IRS proposes rule regarding federally declared disasters

A proposed rule would make things a little easier for finance teams whose duties get impacted by federally declared disasters.

The new IRS rule, Mandatory 60-Day Postponement of Certain Tax-Related Deadlines by Reason of a Federally Declared Disaster, can be found in the Federal Register. Here’s what CFOs need to know.

The who

The regs would create a mandatory 60-day postponement of certain tax deadlines for specific people and organizations, including

• businesses that have a principal place of employment in a disaster area
• people who reside in a disaster area
• relief workers who provide assistance in a disaster area, and
• taxpayers whose tax records necessary to meet a certain tax deadline are located in a disaster area.

The why

This rule also aims to clarify the definition of “federally declared disaster.” This term currently includes any disaster determined by the president under the Robert T. Stafford Disaster Relief and Emergency Assistance Act.

The problem: The Stafford Act doesn’t include the term “federally declared disaster,” which has caused some confusion.

So, the new definition will show that the term “federally declared disaster” encompasses both:

• a “major disaster” declared under Section 401 of the Stafford Act, and
• an “emergency” declared under Section 501 of the Stafford Act.

The when

If your company’s affected by a disaster, when does the relief start and end?

Your calculation of the extension would hinge on the dates for the incident period outlined in the FEMA disaster declaration. The period would begin on the earliest “incident date” and end 60 days after the latest incident date. And this extension would run concurrently with any other IRS relief your company receives.

Also, if the disaster declaration’s incident period doesn’t have an end date, your extension is limited to the one-year maximum allowed by the Internal Revenue Code. But if the disaster declaration doesn’t include an incident period, the mandatory extension doesn’t apply.

Finally, if passed, the regs are would apply to any disaster declared on or after Dec. 21, 2019. We’ll keep you posted.