[Federal Register: December 12, 2006 (Volume 71, Number 238)]
[Rules and Regulations]
[Page 74467-74469]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12de06-8]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9301]
RIN 1545-BF89
Reduction in Taxable Income for Housing Hurricane Katrina
Displaced Individuals
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Temporary regulations.
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SUMMARY: This document contains temporary regulations relating to the
reduction in taxable income under section 302 of the Katrina Emergency
Tax Relief Act of 2005. The regulations affect taxpayers who provide
housing in their principal residences to individuals displaced by
Hurricane Katrina. The text of the temporary regulations also serves as
the text of the proposed regulations set forth in the notice of
proposed rulemaking on this subject in the Proposed Rules section in
this issue of the Federal Register.
DATES: Effective Date: These regulations are effective December 11,
2006.
Applicability Date: For date of applicability, see Sec. 1.9300-
1T(g).
FOR FURTHER INFORMATION CONTACT: Marnette M. Myers, 202-622-4920 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments to the Income Tax Regulations (26
CFR part 1) relating to the reduction in taxable income for housing
provided to displaced individuals under section 302 of the Katrina
Emergency Tax Relief Act of 2005 (Pub. L. No. 109-73, 119 Stat. 2016)
(KETRA).
For taxable years beginning in 2005 and 2006, a taxpayer may reduce
taxable income by $500 for each Hurricane Katrina displaced individual
to whom the taxpayer provides free housing in the taxpayer's principal
residence for a period of 60 consecutive days that ends in the taxable
year. No reduction is allowed if the taxpayer receives rent or other
compensation from any source for providing the housing.
A taxpayer may not claim a reduction in taxable income with respect
to the same Hurricane Katrina displaced individual in more than one
taxable year and must include the Hurricane Katrina displaced
individual's tax identification number on the taxpayer's return.
Generally, the total reduction for all taxable years is $2,000.
A Hurricane Katrina displaced individual is defined as a natural
person who was displaced from a principal place of abode that, on
August 28, 2005, was in the Hurricane Katrina core disaster area. A
Hurricane Katrina displaced individual also is defined as an individual
whose principal place of abode was located in the Hurricane Katrina
disaster area, but outside the core disaster area, if the abode was
damaged by Hurricane Katrina or the individual was evacuated from the
abode because of Hurricane Katrina. A Hurricane Katrina displaced
individual may not be the taxpayer's spouse or dependent.
Under section 2(1) of KETRA, the Hurricane Katrina disaster area is
the area with respect to which a major disaster by reason of Hurricane
Katrina has been declared by the President before September 14, 2005,
under section 401 of the Robert T. Stafford Disaster Relief and
Emergency Assistance Act (42 U.S.C. 5170) (Stafford Act). For purposes
of relief provided under KETRA, this area comprises the states of
Louisiana, Mississippi, Alabama, and Florida. Under section 2(2) of
KETRA, the Hurricane Katrina core disaster area is the portion of the
Hurricane Katrina disaster area determined by the President to warrant
individual or individual and public assistance from the Federal
government under the Stafford Act. See Appendix to Notice 2005-73
(2005-42 I.R.B. 723) (Oct. 17, 2005) (listing parishes and counties
designated for assistance under the Stafford Act).
Explanation of Provisions
Provision of Housing
The temporary regulations provide that a taxpayer is considered to
provide housing if the housing is provided either in, or on the site
of, the taxpayer's principal residence. In addition, the taxpayer must
be an owner or lessee of the residence to be treated as providing
housing to a Hurricane Katrina displaced individual. The term principal
residence has the same meaning as in section 121 and the regulations
thereunder. Amounts in connection with the provision of housing (for
which the taxpayer may not be reimbursed or compensated) include rent
and utilities. Amounts for telephone calls, food, clothing and
transportation are not amounts in connection with the provision of
housing for this purpose.
Limitations on Amount of Reduction
The temporary regulations provide that the $2,000 aggregate limit
on the reduction in taxable income applies to unmarried individuals and
married taxpayers filing a joint tax return. Married taxpayers who file
separate returns may reduce taxable income by $1,000 each for all
taxable years.
