The House and the Senate have approved a final version of a bill that will offer disaster survivors and donors to Hurricane Katrina relief funds a variety of tax breaks and incentives.[@@]

The House voted Wednesday to approve the final version of the bill, H.R. 3768, 422-0, and the Senate passed the bill by a voice vote.

“I’m pleased this has been a bipartisan effort and look forward to the legislation being signed into law soon,” says House Ways and Means Committee Chairman William Thomas, R-Calif.

H.R. 3768 was sponsored by Rep. Jim McCrery, R-La., a Ways and Means Committee member.

Sections of H.R. 3768 would:

- Waive the 10% penalty tax on early withdrawals of funds from individual retirement accounts, defined benefit pension plans, 401(k) plans, 403(b) plans and 457 plans for individuals who have been living in what are federally declared disaster areas as a result of Katrina.

- Raise the permitted individual limit for cash charitable contributions to 60% of gross income, from 50%, for donations made this year.

- Give the IRS commissioner permission to extend deadlines for filing tax returns and paying income, estate and gift taxes.

- Increase the limit on tax-deductible casualty losses.

- Extend the period in which homes or businesses have to recognize gains on property damaged or destroyed as a result of a federally designated catastrophe.

- Offer employers tax credits to hire or retain workers displaced by Katrina.

- Reward taxpayers who house Katrina evacuees a $500-per-evacuee income tax exemption. Taxpayers can report a maximum of 4 evacuee housing exemptions.

H.R. 3768 was written before the evacuation for Hurricane Rita began, and it makes no direct mention of accommodations for individuals or companies affected by Rita.

The retirement plan withdrawal section states that individuals eligible for the waiver of the 10% early withdrawal penalty tax because of Katrina would be permitted to pay income tax on such distributions over a 3-year period.

Amounts distributed could be put back into a qualified retirement plan over the 3-year period following the distribution date and receive rollover treatment.

Distributions for home purchases which were not completed because of Hurricane Katrina also could be re-contributed to a qualified retirement plan or IRA.

The charitable rollover provision would exclude from gross income otherwise taxable individual retirement account withdrawals from a traditional or a Roth IRA for qualified charitable distributions. Under the provision, taxpayers who are 70.5 and older would be allowed to roll over amounts from their IRA accounts directly to a qualified charitable organization on a tax-free basis.

In addition, the rollover provision would allow taxpayers aged 59.5 and older to transfer IRA funds to a charitable remainder trust and give a remainder interest in the trust to charity without tax consequences.

Links to the final version of H.R. 3768, which was approved as H.Res. 454, are on the Web at http://thomas.loc.gov/cgi-bin/bdquery/z?d109:h.res.00454: