Hurricane and Wildfire Tax Relief Act

Potential for Employer Tax Relief in 2018 to Cover Recent Natural Disasters

On Thursday, November 15, Senators Richard Burr (R-NC), Thom Tillis (R-NC), Lindsey Graham (R-SC), Marco Rubio (R-FL), Bill Nelson (D-FL), Dianne Feinstein (D-CA) and Kamala Harris (D-CA) introduced the Hurricanes Florence and Michael and California Wildfire Tax Relief Act (S. 3648).

This bipartisan legislation includes employee retention credits for employers affected by Hurricane Florence, Hurricane Michael and California wildfires. It is likely that Congress will consider this legislation as part of a broader disaster relief package before the end of 2018. There is discussion that this could potentially be attached to “must-pass” legislation, such as pending funding bills. These tax relief provisions are similar to the employee retention credits passed in 2017 for areas affected by Hurricanes Harvey, Irma and Maria.

The employee retention credit for any taxable year is an amount equal to 40 percent of the qualified wages with respect to each eligible employee of such employer for such taxable year. The amount of qualified wages, which may be taken into account with respect to any individual, shall not exceed $6,000.

Employers will be able to claim the credit in the following areas, if it was inoperable within the time periods outlined in the proposed legislation:

  • Hurricane Florence disaster zone on any day after September 13, 2018 and before January 1, 2019
  • Hurricane Michael disaster zone on any day after October 7, 2018 and before January 1, 2019
  • California wildfire disaster zone on any day after July 23, 2018 and before January 1, 2019

See the text below for the proposed employee retention credits, and contact us to learn more.  

3648The Hurricanes Florence  and Michael and California Wildfire Tax Relief Act

SEC. 4. EMPLOYMENT RELIEF.

(a) EMPLOYEE RETENTION CREDIT FOR EMPLOYERS AFFECTED BY HURRICANE FLORENCE.—

(1) IN GENERAL.—For purposes of section 38 of the Internal Revenue Code of 1986, in the case of an eligible employer, the Hurricane Florence employee retention credit shall be treated as a credit listed in subsection (b) of such section. For purposes of this subsection, the Hurricane Florence employee retention credit for any taxable year is an amount equal to 40 percent of the qualified wages with respect to each eligible employee of such employer for such taxable year. For purposes of the preceding sentence, the amount of qualified wages which may be taken into account with respect to any individual shall not exceed $6,000.

(2) DEFINITIONS.—For purposes of this subsection—

(A) ELIGIBLE EMPLOYER.—The term ‘‘eligible employer’’ means any employer—

(i) which conducted an active trade or business on September 13, 2018, in the Hurricane Florence disaster zone, and

(ii) with respect to whom the trade or business described in clause (i) is inoperable on any day after September 13, 2018, and before January 1, 2019, as a result of damage sustained by reason of Hurricane Florence.

(B) ELIGIBLE EMPLOYEE.—The term ‘‘eligible employee’’ means with respect to an eligible employer an employee whose principal place of employment on September 13, 2018, with such eligible employer was in the Hurricane Florence disaster zone.

(C) QUALIFIED WAGES.—The term ‘‘qualified wages’’ means wages (as defined in section 51(c)(1) of the Internal Revenue Code of 1986, but without regard to section 3306(b)(2)(B) of such Code) paid or incurred by an eligible employer with respect to an eligible employee on any day after September 13, 2018, and before January 1, 2019, which occurs during the period—

(i) beginning on the date on which the trade or business described in subparagraph (A) first became inoperable at the principal place of employment of the employee immediately before Hurricane Florence, and

(ii) ending on the date on which such trade or business has resumed significant operations at such principal place of employment.

Such term shall include wages paid without regard to whether the employee performs no services, performs services at a different place of employment than such principal place of employment, or performs services at such principal place of employment before significant operations have resumed.

(3) CERTAIN RULES TO APPLY.—For purposes of this subsection, rules similar to the rules of sections 51(i)(1), 52, and 280C(a), of the Internal Revenue Code of 1986, shall apply. (4) EMPLOYEE NOT TAKEN INTO ACCOUNT MORE THAN ONCE.—An employee shall not be treated as an eligible employee for purposes of this subsection for any period with respect to any employer if such employer is allowed a credit under section 51 of the Internal Revenue Code of 1986 with respect to such employee for such period.

 

(b) EMPLOYEE RETENTION CREDIT FOR EMPLOYERS AFFECTED BY HURRICANE MICHAEL.—

(1) IN GENERAL.—For purposes of section 38 of the Internal Revenue Code of 1986, in the case of an eligible employer, the Hurricane Michael employee retention credit shall be treated as a credit listed in subsection (b) of such section. For purposes of this subsection, the Hurricane Michael employee retention credit for any taxable year is an amount equal to 40 percent of the qualified wages with respect to each eligible employee of such employer for such taxable year. For purposes of the preceding sentence, the amount of qualified wages which may be taken into account with respect to any individual shall not exceed $6,000.

