H.R.3975 - Tax Fairness for Disaster Victims Act (119th Congress)
Summary
H.R. 3975, the "Tax Fairness for Disaster Victims Act," aims to amend the Internal Revenue Code of 1986 to allow individuals affected by federally declared disasters to use their prior year's earned income for determining eligibility for certain tax credits, specifically the Earned Income Tax Credit (EITC) and the Child Tax Credit. This "lookback" rule would apply if the individual's income or social security taxes are lower in the disaster year than in the previous year. The bill intends to provide financial relief to those whose income is temporarily reduced due to a disaster.
Expected Effects
The bill's enactment would allow disaster victims to potentially qualify for or receive larger tax credits during the year they are impacted by a disaster. This could provide immediate financial assistance to help them recover. It also adds a provision to treat incorrect use of the lookback rule as a mathematical or clerical error, streamlining the correction process.
Potential Benefits
- Provides immediate financial relief to disaster victims by allowing them to use prior year's income for tax credit eligibility.
- Increases access to the Earned Income Tax Credit (EITC) and Child Tax Credit for those whose income is temporarily reduced due to a disaster.
- Simplifies the tax filing process for affected individuals by allowing a "lookback" option.
- Treats errors in applying the lookback rule as mathematical errors, facilitating quicker corrections.
- Supports families and individuals in disaster-stricken areas, promoting community recovery.
Most Benefited Areas:
Potential Disadvantages
- May increase complexity in tax administration and verification due to the lookback provision.
- Could potentially lead to erroneous claims if not properly understood or implemented.
- The financial impact on the federal budget is not explicitly addressed in the bill.
- The bill's effectiveness depends on individuals being aware of and able to utilize the lookback provision.
- The bill only addresses tax credits related to earned income and social security taxes, potentially leaving out other forms of disaster relief.
Constitutional Alignment
The bill aligns with the Constitution's general welfare clause (Preamble). By providing tax relief to disaster victims, the bill aims to promote the well-being of affected individuals and communities. The bill falls under the purview of Congress's power to lay and collect taxes, duties, imposts, and excises, as outlined in Article I, Section 8, Clause 1.
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).