Working Families Disaster Tax Relief Act
Summary
The Working Families Disaster Tax Relief Act aims to amend the Internal Revenue Code of 1986, allowing taxpayers affected by qualified disasters 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 provision is designed to provide immediate financial relief to those facing economic hardship due to major disasters. The bill defines 'disaster-affected taxpayer' and 'qualified disaster' based on declarations made under the Robert T. Stafford Disaster Relief and Emergency Assistance Act.
Expected Effects
The bill will allow disaster-affected taxpayers to potentially qualify for or receive larger EIC and CTC payments by using their prior year's income, which may be higher than their current disaster-impacted income. This could provide a crucial financial lifeline during recovery periods. The changes would apply to taxable years beginning after December 31, 2024.
Potential Benefits
- Provides immediate financial relief to families impacted by disasters.
- Increases access to the Earned Income Credit and Child Tax Credit for eligible families.
- Uses prior year income to determine eligibility, which may be more representative of a family's typical financial situation before the disaster.
- Offers flexibility and support during times of economic hardship and uncertainty.
- Streamlines the process for disaster-affected taxpayers to receive tax benefits.
Potential Disadvantages
- May increase the complexity of tax filing for disaster-affected taxpayers, requiring them to understand and elect to use the prior year income option.
- Could potentially lead to errors or fraud if the eligibility criteria are not clearly defined and enforced.
- Might create administrative burdens for the IRS in processing and verifying claims under this provision.
- The benefits are limited to those eligible for the EIC and CTC, potentially excluding other vulnerable populations affected by disasters.
- The effectiveness of the relief depends on the speed and efficiency of the disaster declaration process and the IRS's ability to implement the changes.
Constitutional Alignment
The bill aligns with the Constitution's general welfare clause (Preamble) by aiming to provide relief to families affected by disasters. 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 (Article I, Section 8, Clause 1). This bill falls under Congress's power to make laws necessary and proper for carrying into execution the powers vested by the Constitution in the government of the United States, or in any department or officer thereof (Article I, Section 8, Clause 18).
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).