Senators introduce disaster tax relief bill backed by AICPA

Lawmakers proposed bipartisan legislation in the Senate to allow the Internal Revenue Service to postpone filing deadlines when a state-level disaster declaration is issued, rather than waiting for the federal government.

The Filing Relief for Natural Disasters Act, introduced Tuesday by Sen. Catherine Cortez Masto, D-Nevada, John Kennedy, R-Louisiana and Chris Van Hollen, D-Maryland, aims to offer relief to taxpayers in states that have issued state-level emergency declarations. The IRS currently has the authority to delay filing deadlines only in the event of a presidentially-declared federal disaster, but not state-level emergencies. The bill would extend the IRS’s authority to grant tax filing relief following state-declared disasters and states of emergency. It would also expand the mandatory federal filing extension from 60 days to 120 days, giving taxpayers extra time to file their taxes after a disaster occurs.

The legislation comes as Tropical Depression Nicholas batters Louisiana, Texas and other Gulf Coast states only weeks after the area was hit by Hurricane Ida. Hurricanes, tropical storms and wildfires have wrought damage across the country as the pace of climate change accelerates. The IRS has been busy this year and last year granting tax relief as a result of natural disasters and the COFIC-19 pandemic.

Cortez Masto’s constituents in Nevada have been affected as well, but weren’t always eligible for tax relief. This summer, for example, Nevada declared state-level emergencies for both the Tamarack and the Caldor fires out west, which have displaced thousands of Nevada families, pulled resources from Nevada’s firefighters, and affected Nevada’s economy. But under current law, Nevadans aren’t eligible for any tax relief for these state disaster declarations. Her legislation would help them get support to recover from wildfires and other natural disasters.

“Nevadans shouldn’t be denied tax relief after experiencing wildfires just because the state doesn’t receive a federally recognized disaster declaration,” said Cortez Masto said in a statement Tuesday. “Nevadans across the state have been affected by major wildfires in the west, and my legislation would ensure that any taxpayer feeling the impact of a natural disaster can access vital tax relief so our communities are able to recover.”

Kennedy, who is teaming up with her across the aisle, has seen a series of disasters affecting his home state, including Hurricane Kaatrina in 2005. “It seems like Louisianians have been hit with all the storms nature has to offer, and we need all the help we can get to recover, and that includes extensions for filing taxes,” Kennedy said in a statement. “Since Louisiana can’t always rely on Washington to get us the relief we need when we need it, this bill would make sure that Louisianians get the tax extensions necessary for rebuilding after our state declares a natural disaster. I’m thankful to partner with Sen. Cortez Masto on this effort.”

Maryland too was hit by remnants of Ida. “When disaster strikes, Marylanders need immediate financial flexibility to rebuild and recover,” Van Hollen said in a statement. “This legislation will help ensure that — even when a federal disaster has not been declared. I’ll be working with my colleagues to pass this common-sense, bipartisan bill.”

The Filing Relief for Natural Disasters Act would enable the governor of a state or territory to extend a federal tax filing deadline in the event of a state-declared emergency or disaster, which happens automatically for federally-declared disasters. Extending such authority to states gives them the ability to provide relief independent of the federal government’s involvement in an emergency or natural disaster. The legislation would also expand the mandatory federal filing extension from 60 days to 120 days.

The bill is supported by the American Institute of CPAs. “The AICPA has been a vocal advocate for expanded disaster tax filing relief for many years, and we are grateful to Senator Cortez Masto for her leadership on this issue,” said AICPA vice president of taxation Edward Karl in a statement Wednesday. “It’s often difficult for the IRS to act quickly to offer tax relief in the wake of a natural disaster. Senator Cortez Masto recognizes that victims of natural disasters shouldn’t have to worry about tax filing deadlines during an already stressful time and is committed to providing expedited tax filing relief to those taxpayers.”