The “GO Zone” is that portion of the Hurricane Katrina Disaster Area determined by the President to warrant individual or individual and public assistance from the federal government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act by reason of Hurricane Katrina. The GO Zone covers the same areas designated as the “core disaster area” by KETRA.

The new Act allows taxpayers to claim an additional first-year bonus depreciation allowance equal to 50% of the adjusted basis of qualified GO Zone property. The property must be acquired after August 27, 2005 and placed in service before December 31, 2007. For nonresidential real property and residential rental property, it must be placed in service before December 31, 2008.

The new Act extends the carryback period from 2 years to 5 years for NOLs from GO Zone related casualty losses, moving and temporary housing expenses, first-year depreciation, and repair costs. The 5-year carryback applies for losses paid or incurred after August 27, 2005, and before January 1, 2008. An irrevocable election not to apply the five-year carryback may be made for any tax year.

Partial Expensing for Demolition and Clean-Up Costs

For amounts paid or incurred after August 27, 2005 and before January 1, 2007, 50% of the costs (that would otherwise be capitalized) related to site cleanup and demolition of structures are deductible. The expenses must relate to property in the GO Zone held by the taxpayer for use in a trade or business or for production of income, or inventory held primarily for sale to customers in the ordinary course of business.

Employee Housing Allowance & Employer Credit

Employees are allowed to exclude from gross income up to $600 per month for the value of in-kind lodging provided to them, their spouse, or dependents by or on behalf of a qualified employer located in the GO Zone. The exclusion doesn't apply for purposes of Social Security, Medicare, or unemployment taxes.

A qualified employee is an individual, for any month, who:

1. On August 28, 2005, had a principal residence in the GO Zone, AND

2. Performs substantially all of his or her employment services in the GO Zone for the qualified employer furnishing the lodging.

Employers with a trade or business located in the GO Zone providing this housing are entitled to a credit equal to 30% of the amount which is excludable from the gross income of qualified employees.

Hope & Lifetime Education Credits Increased

The HOPE and Lifetime Learning credits are doubled to $3,000 and $4,000 respectively for tax year 2005 for students attending eligible education institutions located in the GO Zone.

Certain KETRA Provisions Extended to Victims of Hurricanes Rita & Wilma

The following provisions have been extended. See KETRA for more information.

• Casualty Losses are Deductible Without Regards to the 10% Adjusted Gross Income Limitation and the $100 Casualty Loss Deduction

• Look-Back Election Provided for Earned Income Credit (EIC) and the Refundable Child Tax Credit

• Penalty-Free Withdrawals from Retirement Plans

• Repayments of Qualified Hurricane Distributions

• Income Averaging Allowed for Qualified Hurricane Distributions

• Retirement Plan Loan Limits Increased and Payments Postponed

• Limitations on Charitable Contributions Relaxed