WASHINGTON, D.C.: House Republican leaders today, blocked an effort by Congresswoman Carolyn Maloney (NY-14) and Congressman Jerrold Nadler (NY-8) to reverse the wrongheaded decision by the IRS to tax 9/11 aid.

When Maloney offered an amendment to the Transportation-Treasury Appropriations Bill to stop the IRS from collecting taxes on grants received by individuals and businesses in Lower Manhattan after the terrorist attacks of September 11, 2001, the Republican Chair of the Committee, Rep. Ernest Istook (OK) blocked the effort by raising a procedural point of order against it. When asked to remove his point of order, Istook did not respond, and no one answered Maloney's question about any other way to prevent the taxation of 9/11 aid. Links to the world wide web, with more details on this issue can be found at the end of this release. Maloney's statement from the House floor today follows, which explains the issue in more detail:

"Mr. Chairman, I would like to thank my colleagues for their leadership on behalf of New York following the tragedy of 9/11. I never saw Congress so determined and united. We responded with a national commitment to help New York City rebuild. Part of this rebuilding effort was federal grants to businesses and individuals in Lower Manhattan near Ground Zero. These grants have been wonderfully helpful to many in need but they have not been without their fair share of problems. Just yesterday the New York Times wrote of problems getting all of the aid to those who needed it the most. But what is more disturbing is that after deserving victims of 9/11 got the aid, the IRS, in a surprise announcement decided to take part of it away in taxes. Many grant recipients accepted the aid and spent every penny, not knowing they would have to pay taxes on it when the IRS, in a surprise decision last November announced that they would tax the grants.

"Apparently the IRS was secretly planning to impose this tax for months before their decision but did not have the decency to consult with Congress. Had IRS consulted with Congress last summer we would have been able to work to correct this problem before they came out with their decision. Sadly, if this grant money had gone through FEMA, like what some in the NY Delegation wanted it clearly would not have been taxed. Instead, this grant money was appropriated through HUD which left it open for the IRS to make this ridiculous decision. It is just unfair for these cash-strapped businesses and individuals to take another financial hit. A financial hit that the Joint Committee on Taxation estimates to be $268 million dollars. The IRS is taking back $268 million in federal aid that the President pledged to New York and Congress appropriated.

"This IRS decision has also had a ripple affect on other federal benefits that survivors of 9/11 may receive. Since many agency rely on the IRS's definition of gross income, some recipient's eligibility for programs like medicare, medicaid and social security may be in jeopardy. The amendment that I am offering today, along with my colleague Jerry Nadler, would bar the use of any funds for one year for the IRS to enforce their decision to collect taxes on these grants to Lower Manhattan. After all, the Federal Government is supposed to be sending aid to disaster victims, not taking it away. Taxing the grants violates the spirit of Federal disaster aid.

"This is not the first action that I and others have taken to right this wrong. Actually, it is the latest in a series of actions I , along with others in the NY Delegation have written IRS and the Secretary of Treasury, we have written the President, Speaker Hastert and the leadership of the other body, I have introduced bipartisan legislation, the Ways and Means Committee is aware of the problem, the Congressional Research Service has done a memo, I have gone in front of the Rules Committee seeking to add it on as an amendment to HR 1308, the Increased Child Tax Credit Bill and I am on the Floor today with this amendment.

"I ask my colleagues, who have the ultimate authority to decided what gets taxed for their help. I am confident that it was never this Congress's intent to tax this aid so please tell me how and when we are going to fix this and stop the IRS from taxing New Yorkers for the 9/11 money that we gave them? Take as one example the story of Olga Diaz, the owner of a hair salon in the World Trade Center she lost $300,000 in the attacks and received a federal grant of $37,000. Ms. Diaz states that she learned about the taxation on the grants 'after I invested it in rebuilding my business and I am now struggling to find ways to pay.'

"My colleagues, this amendment is a step in the right direction, a step toward the kind of compassionate bipartisan response that Congress first demonstrated toward the economic victims of 9/11. Making this amendment subject to a point of order means that this Congress has made a decision to continue to tax this 9/11aid two days before the second anniversary of these attacks. If we can not fix this decision now, please tell me when because we are the only ones that can stop this taxation. I urge my distinguished colleagues to support this amendment and do right by these victims of terrorism."

Please view a copy of the amendment, a time line of events and the IRS's decision to tax these grants at the following urls:

THE AMENDMENT: http://maloney.house.gov/documents/olddocs/Sept11/TaxAmendment.PDF

TIME LINE: http://maloney.house.gov/documents/olddocs/Sept11/TaxTimeLine.pdf

IRS RESPONSE: http://maloney.house.gov/documents/olddocs/Sept11/110602IRSResponse.pdf

PRIOR ACTION AND REPORT FROM CONGRESSWOMAN MALONEY: See Press Release