LEGISLATION Bush signs law making FEMA grants tax-free

WASHINGTON (AP) -- Ohioans who receive federal assistance due to a flooding or other natural disasters won't owe taxes on that money, thanks to legislation President Bush signed into law Friday, the federal tax deadline.
Congress had rushed to pass the bill this week, but House and Senate lawmakers disagreed about whether it should be retroactive.
In the end, a measure making the Federal Emergency Management Agency grants tax-free for about 43,000 recipients since the program started in 1990 passed the Senate late Wednesday and the House on Thursday, both with broad bipartisan support.
These FEMA grants have helped Ohio residents in flood plains strengthen the foundations of their homes to protect against future flooding. The money also has helped people hit by hurricanes or tornadoes relocate or safeguard their homes.
The Internal Revenue Service determined last year, after a string of hurricanes hit the Southeast, that these hazard mitigation grants were taxable under current law. However, no taxes previously had been collected on the grants because they were assumed to be exempt.
Bush had encouraged Congress in his budget proposal to change the law and make them exempt.

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