Other Extensions of KETRA Relief to Victims of Rita

The Katrina Emergency Tax Relief Act of 2005 provided charitable giving incentives and tax relief for families affected by Hurricane Katrina. The following provisions from KETRA are extended to families affected by Hurricane Rita in areas designated for individual or individual and public assistance:

• Waives the 10% penalty for early distributions from pensions and IRAs if the taxpayer suffered an economic loss by reason of Hurricane Rita or Hurricane Wilma. The income tax can be paid over three years. Amounts repaid to the pension or IRA within a certain time are not subject to income tax.
• Allows corporations to claim a charitable deduction for cash contributions related to hurricanes Rita or Wilma without regard to the 10% of taxable income cap.
• Authorizes the Secretary of the Treasury to suspend the time period for certain acts, such as the filing of tax returns and the payment of taxes, by taxpayers affected by Hurricane Rita or Hurricane Wilma.
• Authorizes the Secretary of the Treasury to adjust rules so that individuals displaced by the hurricanes do not lose tax benefits—such as the Earned Income Credit and the child credit—because of a change in their eligibility status due to a prolonged dislocation.

Additional information and explanations of KETRA provisions affecting both individuals and businesses are available from the IRS in Publication 4492.