Last week, many Texans and residents of other southern states were severely impacted by a historic winter storm. A substantial amount of time may lapse before we fully recover. Today, HM&M presents an overview of Federal, state, and local resources that may be available to assist you in your recovery efforts. We also suggest some actions that you need to take. Soon we will be addressing in more detail some of the topics we touch on below.
If you suffered damages from the storm, this is what you need to be doing right now:
- Mitigate damages.
- Document your damages. Take photos.
- Clean up your damages in order to minimize additional damages.
- Contact your insurance company and initiate your insurance claim.
- Determine if you qualify for disaster relief assistance, and what kind of assistance for which you may qualify. Apply for the assistance. (See below for some guidance.)
- Secure and retain your financial records. If you suffer losses that may be deductible for Federal income tax purposes, you need to be able to document the existence and amount of those losses. Also, you may need your financial records to justify grants and loans.
State and Local Aid
People may be able to find the most direct and expeditious aid for basic needs by contacting local authorities, churches, synagogues, and philanthropic organizations. Local media may compile lists of organizations providing a wide variety of aid. A good place to start your search for assistance is the American Red Cross or your local Red Cross chapter.
Three online resources that may help you identify state and local aid include:
- Texas Department of Housing and Community Affairs
- Texas Department of Emergency Management
- A comprehensive guide provided by the State Bar of Texas
Federal Disaster Aid
President Biden made two kinds of disaster declarations with regard to Texas last week. These disaster declarations make Federal disaster relief funds available to Texas and part or all of its residents.
First, President Biden declared that an emergency exists in the entire state of Texas. This declaration provides that the Federal Emergency Management Agency (“FEMA”) is authorized to identify, mobilize, and provide at its discretion, equipment and resources necessary to alleviate the impacts of the severe winter storm emergency. Emergency protective measures for mass care and sheltering and for direct federal assistance will be provided at 75 percent federal funding, with local and state governments and/or certain nonprofits providing the remaining share of funding. Basically, the President may spend up to $5 million of federal funds at his discretion under such a declaration. An emergency declaration with expenditures above $5 million must be reported to Congress. Generally, the funds under an emergency declaration are not used for grants directly to individuals or businesses.
Later in the week, President Biden signed a major disaster declaration making federal funding available to affected Texas residents and businesses in 77 of 254 counties. Individuals and businesses in these counties can apply for assistance by registering online at www.DisasterAssistance.gov or by calling 1-800-621-3362 or 1-800-462-7585. Governor Abbott continues to seek the major disaster declaration for the remaining Texas counties at the time of preparation of this memorandum (2/21/2021).
The Small Business Administration (“SBA”) offers disaster assistance in the form of low interest loans to businesses, nonprofit organizations, homeowners, and renters located in regions affected by declared disasters. SBA also provides eligible small businesses and nonprofit organizations with working capital to help overcome the economic injury of a declared disaster. You should be able to initiate the process through www.DisasterAssistance.gov.
Internal Revenue Service
The Internal Revenue Service may provide administrative relief to taxpayers and tax practitioners in areas affected by a major disaster. Such relief may include extended periods to file tax returns and/or make tax payments. At the time of the preparation of this memorandum (2/21/2021), the IRS has not provided such tax relief.
Federal Income Taxation – Deducting Casualty Losses; Taxation of Disaster Relief Payments and Insurance Proceeds
Beginning in 2018 and continuing through 2025, individuals may claim “personal” casualty losses for Federal income tax purposes only for losses sustained in a federal disaster area. Business casualty losses are not so limited. Multiple additional tax rules apply to both personal and business casualty losses sustained in federal disaster areas. In some cases, a 2021 casualty loss can be claimed on a 2020 tax return, in order to speed up the effect of the tax reduction. Special tax rules may apply to payments from government programs and insurance payments. Soon we will provide additional guidance and resources about claiming casualty losses and the taxation.
If you have questions about disaster relief, please contact your HM&M advisor.
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