Hurricane-Related Tax Incentives & Employer Tax Credits Available
From Carr, Riggs & Ingram
With autumn colors abounding, temperatures falling, football ongoing, and Halloween ghouls and ghosts now trailing behind us, many people start looking forward to Thanksgiving. Thanksgiving is a time for people to reflect and give thanks for things such as family, friends, health, and shelter.
However, this reflection also causes us to pause and realize that many folks are still struggling to recover from the devastating impact of Hurricanes Harvey, Irma, and Maria. The government, too, has realized that people and businesses need a boost to assist in their recovery effort, and, therefore, has recently passed the Disaster Tax Relief and Airport and Airway Extension Act of 2017 (Disaster Tax Relief Act).
There are two components of the Disaster Tax Relief Act that have broad-ranging and immediate tax implications.
1. More Generous Charitable Contribution Deduction
Normally, individuals who can itemize their deductions face two hurdles in deducting charitable contributions:
- Charitable deductions are limited to a percentage of income, and
- Overall itemized deductions can be phased-out for higher income.
Similarly, corporations face a limitation in deducting contributions as they can only deduct donations up to 10% of their taxable income.
The Disaster Tax Relief Act temporarily changes these rules by stating that any qualified contribution is not subject to either the percentage of income limitation (for individuals or corporations) or the individual itemized deduction phase-out.
Qualified contributions are defined as any cash donations made August 23 — December 31, 2017, to charities that help with relief efforts in the areas affected by Hurricanes Harvey, Irma, and Maria. The normal rules apply that a taxpayer must receive a written acknowledgment from that charity, but there is an additional stipulation that the charity should state that the contribution will be used for hurricane relief efforts. This change is widely attractive to all taxpayers because it does not matter where an individual or corporation resides to be able to take this deduction.
CRInsight: As long as a taxpayer’s donation is made to a charitable organization that is directly helping with hurricane relief efforts in the areas impacted by Hurricanes Harvey, Irma, or Maria, the taxpayer can benefit regardless of the taxpayer’s place of residence.
Individuals and corporations could offset up to 100% of their incomes with these qualified donations. Likewise, higher income individuals won’t have these qualified contributions reduced by the itemized deduction phase-out. Clearly, the true winners are the people receiving this much needed assistance from those charitable organizations. The Disaster Tax Relief Act just creates an additional tax incentive for people to give to these worthy organizations.
2. Brand New Employer Credit
The Disaster Tax Relief Act has created a brand new general business credit for the wages that eligible employers continue paying employees after a business is rendered inoperable due to hurricane damage. The credit is in place to encourage employers to retain and keep paying their employees during this time of crisis.
|ELIGIBLE EMPLOYERS CRITERIA|
|Date Company Must Have Conducted Active Business
Prior to Damage
|Range of Days Business Was Rendered Inoperable
Due to Disaster
|HURRICANE HARVEY||August 23, 2017||August 23 – December 31, 2017|
|HURRICANE IRMA||September 4, 2017||September 4 – December 31, 2017|
|HURRICANE MARIA||September 16, 2017||September 16 – December 31, 2017|
The employee retention credit is equal to 40% of wages up to $6,000 paid to an eligible employee, and thus the maximum credit per employee is $2,400. Wages for this credit must be paid while the business is inoperable and before significant operations resume.
The wages can be paid to employees while no services are performed, while the employees work at a different location, or while the employees are working at the damaged location before reopening. An eligible employee is one whose principal place of employment is located in a disaster area. Note: the employee’s residence is not pertinent — only the employee’s place of employment.
CRI Is Thankful for You and Ready to Help
CRI is thankful for our clients, our outstanding professionals and staff, and the blessings that we all enjoy. However, we recognize that many people are still struggling from enduring a natural disaster. The government has given taxpayers incentives to help the recovery process, and our professionals stand ready to help business and individuals maximize those benefits. Contact us if we can help.