Working Families Disaster Tax Relief Act
Summary
The Working Families Disaster Tax Relief Act aims to amend the Internal Revenue Code to provide tax relief for taxpayers affected by qualified disasters. Specifically, it allows these taxpayers to use their earned income from the preceding taxable year to determine eligibility for the Earned Income Credit (EIC) and the refundable portion of the Child Tax Credit (CTC). This adjustment is intended to provide immediate financial assistance to those whose income may have been disrupted due to a disaster.
The bill defines a disaster-affected taxpayer as someone whose principal place of abode or work is located in a qualified disaster zone or who is displaced from their home due to a qualified disaster. A qualified disaster is one for which a major disaster has been declared by the President under the Robert T. Stafford Disaster Relief and Emergency Assistance Act.
This legislation seeks to offer flexibility and support to families facing financial hardship in the wake of natural disasters, ensuring they can still access crucial tax credits designed to alleviate poverty and support working families.
Expected Effects
The bill will allow disaster-affected taxpayers to use their prior year's income to qualify for the Earned Income Tax Credit and the refundable portion of the Child Tax Credit. This will provide immediate tax relief to those who may have experienced a loss of income due to a disaster.
By allowing the use of prior-year income, the bill aims to ensure that families who were previously eligible for these credits remain eligible even if their current income has been temporarily reduced due to the disaster. This will help to stabilize their financial situation during the recovery period.
The changes will apply to taxable years beginning after December 31, 2024.
Potential Benefits
- Provides immediate financial relief to families affected by disasters.
- Allows access to the Earned Income Credit and Child Tax Credit based on pre-disaster income levels.
- Offers flexibility in tax calculations during times of economic hardship.
- Targets assistance to those most directly impacted by qualified disasters.
- Simplifies the process of claiming tax credits for disaster-affected individuals.
Potential Disadvantages
- May increase the complexity of tax filing for some individuals.
- Could potentially lead to errors in calculating eligibility if prior-year income is not accurately reported.
- The definition of 'disaster-affected taxpayer' may exclude some individuals who experience indirect economic impacts from a disaster.
- The bill relies on the President declaring a major disaster, which may introduce political considerations into the eligibility process.
- Potential for fraud or abuse if eligibility requirements are not carefully monitored.
Constitutional Alignment
The bill appears to align with the constitutional principle of promoting the general welfare, as it seeks to provide targeted tax relief to families affected by disasters. This aligns with the Preamble of the US Constitution, which states the goal of promoting the general welfare.
Congress has the power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States, as stated in Article I, Section 8, Clause 1. This bill falls under the power of Congress to lay and collect taxes to provide for the general welfare.
There are no apparent conflicts with specific constitutional provisions, assuming the law is applied fairly and without discrimination.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).