The temporary regulations clarify that a taxpayer may reduce
taxable income with respect to a specific Hurricane Katrina displaced
individual in 2005 or 2006, but not both years. Additionally, the
temporary regulations provide that a Hurricane Katrina displaced
individual may be taken into account by only one taxpayer occupying the
same principal residence.
Effective Date
The temporary regulations apply to taxable years beginning after
December 31, 2004, and before January 1, 2007, and ending on or after
December 11, 2006, which is the date the temporary regulations were
filed with the Federal Register. Taxpayers may rely on the temporary
regulations with respect to taxable years ending before the filing
date, but may not rely on the absence of regulations for taxable years
ending before the filing date for a result contrary to that under the
temporary regulations.
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in Executive Order 12866.
Therefore, a regulatory assessment is not required. It also has been
determined that section 553(b) of the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply
[[Page 74468]]
to these regulations. Please refer to the cross-referenced notice of
proposed rulemaking published elsewhere in this issue of the Federal
Register for applicability of the Regulatory Flexibility Act (5 U.S.C.
chapter 6). Pursuant to section 7805(f) of the Code, these temporary
regulations will be submitted to the Chief Counsel for Advocacy of the
Small Business Administration for comment on their impact on small
business.
Drafting Information
The principal author of these regulations is Marnette M. Myers of
the Office of the Associate Chief Counsel (Income Tax and Accounting).
However, other personnel from the IRS and Treasury Department
participated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
0
Accordingly, 26 CFR part 1 is amended as follows:
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 continues to read, in
part, as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.9300-1T also issued under 26 U.S.C. 6001. * * *
0
Par. 2. Section 1.9300-1T is added to read as follows:
Sec. 1.9300-1T Reduction in taxable income for housing Hurricane
Katrina displaced individuals.
(a) In general. For a taxable year beginning in 2005 or 2006, a
taxpayer who is a natural person may reduce taxable income by $500 for
each Hurricane Katrina displaced individual (as defined in paragraph
(e)(1) of this section) to whom the taxpayer provides housing free of
charge in, or on the site of, the taxpayer's principal residence for a
period of 60 consecutive days ending in the taxable year. A taxpayer
may not claim the reduction in taxable income unless the taxpayer
includes the taxpayer identification number of the Hurricane Katrina
displaced individual on the taxpayer's income tax return.
(b) Provision of housing--(1) Principal residence. For purposes of
this section, the term principal residence has the same meaning as in
section 121 and the regulations thereunder. See Sec. 1.121-1(b)(1) and
(b)(2).
(2) Legal interest required. A taxpayer is treated as providing
housing for purposes of this section only if the taxpayer is an owner
or lessee (including a co-owner or co-lessee) of the residence.
(3) Compensation for providing housing--(i) In general. No
reduction in taxable income is allowed under this section to a taxpayer
who receives rent or any other amount from any source in connection
with the provision of housing.
(ii) Amounts in connection with the provision of housing. For
purposes of this section, amounts in connection with the provision of
housing include (but are not limited to) amounts for rent and
utilities. Amounts for telephone calls, food, clothing, and
transportation are examples of amounts not in connection with the
provision of housing.
(c) Limitations--(1) Dollar limitation--(i) In general. The
reduction under paragraph (a) of this section may not exceed the
maximum dollar limitation reduced by the amount of the reduction under
this section for all prior taxable years. The maximum dollar limitation
is--
(A) $2,000 in the case of an unmarried individual;
(B) $2,000 in the case of a husband and wife who file a joint
income tax return; and
(C) $1,000 in the case of a married individual who files a separate
income tax return.
(ii) Married individuals with separate principal residences. The
limitations in paragraphs (c)(1)(i)(B) and (c)(1)(i)(C) of this section
apply without regard to whether the married individuals occupy the same
principal residence. A person is treated as married for purposes of
this section if the individual is treated as married under section
7703.
(2) Spouse or dependent of the taxpayer. No reduction is allowed
for a Hurricane Katrina displaced individual who is the spouse or
dependent of the taxpayer.
(3) Individual taken into account only once. A taxpayer may not
reduce taxable income under paragraph (a) of this section with respect
to a Hurricane Katrina displaced individual who was taken into account
by the taxpayer for any prior taxable year.
