tax Relief Act of 2025" aim to provide targeted relief, they also introduce potential challenges related to complexity and potential misuse. The ambiguity in defining who qualifies for these financial benefits and the intricate tax provisions may result in unequal or unjust applications of these financial assistances. This highlights the importance of clear guidelines and thorough administrative oversight to prevent exploitation while ensuring that support reaches those genuinely in need.

Issues

  • The definition of 'qualified hurricane disaster area' is solely dependent on a declaration by the President (Section 2), which could lead to inconsistencies or delays in aid distribution if the necessary declarations are not timely or uniformly made. This could leave affected individuals without adequate relief resources.

  • The narrow focus on Hurricanes Helene and Milton (Section 2) in defining eligible incidents may exclude future hurricanes that cause significant damage within the specified incident period, unfairly omitting victims of these disasters from rightful benefits.

  • The provision allowing taxpayers to choose between current or preceding year's earned income for credit calculations (Section 3) might enable manipulation of reported earnings to optimize the credit, potentially leading to fraudulent claims and misuse of funds.

  • The lack of clear definition for 'economic loss' within the eligibility criteria for individuals (Section 2) may lead to inconsistent application of benefits, causing unfair treatment of disaster victims based on subjective assessments of economic losses.

  • The identification of eligible individuals centers around 'qualified hurricane disaster areas' being a significant criterion (Section 2), yet these areas are not precisely defined within the bill, introducing uncertainties that could affect eligibility for disaster relief.

  • The increased loan limits and extended repayment schedules for borrowing from retirement plans (Section 5) might encourage excessive withdrawals, possibly undermining long-term retirement savings and leading to financial instability for individuals.

  • The complexity and specificity of tax code references for calculating increased charitable contribution limits (Section 4) could cause confusion for both individuals and tax professionals, potentially leading to errors in tax returns and incorrect deductions.

  • The complex regulations around the recontribution and loan default arrangements from retirement plans (Section 5) involving various sections of the Internal Revenue Code can be challenging for non-experts to navigate, potentially leading to compliance issues and financial penalties.

Sections

Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.

1. Short title; table of contents Read Opens in new tab

Summary AI

The section outlines the short title and table of contents of a bill called the "Hurricane Helene and Milton Tax Relief Act of 2025." It introduces key provisions such as tax credits and deductions related to hurricane disaster areas and special rules for using retirement funds in response to these disasters.

2. Definitions Read Opens in new tab

Summary AI

The text defines terms used in the bill related to Hurricane Helene and Hurricane Milton. It describes who counts as an "eligible individual," the meaning of a "qualified hurricane disaster area," and the timeframe called the "incident period" from September 28, 2024, to November 2, 2024.

3. Earned income credit determined based on preceding taxable year income with respect to qualified hurricane disaster areas Read Opens in new tab

Summary AI

In this section, eligible individuals affected by a qualified hurricane disaster can choose to use their earned income from the previous year when claiming the earned income tax credit if their current year's income is lower. This option is available for one tax year only and includes specific rules for joint returns and error handling.

4. Increased limitation on charitable contributions for qualified hurricane disaster relief; certain contributions paid before April 15, 2025, treated as paid in 2024 Read Opens in new tab

Summary AI

This section of the bill allows people and companies to deduct more from their taxes when they make donations for hurricane disaster relief related to Hurricane Helene or Hurricane Milton, as long as they make those donations by April 15, 2025. It specifies the rules for how much can be deducted, including carryover rules for future years, and allows individuals to include certain donations when calculating their standard deduction.

5. Special hurricane disaster-related rules for use of retirement funds Read Opens in new tab

Summary AI

This section outlines special rules for withdrawing from retirement funds due to a hurricane disaster, allowing individuals to access up to $100,000 without penalties and to pay back amounts within three years. It also modifies rules for home purchase withdrawals, increases loan limits from retirement plans, and details deadlines and conditions for plan amendments related to these changes.

Money References

  • (2) AGGREGATE DOLLAR LIMITATION.— (A) IN GENERAL.—For purposes of this subsection, the aggregate amount of distributions received by an individual which may be treated as qualified hurricane disaster distributions for any taxable year shall not exceed the excess (if any) of— (i) $100,000, over (ii) the aggregate amounts treated as qualified hurricane disaster distributions received by such individual for all prior taxable years.
  • (B) TREATMENT OF PLAN DISTRIBUTIONS.—If a distribution to an individual would (without regard to subparagraph (A)) be a qualified hurricane disaster distribution, a plan shall not be treated as violating any requirement of such Code merely because the plan treats such distribution as a qualified hurricane disaster distribution, unless the aggregate amount of such distributions from all plans maintained by the employer (and any member of any controlled group which includes the employer) to such individual exceeds $100,000.
  • (c) Loans from qualified plans.— (1) INCREASE IN LIMIT ON LOANS NOT TREATED AS DISTRIBUTIONS.—In the case of any loan from a qualified employer plan (as defined under section 72(p)(4) of such Code) to an eligible individual made during the period beginning on the date of the enactment of this Act and ending on June 30, 2025— (A) section 72(p)(2)(A)(i) of such Code shall be applied by substituting “ $100,000” for “ $50,000”, and (B) clause (ii) of such section shall be applied by substituting “the present value of the nonforfeitable accrued benefit of the employee under the plan” for “one-half of the present value of the nonforfeitable accrued benefit of the employee under the plan”.