Tax Relief for Crumbling Foundations
Many homeowners in parts of our state have discovered that their home foundations are crumbling due to a mineral called pyrrhotite in the concrete used to pour their homes’ foundations.
Over the past few years, I have worked side-by-side with Representative Joe Courtney (CT-02) and local, state, and federal stakeholders to find solutions for Connecticut homeowners affected by this terrible issue.
Most recently, after working with the IRS and Department of Treasury for several years, we were able to help secure direct federal tax relief for homeowners, allowing them to deduct the cost of foundation repairs under “casualty loss” rules. Read the latest Revenue Procedure here: Rev. Proc 2018-14
Homeowners should consult with a qualified tax preparer (and/or contact the resources below) to see if they qualify for this deduction and determine how to use it on their 2017 tax return or on future returns. Fortunately, some homeowners facing this devastating situation will now be able to see tax relief that wasn’t previously available. While this form of federal tax relief is not a silver bullet for all affected homeowners, I remain committed to working with local, state, and federal partners in ensuring we are looking at every possible solution to help all homeowners.
After hearing from residents and visiting affected homes in South Windsor with Mayor Dr. Saud Anwar of the South Windsor Town Council and Commissioner Jonathan Harris of the Department of Consumer Protection, I joined efforts with Rep. Courtney to see what could be done on the federal level to assist homeowners.
Starting in 2016, we conducted research on the process of issuing a revenue procedure for crumbling foundation relief and began outreach to IRS staff to learn more about the limits of IRS policy in this area.
In May 2017, we consulted with then-IRS Commissioner John Koskinen, who supported the idea of utilizing the casualty loss deduction and agreed to weigh in with Treasury. The former Commissioner remained engaged on the issue even as his term as IRS Commissioner ended in 2017.
As a member of the House Ways & Means Committee, I had the opportunity to discuss the plight of Connecticut homeowners with National Taxpayer Advocate Nina Olson, who agreed to intercede on behalf of affected residents when she testified before the committee in May 2017. We then wrote to Ms. Olson, urging the application of the casualty loss deduction to the crumbling foundation situation. In her response, she indicated support for the effort and shared the proposal that her office submitted to the Treasury and the IRS for priority consideration.
After getting support from Koskinen and Olson, we submitted a letter to Treasury Secretary Steve Mnuchin requesting a meeting to discuss possible federal tax relief for the homeowners who have been harmed by crumbling foundations. The Treasury Department’s Office of Tax Policy has the authority to make a decision on providing such tax relief.
We also enlisted the support of Congressman Richard Neal, the Ranking Member of the House Ways and Means Committee, who weighed in on behalf of the request with Secretary Mnuchin.
In September, we met with Secretary Mnuchin and Assistant Secretary for Tax Policy David Kautter at the Department of the Treasury headquarters in Washington, D.C. to discuss assistance for north-central Connecticut residents affected by crumbling concrete foundation. We requested that Treasury issue an IRS revenue procedure that allows homeowners to deduct foundation repair costs from their federal taxes.
In a September 26 follow up letter to Mr. Kautter, we provided additional information to help guide the department’s consideration of their request.
In November 2017, we were pleased announce that the IRS issued Rev. Proc. 2017-60 to enact a “safe harbor” for the treatment of crumbling foundation-related repair costs as a “casualty loss” deduction from a taxpayer's taxable income under Section 165 of the Internal Revenue Code.
Passage of New Tax Law
However, the passage of the new Republican tax law in December temporarily limits the applicability of Section 165 casualty loss deductions. Under the law, beginning in tax year 2018 only taxpayers who suffer damage related to a presidentially-declared Stafford Act disaster may deduct their property-casualty losses. We urged the IRS to develop additional transitional relief that could help homeowners in 2018 and beyond, as many did not have the opportunity to complete repairs in between the release of the revenue procedure in November and the passage of the Republican tax law in December 2017.
In February 2018, Reps. Courtney, Neal, and I were pleased to announce updated guidance from the IRS to extend the period of time that homeowners would have to claim crumbling foundation related repairs on their federal taxes. Under the new guidance, homeowners will now have through the end of 2020 to make qualified repairs to their home and until April 2021 to claim those repairs on an amended 2017 federal tax return.
Letters of Support:
Taxpayer Advocate Office – CT Department of Revenue Services
Tax Assistance Locations – CT Department of Revenue Services
More on Tax Relief for Crumbling Foundations
Claiming casualty losses on deteriorating concrete foundations caused by the mineral pyrrhotite.
Wednesday, October 24, 2018
(60 minutes including Q&A)
(Hartford, CT) - Today, Congressman John B. Larson (CT-01) and Congressman Joe Courtney (CT-02) announced that the IRS Stakeholder Liaison will be conducting a free webinar on Wednesday, October 24, at 10:00 AM for tax preparers and homeowners who would like to learn more about deducting the cost of crumbling foundations repairs from their taxes.
Congressman John B. Larson (CT-01) and Congressman Joe Courtney (CT-02) announced that the Internal Revenue Service (IRS) had provided them with clarifying information that will offer additional tax relief to homeowners with crumbling foundations. First, the IRS has announced that they will allow homeowners to “carry forward” or “carry back” a net operating loss should their casualty loss exceed their annual tax liability.
(Hartford, CT) – Today, Congressman John B. Larson (CT-01) and Congressman Joe Courtney (CT-02) announced that the Internal Revenue Service (IRS) had provided them with clarifying information that will offer additional tax relief to homeowners with crumbling foundations. First, the IRS has announced that they will allow homeowners to “carry forward” or “carry back” a net operating loss should their casualty loss exceed their annual tax liability.
Washington DC – Today, Congressmen John B. Larson (CT-01) and Joe Courtney (CT-02) released the following statement after the House of Representatives approved two amendments to help address the crumbling foundations problem.
HOMEOWNERS: Learn More About the IRS Casualty Loss Deduction for Crumbling Foundations Repairs
Congressman John B. Larson, Congressman Joe Courtney, and IRS Senior Stakeholder Liaison Joseph S. McCarthy areb hosting a seminar on the IRS Casualty Loss Deduction and the crisis of deteriorating residential concrete foundations
Ellington High School
WASHINGTON, DC—Today, Congressman John B. Larson (CT-01) and Congressman Joe Courtney (CT-02) announced three amendments they authored in support of support Connecticut residents impacted by crumbling foundations passed in the House of Representatives. The amendments were added to an omnibus appropriations bill to fund the federal government which passed the House today. These amendments represent the first time that a full chamber of Congress has passed measures related to crumbling foundations in Connecticut.