Sep 30, 2002
Press Release
NEW YORK: In response to reports that the IRS may treat $772 million in federal disaster recovery grants to businesses and individuals in lower Manhattan as taxable income, New York Reps. Carolyn Maloney and Jerrold Nadler, with six colleagues, have urged U.S. Treasury Secretary Paul O'Neill and IRS Commissioner Charles O. Rossotti to immediately declare the aid tax exempt.
In a letter to O'Neill and Rossotti, the New York members of Congress state that any decision to tax the funds in question, "totally violates the intent of these grants and will do severe damage to the effort to restore lower Manhattan. At the time these grants were distributed, it was incomprehensible that the grants would later be considered taxable income. If the IRS had thought such tax treatment was a possibility at the time, it should have indicated to policymakers such a concern. Taxing this as income will have the direct opposite of the intended effect of these grants and will drive businesses and residents from the disaster zone or into bankruptcy."

Maloney said of the issue, "This is totally outrageous that anyone would consider taxing disaster relief aid meant precisely to help small businesses and individuals to recover from such terrible devastation. Especially considering the precedent that exists of other disaster relief aid being tax exempt, I think it would be terrible to see the IRS put a tax this aid for lower-Manhattan."

"There's been a lot of talk about the infamous 'Death Tax' in Washington the past few years. The tax on this aid might as well be called the 'Small Business Death Tax,' because that is what the result of it could be, in addition to placing a unnecessary burden on some individuals," said Rep. Nadler. "The bottom line the IRS must make it clear that these grants won't be taxed, and they need to do it right now."

Joing Maloney and Nadler in the letter were New York Reps. Elliot Engel, Jose Serrano, Gary Ackerman, Steve Israel, Ed Towns, and Greg Meeks. The letter to O'Neill and Rossotti can be viewed in full at