(4) Taxpayers occupying the same principal residence. A Hurricane
Katrina displaced individual may be taken into account by only one
taxpayer occupying the same principal residence for all taxable years.
(d) Substantiation. A taxpayer claiming a reduction under this
section must prepare and maintain records sufficient to show
entitlement to the reduction as provided in Form 8914 (Exemption Amount
for Taxpayers Housing Individuals Displaced by Hurricane Katrina) or
other forms, instructions, publications or guidance published by the
IRS.
(e) Definitions. The following definitions apply for purposes of
this section.
(1) Hurricane Katrina displaced individual. The term Hurricane
Katrina displaced individual means any natural person if the following
requirements are met--
(i) The person's principal place of abode on August 28, 2005, was
in the Hurricane Katrina disaster area (as defined in paragraph (e)(2)
of this section);
(ii) The person was displaced from that abode; and
(iii) If the abode was located outside the Hurricane Katrina core
disaster area (as defined in paragraph (e)(3) of this section)--
(A) The abode was damaged by Hurricane Katrina; or
(B) The person was evacuated from that abode by reason of Hurricane
Katrina.
(2) Hurricane Katrina disaster area. The term Hurricane Katrina
disaster area means the states of Alabama, Florida, Louisiana, and
Mississippi.
(3) Hurricane Katrina core disaster area. The term Hurricane
Katrina core disaster area means the portion of the Hurricane Katrina
disaster area designated by the President to warrant individual or
individual and public assistance from the federal government under the
Robert T. Stafford Disaster Relief and Emergency Assistance Act (42
U.S.C. 5170).
(f) Examples. The provisions of this section are illustrated by the
following examples in which each Hurricane Katrina displaced
individual, who is not a dependent or spouse of the taxpayer, is
provided housing (within the meaning of paragraph (b) of this section)
in, or on the site of, the taxpayer's principal residence for a period
of at least 60 consecutive days ending in the applicable taxable year.
The examples are as follows:
Example 1. Taxpayer A provides housing to N, a Hurricane Katrina
displaced individual, from September 1, 2005, until March 10, 2006.
Under paragraphs (a) and (c)(3) of this section, A may reduce
taxable income by $500 on A's 2005 income tax return or A's 2006
income tax return, but not both, with respect to N.
Example 2. The facts are the same as in Example 1 except that A
and B, A's unmarried roommate and co-lessee, provide housing to N.
Under paragraphs (a) and (c)(4) of this section, either A or B, but
not both, may reduce taxable income by $500 for 2005 with respect to
N. If either A or B reduces
[[Page 74469]]
taxable income for 2005 with respect to N, neither A nor B may
reduce taxable income with respect to N for 2006.
Example 3. Unmarried roommates and co-lessees C and D provide
housing to eight Hurricane Katrina displaced individuals during
2005. Under paragraphs (a) and (c)(1)(i)(A) of this section, C and D
each may reduce taxable income by $2,000 on their 2005 income tax
returns.
Example 4. (i) H and W are married to each other and provide
housing to a Hurricane Katrina displaced individual, O, in 2005. H
and W file their 2005 income tax return married filing jointly.
Under paragraphs (a) and (c)(4) of this section, H and W may reduce
taxable income by $500 on their 2005 income tax return with respect
to O.
(ii) In 2006, H and W provide housing to O and to another
Hurricane Katrina displaced individual, P. H and W file their 2006
income tax return married filing separately. Because H and W reduced
their 2005 taxable income with respect to O, under paragraph (c)(3)
of this section, neither H nor W may reduce taxable income on their
2006 income tax return with respect to O. Under paragraphs (a) and
(c)(4) of this section, either H or W, but not both, may reduce
taxable income by $500 on his or her 2006 income tax return with
respect to P.
(g) Effective date. This section applies for taxable years
beginning after December 31, 2004, and before January 1, 2007, and
ending on or after December 11, 2006.
Approved: December 1, 2006.
Linda M. Kroening,
Acting Deputy Commissioner for Services and Enforcement.
Eric Solomon,
Acting Deputy Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. E6-21031 Filed 12-11-06; 8:45 am]
BILLING CODE 4830-01-P