(2) DEFINITIONS.—For purposes of this subsection— (A) ELIGIBLE EMPLOYER.—The term ‘‘eligible employer’’ means any employer—

(i) which conducted an active trade or business on October 7, 2018, in the Hurricane Michael disaster zone, and

(ii) with respect to whom the trade or business described in clause (i) is inoperable on any day after October 7, 2018, and before January 1, 2019, as a result of damage sustained by reason of Hurricane Michael.

(B) ELIGIBLE EMPLOYEE.—The term ‘‘eligible employee’’ means with respect to an eligible employer an employee whose principal place of employment on October 7, 2018, with such eligible employer was in the Hurricane Michael disaster zone.

(C) QUALIFIED WAGES.—The term ‘‘qualified wages’’ means wages (as defined in section 51(c)(1) of the Internal Revenue Code of 1986, but without regard to section 3306(b)(2)(B) of such Code) paid or incurred by an eligible employer with respect to an eligible employee on any day after October 7, 2018, and before January 1, 2019, which occurs during the period—

(i) beginning on the date on which the trade or business described in subparagraph (A) first became inoperable at the principal place of employment of the employee immediately before Hurricane Michael, and

(ii) ending on the date on which such trade or business has resumed significant operations at such principal place of employment. Such term shall include wages paid without regard to whether the employee performs no services, performs services at a different place of employment than such principal place of employment, or performs services at such principal place of employment before significant operations have resumed.

(3) CERTAIN RULES TO APPLY.—For purposes of this subsection, rules similar to the rules of sections 51(i)(1), 52, and 280C(a), of the Internal Revenue Code of 1986, shall apply.

(4) EMPLOYEE NOT TAKEN INTO ACCOUNT MORE THAN ONCE.—An employee shall not be treated as an eligible employee for purposes of this subsection for any period with respect to any employer if such employer is allowed a credit under section 51 of the Internal Revenue Code of 1986 with respect to such employee for such period.

(c) EMPLOYEE RETENTION CREDIT FOR EMPLOYERS AFFECTED BY CALIFORNIA WILDFIRES.—

(1) IN GENERAL.—For purposes of section 38 of the Internal Revenue Code of 1986, in the case of an eligible employer, the 2018 California wildfire employee retention credit shall be treated as a credit listed in subsection (b) of such section. For purposes of this subsection, the 2018 California wildfire employee retention credit for any taxable year is an amount equal to 40 percent of the qualified wages with respect to each eligible employee of such employer for such taxable year. For purposes of the preceding sentence, the amount of qualified wages which may be taken into account with respect to any individual shall not exceed $6,000.

(2) DEFINITIONS.—For purposes of this subsection—

(A) ELIGIBLE EMPLOYER.—The term ‘‘eligible employer’’ means any employer—

(i) which conducted an active trade or business on July 23, 2018, in the California wildfire disaster zone, and (ii) with respect to whom the trade or business described in clause

(i) is inoperable on any day after July 23, 2018, and before January 1, 2019, as a result of damage sustained by reason of the wildfires to which such the declaration of such the California wildfire disaster area relates.

(B) ELIGIBLE EMPLOYEE.—The term ‘‘eligible employee’’ means with respect to an eligible employer an employee whose principal place of employment on July 23, 2018, with such eligible employer was in the California wildfire disaster zone.

(C) QUALIFIED WAGES.—The term ‘‘qualified wages’’ means wages (as defined in section 51(c)(1) of the Internal Revenue Code of 1986, but without regard to section 3306(b)(2)(B) of such Code) paid or incurred by an eligible employer with respect to an eligible employee on any day after July 23, 2018, and before January 1, 2019, which occurs during the period—

(i) beginning on the date on which the trade or business described in subparagraph (A) first became inoperable at the principal place of employment of the employee immediately before the wildfires to which the declaration of the California wildfire disaster area relates, and

(ii) ending on the date on which such trade or business has resumed significant operations at such principal place of employment.

Such term shall include wages paid without regard to whether the employee performs no services, performs services at a different place of employment than such principal place of employment, or performs services at such principal place of employment before significant operations have resumed.

(3) CERTAIN RULES TO APPLY.—For purposes of this subsection, rules similar to the rules of sections 51(i)(1), 52, and 280C(a), of the Internal Revenue Code of 1986, shall apply.

(4) EMPLOYEE NOT TAKEN INTO ACCOUNT MORE THAN ONCE.—An employee shall not be treated as an eligible employee for purposes of this subsection for any period with respect to any employer if such employer is allowed a credit under section 51 of the Internal Revenue Code of 1986 with respect to such employee for such period.

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