Update regarding Crumbling Foundations Tax Relief Extension
COURTNEY, LARSON, NEAL ANNOUNCE EXTENSION OF FEDERAL TAX RELIEF FOR CRUMBLING FOUNDATION REPAIRS
WASHINGTON, DC – Today, Rep. Joe Courtney (CT-02), Rep. John Larson (CT-01), and Rep, Richard Neal (MA-01) announced updated guidance from the Internal Revenue Service (IRS) that extends the period of time that homeowners have to claim crumbling foundation related repairs on their federal taxes. Under the guidance issued today, homeowners will now have through the end of 2020 to make qualified repairs to their home and until April 2021 to claim those repairs on an amended 2017 federal tax return.
“This is welcome news for homeowners in our districts,” the members said. “The additional three years afforded under this updated policy provides critical time for more homeowners impacted by crumbling foundations to make repairs and secure federal tax relief. Since enactment of the new tax law, we have been in regular contact with officials from the Treasury and IRS to explore ways to extend as much relief as possible to homeowners in spite of the changes made by the law. We are grateful for their attention to our concerns and the support they have provided today to homeowners struggling with the damage caused by crumbling foundations.”
Last November, the IRS issued Rev. Proc. 2017-60 to enact a “safe harbor” for the treatment of crumbling foundation-related repair costs as a “casualty loss” deduction from a taxpayer's taxable income under Section 165 of the Internal Revenue Code.
The new tax law, signed into law in December, temporarily limits the applicability of Section 165. Under the law, beginning in tax year 2018 only taxpayers who suffer damage related to a presidentially-declared Stafford Act disaster may deduct their property-casualty losses. This provision expires in 2025.
A December 21 letter to the members from the IRS confirmed that homeowners who had already completed repairs to their home before the end of 2017 would be able to claim the costs on their federal tax returns for 2017, or any open prior year.
Generally speaking, taxpayers have three years from the date they filed their original tax return to file Form 1040X to amend their return (and claim this deduction). The updated revenue procedure extends the “safe harbor” through the period that 2017 returns can be amended, expected to be the filing season in spring of 2021.
Homeowners should consult with a qualified tax preparer to see if they qualify for this deduction and determine how to use it on their 2017 or future returns as allowed under today’s updated guidance.
Office of Congressman Joe Courtney (CT-02)
Courtney, Larson Announce Approval of Federal Crumbling Foundations Tax Relief
Hartford, CT -- Congressman Joe Courtney (CT-2) and John Larson (CT-1) announced approval of new federal tax relief for homeowners dealing with crumbling foundations today. The relief, released today through an Internal Revenue Service (IRS) “revenue procedure,” follows nearly 19 months of work by the two members.
“Today, the federal government has said ‘yes’ to helping homeowners struggling with the cost and damage of crumbling foundations,” Courtney said. “This is the culmination of a 19-month process with the Treasury Department, IRS, and the National Taxpayer Advocate to get federal recognition of the severe property casualty loss that north-central and eastern Connecticut homeowners are struggling with. This tax guidance adds a powerful new tool to the toolbox of options for homeowners and communities looking for way to get their arms around this extensive and long-term problem for our region. The origins of this effort started at the grassroots level from homeowners speaking out at community meetings and from Connecticut’s CPAs who urged Washington to extend casualty loss deduction to this problem. I thank Assistant Secretary Kautter, Secretary Mnuchin and former IRS Commissioner Koskinen for their personal attention and commitment to this issue - today’s announcement reflects their recognition that this is a severe problem requiring immediate attention. I look forward to continuing to work with my partner in this effort, Congressman John Larson, and officials from Treasury and IRS to make the implementation of this guidance as smooth as possible for homeowners and their communities.”
“The individuals and families in Connecticut with crumbling foundations have been experiencing an ongoing nightmare. While there is no one silver bullet solution to make up for the loss experienced by these homeowners, today’s announcement by the U.S. Department of Treasury will provide at least some degree of relief for many of them. It is the first time that the federal government has acknowledged the unique harm Connecticut residents have suffered through no fault of their own. I’d like to thank the IRS, the Department of Treasury, the National Taxpayer Advocate, and especially all of the homeowners who have reached out to my office to share their stories and allowed me to tour their homes,” said Larson. “Our work is not done. Rep. Courtney and I will continue to engage with the administration and colleagues on both sides of the aisle to pursue every possible avenue at the federal level to provide relief for these homeowners.”
Under current federal tax law, taxpayers may deduct a casualty loss from their income if they have suffered a sudden loss due to fire, flood, theft, or other sudden and unusual causes. While pyrrhotite-related damage develops over time, Courtney and Larson have been seeking IRS guidance to allow a casualty deduction related to this longer-term damage, citing the precedent of IRS assistance to homeowners affected by corrosive Chinese drywall in 2010.
The new guidance, released earlier today by the Treasury Department, approves their request for federal tax relief. Specifically, the guidance allows for the treatment of crumbling foundation-related repair costs as a “casualty loss” deduction from a taxpayer's taxable income. The change is effective immediately, and taxpayers are allowed to submit amended returns.
Background on Courtney and Larson’s efforts to secure this relief:
Starting in 2016, the two members and their staffs conducted research on the process of issuing a revenue procedure for crumbling foundation relief and began outreach to IRS staff to learn more about the limits of IRS policy in this area.
In May 2017, they consulted with then-IRS Commissioner John Koskinen, who supported the use of the 2010 precedent and agreed to weigh in with Treasury. The former Commissioner remained engaged on the issue as his term ended this month.
The two then wrote to National Taxpayer Advocate Nina Olson urging her support for applying the deduction to the crumbling foundation situation. In her response, she indicated support for the effort and sharing the proposal that her office submitted for consideration.
After getting support from Koskinen and Olsen, the two submitted a letter to Treasury Secretary Steve Mnuchin requesting a meeting to discuss possible federal tax relief for the homeowners who have been harmed by crumbling foundations. The Treasury Department’s Office of Tax Policy has the authority to make a decision on providing such tax relief.
Courtney and Larson also enlisted the support of the Congressman Richard Neal, the Ranking Member of the House Ways and Means Committee, who weighed in on behalf of the request with Secretary Mnuchin.
In September, Courtney and Larson met with Secretary Mnuchin and Assistant Secretary for Tax Policy David Kautter at the Department of the Treasury headquarters in Washington, D.C. to discuss assistance for north-central Connecticut residents impacted by crumbling concrete foundation. They requested that Treasury issue an IRS “revenue procedure” that to allow homeowners to deduct foundation repair costs from their federal taxes.
In a September 26 follow up letter to Mr. Kautter, Courtney and Larson provided additional information to help guide the department’s consideration of their request.
The Connecticut Society of CPAs also issued a letter in support of the effort in September.