Nov 8, 2002
Press Release
NEW YORK: Inexplicably, the Internal Revenue Service (IRS) has decided to tax 9/11 recovery grants for businesses in lower-Manhattan. Congresswoman Carolyn Maloney (NY), who had organized Congressional letters to the IRS opposing the idea of a tax on the grants, and has authored legislation (HR 5624) to overrule this decision, called the IRS action "troubling".
Rep. Maloney stated:

" It is troubling that we are only getting this decision now, apparently this has been an issue with the IRS for several months and now, less than two months from the end of the year, all we have is this letter and we still do not have a published guidance from the IRS. Small business owners who received the grants are only now being told they might have tax consequences, this is inexcusable."

"Nobody who was involved in the passage of the CDBG grants could have gotten the idea that the Congress intended to have these grants be subject to tax. Had the IRS told the New York Delegation that this was even possibly an issue, even as late as last summer, we could have easily moved to correct this, but now it will be a struggle to get the House to overrule the IRS during next week's lame duck session."

" I urge the Republican leadership in the House to allow an immediate vote on our legislation to exempt all of these 9/11 recovery grants from IRS taxes."

Maloney and other members of Congress were notified of the decision in a letter from the IRS today that states, "Governmental grants to businesses in response to a disaster also do not qualify for exclusion from income as gifts because the government's intent in making the payments proceeds, not from a detached and disinterested generosity, but from its duty to relive the hardship caused by the disaster." The full letter can be viewed at: 


On September 30, 2002, after reports surfaced that the IRS was considering a tax on federal grants to small businesses and individuals in lower-Manhattan who suffered economic impacts from 9/11, New York Representatives Maloney, Elliot Engel, Jose Serrano, Gary Ackerman, Steve Israel, Ed Towns, and Greg Meeks sent a letter to U.S. Treasury Secretary Paul O'Neill and IRS Commissioner Charles O. Rossotti urging that they immediately declare the over $1 billion in aid, tax exempt. The letter to O'Neill and Rossotti can be viewed in full at

 Senators Schumer and Clinton took similar action.

On October 8, 2002, it was reported that the IRS had decided not to tax residents of lower-Manhattan for recovery about $281 million in grants, but had yet to make a decision on the small business grants of approximately $772 million.

On October 10, 2002 Maloney and several other New York Lawmakers introduced legislation to protect lower Manhattan businesses and residents from having to pay any taxes on 9/11 recovery assistance (HR 5624 - the "September 11th Assistance Tax Clarification Act") New York State Assembly speaker introduced separate legislation as well, to exempt the grants from city and state taxes, no matter what the IRS decision would be.

Read the Bill (Click Here)