Gulf Opportunity Zone Act of 2005

Earlier this week, President Bush signed the Gulf Oportunity Zone Act of 2005. The law originated as additional relief for Hurricane Katrina, and was expanded to include relief for Hurricanes Rita and Wilma and now includes some other miscellaneous tax relief. Some of the key provisions include:

• Tax incentives to encourage rebuilding of the areas hardest hit by Hurricane Katrina (designated as the Gulf Opportunity Zone. These include 50% bonus first-year depreciation, a substantially increased Code Section 179 expensing allowance, a five year net operating loss carryback, partial expensing of demolition and cleanup costs, increased rehabilitation tax credits, and boosted higher-education credits for those attending school in the Gulf Opportunity Zone.
• Some of the KETRA tax breaks from Hurricane Katrina are extended to areas affected by Hurricanes Rita and Wilma. These include retirement plan relief measures (e.g., exemption from the 10% penalty tax for up to $100,000 of qualified distributions), eased casualty loss rules, larger corporate charitable contribution limits for donations to hurricane aid, and a special employee retention credit.
• New bond provisions designed to stimulate rebuilding in the affected areas, such as new authority for Louisiana, Mississippi and Alabama to issue a special class of bonds outside of the normal state volume caps.
• Extensions of some expiring provisions, such as the special rule giving military personnel the option of treating their tax-free combat pay as income when computing their eligibility for the earned income credit.
• Technical corrections to a number of earlier laws from 2003-2005.