AICPA asks Congress to include disaster relief break in retirement bill

The American Institute of CPAs sent a letter to House lawmakers urging them to include a disaster provision in a bipartisan retirement bill that’s already part of the Senate version of the legislation.

In a letter last week to leaders of the House Ways and Means Committee and the House Education and Labor Committee, AICPA Tax Executive Committee chair Jan Lewis asked them to include a provision in the Enhancing American Retirement Now (EARN) Act allowing individuals affected by natural disasters to withdraw up to $22,000 from qualified retirement accounts without being assessed early-withdrawal penalties and fees. The provision comes from the AICPA-endorsed Disaster Retirement Savings Act and would permanently remove these penalties for individuals impacted by natural disasters who choose to use retirement funds to cover unexpected expenses associated with those disasters.

“Allowing natural disaster victims to tap into their own funds to cover unexpected expenses associated with those disasters removes an unnecessary burden while they wait for government assistance and insurance reimbursements that may not be immediately forthcoming,” Lewis wrote. “Natural disasters such as hurricanes, floods, tornados, wildfires, and heat waves regularly affect the nation at all times of the year, but the current system does not provide fair and reliable tax assistance for disaster victims.”

For years, the AICPA has asked Congress to pass permanent tax legislation that would take effect immediately when a declaration of a federal disaster occurs, instead of providing delayed tax relief through separate individual bills following each disaster, she noted. This particular proposal could help homeowners and business owners with the expensive, often arduous process of recovery. The AICPA believes the related provision in the EARN Act would provide significant relief to victims of natural disasters.

“Disasters can have a devastating impact on families and businesses and we must do everything we can to reduce the stress and burden of rebuilding after a disaster. Taxpayers should be allowed to use their own funds, without penalty, to help restore their lives and businesses while they wait for government assistance and insurance reimbursements,” said AICPA vice president of taxation Edward Karl in a statement Wednesday.

The AICPA thanked Sen. Bob Menendez, D-New Jersey, and Bill Cassidy, R-Louisiana, and Rep. Mike Thompson, D-California, and Mike Kelly, R-Pennsylvania, for supporting the Disaster Retirement Savings Act.