To amend the Internal Revenue Code of 1986 to exclude from gross income certain hazard mitigation assistance.

Mr. President, in these final days of the 108th Congress, I would like to call attention to an issue of great consequence to the people of Florida and to other States that recently have been victimized by natural disasters.

This year, four hurricanes wrought a path of damage and destruction across Florida and other areas. The U.S. Congress was quick to provide Federal relief for victims of the storms, and we are grateful for this. Yet a June Internal Revenue Service ruling determines that this assistance ought to be taxed.

This means that if a homeowner accepts a $25,000 Federal grant to elevate their flood prone home, the grant would be included in their taxable income. This unexpected tax liability could be financially devastating to a retiree living on a fixed income after already having faced the costs of hurricane cleanup. It also creates a strong disincentive for homeowners to participate in Federal mitigation programs,

increasing the risk of damage and expense in future disasters. The IRS policy runs counter to good public policy and common sense.

Senator Kit Bond and Representative Mark Foley have introduced S. 2886 and H.R. 5206, respectively, identical bills that would fix this problem by exempting mitigation grants from being included as taxable income. These bills have drawn support from both sides of the aisle and a large number of the Florida Congressional delegation. I am disappointed that we will not have an opportunity to pass these bills before Congress adjourns. If we fail to act early on in the 109th Congress, come April, some homeowners could be in for a rude awakening in the form of a higher tax bill from the IRS.

To help ease the minds of Floridians and other Americans living in disaster prone areas of the country, I joined Senator Landrieu in sending a letter to Finance Committee Chairman Grassley and Ranking Member Baucus asking them to direct the Treasury and the IRS to delay implementing this policy until Congress has the opportunity to act.

I will continue to work with my colleagues in the Senate to find a solution to this problem.