CT News Junkie | Tax Debate In Washington Could Impact Relief for Homeowners With Crumbling Foundations

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Tax Debate In Washington Could Impact Relief for Homeowners With Crumbling Foundations

by | Nov 30, 2017 2:46pm
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Posted to: Congress, 1st CD, 2nd CD, Consumer Protection

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U.S. Rep. Joe Courtney last week in Hartford announcing the IRS guidance

HARTFORD, CT — Connecticut homeowners with crumbling foundations will be watching the U.S. Senate’s debate on tax policy very closely because it could impact their ability to seek relief.

The tax bill passed by the U.S. House completely eliminated prospectively the casualty loss deduction for any homeowner whose home was damaged by a natural disaster. The Senate version of the bill would require an emergency declaration from the president of the United States in order to qualify for a property loss deduction.

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U.S. Rep. Joe Courtney said the House version “screws anybody hit with a disaster” because the Federal Emergency Management Administration pays out on average about $6,000. He said that’s why being able to claim a tax deduction to repair or rebuild your home is so important for homeowners.

So while the House bill would have impacted communities hard hit by hurricanes or wildfires, the Senate bill would allow homeowners living in counties under an emergency declaration to claim a deduction. Gov. Dannel P. Malloy has been working to get a federal disaster declaration, but has so far been unsuccessful.

Courtney argued that the U.S. Treasury, which issued guidance last week to homeowners with crumbling foundation that would allow them to file a tax deduction for their losses, may still be helpful. He said anyone up to the date the guidance was issued should be grandfathered in. He said the proof of loss that predates any Senate passage of the tax package should still be able to claim a deduction.

“But if this idiocy does pass then we will go to the taxpayer advocate’s office to determine the impact,” Courtney said.

It doesn’t erase all hope for relief, but it “definitely creates a cloud prospectively,” Courtney said.

U.S. Sen. Richard Blumenthal wasn’t as optimistic.

“There are interpretations that would possibly permit it, but our conclusion is that the deduction would be eliminated,” Blumenthal said Thursday on his way to vote.

He said the Connecticut delegation worked very hard for the IRS ruling, and “certainly this provision would eviscerate all our hard work. “

He said he’s introduced an amendment to eliminate that part of the tax package. He added that Democrats are still trying to defeat the entire tax package.

“People living with crumbling foundations have been through so much already,” U.S. Sen. Chris Murphy, said. “They don’t deserve to be jerked around like this. This is another reason we’re fighting tooth and nail against this disaster of a bill.”

U.S. Rep. John B. Larson said the elimination of the property casualty loss deduction “is terrible and is just another example of how bad this plan would be for Connecticut residents.”

He said the savings from the elimination are minimal.

It’s about $500 million nationwide, which many sound like a lot of money, but it’s “budget dust,” Courtney said.

Larson agreed the savings would be minimal.

“Even if this bill does pass, it is unclear how this will affect those who have already made repairs that qualify under the rule. I am proud of our work that led to the IRS issuing guidance allowing homeowners with crumbling foundations to deduct the cost of repairs,” Larson said. “That deduction is allowed under current law and we can’t speculate on a hypothetical scenario when we still don’t know the final details of the Senate bill or whether it will pass.”

The Senate is voting Thursday on a series of amendments to the tax package and it’s unclear when that voting will conclude.

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