What Is the HR 597 Taxpayer Certainty & Disaster Act?
This 2019 law reinstated expired tax benefits and made permanent repeals, creating retroactive tax opportunities for individuals and businesses.
In late 2019, the Taxpayer Certainty and Disaster Tax Relief Act of 2019 was signed into law. The legislation served two main purposes: it retroactively extended over 30 tax provisions that had expired or were set to expire, and it provided targeted tax relief for individuals and businesses in federally declared disaster zones.
Key Tax Provisions Extended for Individuals
The act retroactively extended several deductions for individual taxpayers. One was the deduction for mortgage insurance premiums, which allowed homeowners to treat private mortgage insurance (PMI) payments as deductible mortgage interest. This provision expired at the end of 2021 and is not available for the current tax year.
The law also temporarily reinstated the deduction for qualified tuition and related expenses, which has since been replaced by the American Opportunity and Lifetime Learning Credits. Another extension involved the medical expense deduction, maintaining the adjusted gross income (AGI) threshold at 7.5% for unreimbursed medical expenses. This lower threshold was later made permanent.
Finally, the act extended the exclusion for the discharge of qualified principal residence indebtedness. This allows taxpayers to exclude certain forgiven mortgage debt on their primary home from their gross income. The exclusion is available through 2025, with a maximum excludable amount of $750,000.
Major Tax Provisions Extended for Businesses
The act renewed several tax incentives for businesses. The Work Opportunity Tax Credit (WOTC) gives employers a tax credit for hiring individuals from certain targeted groups. This credit was extended through 2025.
The New Markets Tax Credit (NMTC) was also extended through 2025. This credit is designed to spur investment in low-income communities.
Empowerment zone tax incentives were renewed through 2025. These provide tax benefits for businesses operating in designated areas and include special expensing rules, tax-exempt bond financing, and a wage credit.
The act also extended several energy-related tax credits. These included the credit for alternative fuel vehicle refueling property and credits for two-wheeled plug-in electric vehicles, biodiesel, and renewable diesel.
Federally Declared Disaster Tax Relief
The act provided tax relief for victims of natural disasters, and subsequent legislation has extended similar benefits for federally declared disasters through early 2025. This relief includes modified casualty loss rules and more flexible access to retirement funds.
Affected taxpayers can deduct net disaster losses without having to itemize. The law also removes the requirements that losses must exceed 10% of adjusted gross income (AGI) and the $100-per-casualty floor.
Individuals in a qualified disaster area can take distributions up to a certain amount from retirement plans like a 401(k) or IRA without the 10% early withdrawal penalty. The law also allows these distributions to be repaid over a three-year period to avoid income tax on the withdrawal.
The law also created an employee retention credit for employers in disaster zones. This credit helps businesses that were inoperable due to a disaster but continued to pay their employees.
Repeal of Certain ACA Taxes
The act also permanently repealed several taxes that were part of the Affordable Care Act (ACA).
One repeal was of the excise tax on high-cost employer-sponsored health coverage, known as the “Cadillac Tax.” This would have imposed a 40% tax on health plans exceeding certain annual limits, and its repeal removed a potential cost increase for employees.
The act also eliminated the medical device excise tax, a 2.3% tax on the sale of certain medical devices. The tax had been under a temporary moratorium, and its full repeal was a development for the medical device industry.
Finally, the act repealed the annual fee on health insurance providers, which was based on their market share of net premiums. This repeal was intended to lower costs for insurers, potentially leading to more affordable premiums for consumers.