Federal and Texas Tax Related Relief for Taxpayers Affected by Hurricane Harvey

The IRS and the Texas Comptroller have announced forms of due date and other relief for individuals impacted by Hurricane and Tropical Storm Harvey in Houston and surrounding areas.

The IRS has announced information related to relief provided under IRC §7508A for performing certain acts in News Release IR-2017-135.  IRC §7805A provides that the IRS may authorize a delay of up to one year to allow taxpayers to perform certain acts when the taxpayer is affected by a federally declared disaster or terroristic or military action.

As of the date the news release was issued, the counties in Texas affected by the disaster and which were granted relief were:

  • Aransas,
  • Bee,
  • Brazoria,
  • Calhoun,
  • Chambers,
  • Fort Bend,
  • Galveston,
  • Goliad,
  • Harris,
  • Jackson,
  • Kleberg,
  • Liberty,
  • Matagorda,
  • Nueces,
  • Refugio,
  • San Patricio,
  • Victoria and
  • Wharton.

The IRS relief is automatically granted to any taxpayer with an address of record located in the disaster area.  Those who live outside the disaster area but whose records are located within the disaster area and relief workers working with a recognized organization need to contact the IRS at 866-562-5227 to discuss relief.

The IRS describes the affected tax deadlines as follows:

The tax relief postpones various tax filing and payment deadlines that occurred starting on Aug. 23, 2017. As a result, affected individuals and businesses will have until Jan. 31, 2018, to file returns and pay any taxes that were originally due during this period. This includes the Sept. 15, 2017 and Jan. 16, 2018 deadlines for making quarterly estimated tax payments. For individual tax filers, it also includes 2016 income tax returns that received a tax-filing extension until Oct. 16, 2017. The IRS noted, however, that because tax payments related to these 2016 returns were originally due on April 18, 2017, those payments are not eligible for this relief.

A variety of business tax deadlines are also affected including the Oct. 31 deadline for quarterly payroll and excise tax returns. In addition, the IRS is waiving late-deposit penalties for federal payroll and excise tax deposits normally due on or after Aug. 23 and before Sept. 7, if the deposits are made by Sept. 7, 2017. Details on available relief can be found on the disaster relief page on IRS.gov.

The news relief also reminds taxpayers that suffered uninsured disaster-related losses may claim elect to claim the losses on their return for the year of loss (2017) or the previous year (2016).  See IRC §165(I) and Temporary Reg. §1.165-11T for information on this option.  Advisers should point to affected clients that even personal casualty losses may be used in the computation of a federal net operating loss available for carryback (IRC §172(d)(4)(C)). 

Similarly, a three year net operating loss carryback period (rather than the standard two year periods) is available for

  • Casualty losses of an individual (IRC §172(b)(1)(E)(ii)(I)) and
  • Net operating losses of a “small business” attributable to a federally declared disaster (IRC §172(b)(1)(E)(ii)(II).

For this purpose, a “small business” is generally one that has average gross receipts for the prior three years of less than $5,000,000. (IRC §172(b)(1)(E)(iii) ; IRC §448(c))

The Comptroller of the State of Texas has also announced various forms of tax relief available to affected taxpayers related to various state taxes.  The information is found in a page containing frequently asked questions on disaster relief on the agency’s website.

The page notes that, unlike the IRS relief, affected who cannot timely file taxes with the Comptroller’s office will need to contact the agency.  The page states:

Some taxpayers may be unable to file taxes timely due to damage caused by a declared natural disaster. The Comptroller can grant an extension of up to 90 days to file tax returns to a business affected by a declared disaster. An affected business must request the extension. These types of extension requests are handled on a case-by-case basis. For more information or to request a tax filing extension, call the Comptroller's tax assistance line at 800-252-5555.

The page also notes that the Governor of Texas has issued certain proclamations on exemptions for certain sales and other taxes.  The FAQ page has information on this relief, which at the time this article was written included certain relief from hotel taxes and sales taxes, as well as relief for out of state businesses performing disaster or emergency related work in Texas.

In the past, such relief has often covered an expanded area in the case of storms such as Harvey, as the storm affects additional areas as it continues to move.  Advisers should be sure to continue to monitor developments with the various taxing agencies to see if clients may qualify for some form of relief