Insurance and tax issues for storm recovery
Even entities that suffered no physical damage from Hurricane Harvey may be experiencing disruptions to their supply chains, utilities or transportation. As business leaders and owners pull themselves up, there are a number of key issues they need to consider as they begin the rebuilding process. Insurance claims
Post-disaster economic recovery often entails the filing of complex property and business interruption insurance claims including property damage, business interruption, extra expenses and inventory losses. Here are a number of things to do in advance of submitting a claim: Capture sufficient documentary and electronic evidence to support a claim; calculate the additional costs incurred as a result of the disaster and ascertain the appropriateness of those expenditures; quantify the loss of sales and profits during the period of the disaster and beyond; assess and quantify mitigation actions taken (including in relation to saved costs); make sure claims with FEMA are properly documented so that FEMA can reimburse the claimant quickly. Tax implications
All organizations, regardless of size, can benefit from some of the relief and assistance provided on tax issues.
Federal tax relief — the IRS has granted businesses in select Texas counties until Jan. 31, 2018, to file certain business tax returns and to make certain tax payments. This automatic postponement applies to affected taxpayers filing most federal tax returns that have an original or extended due date occurring on or after Aug. 23, 2017, and before Jan. 31, 2018. Accelerated casualty loss claims:
Businesses that suffered uninsured and unreimbursed disasterrelated losses can choose to deduct those losses on either the return for the year the loss occurred (in this instance, the 2017 return normally filed next year) or the return for the prior year (2016). For some companies, taking the casualty deduction in the earlier year can provide a faster tax refund. Charitable contributions:
In addition to the normally available deduction for charitable contributions, the tax law provides
an enhanced deduction for the donation of inventory — including food inventory — to charitable organizations for use by the ill, needy, or infants.
Involuntary conversions: The tax law provides special rules applicable to business property “involuntarily converted” within a federally declared disaster area. Taxpayers receiving insurance proceeds from business property destroyed by Hurricane Harvey and the resulting floods may be entitled to invest those proceeds in other tangible property to be held for productive use in a trade or business by complying with the procedural requirements of section 1033 of the tax code. However, it is important to work with the company’s tax professionals to determine whether the transaction can satisfy section 1033.
State tax relief: The Texas Comptroller has announced that for 2017 Texas franchise tax reports, taxpayers with a valid extension to Nov. 15 are granted an automatic extension to Jan. 5, 2018, to file the report if they are in the federally declared disaster area in Texas. For sales taxes, the comptroller is granting an automatic 30-day extension (to Oct. 20) to file the return normally due Sept. 20. Taxpayers that are required to file sales tax electronically may request a 30-day extension to file. Other relief includes labor charges related to the repair or restoration of nonresidential real property damaged due to a declared disaster are exempt from tax under certain conditions. There is no state tax on labor charges related to residential real property. Labor charges related to the repair or restoration of tangible personal property damaged by a declared disaster are exempt from tax.
As with any critical business issue, your preferred providers for tax, legal and consulting will have additional details and information to quickly help your business return to full strength.