Senate approves tax breaks for attack victims' families

WASHINGTON -- Families of the victims of the Sept. 11 terror attacks would get tax breaks under legislation approved Friday by the Senate.

"This is not all we could do. It is only the beginning of what we should do," said Sen. Robert Torricelli, D-N.J., a prime sponsor of the 10-year, $430 million bill. "But it is something we can do."

The bill, which passed on a voice vote, heads back to the House, where a less expansive version was approved shortly after the attacks. House leaders were unsure Friday whether the Senate bill would be acceptable or if a conference would be necessary to work out a final agreement.

Under the Senate bill, people who died in the attacks on the World Trade Center and the Pentagon and those killed when a hijacked plane crashed in rural Pennsylvania would not owe income taxes in the year of death and at least one previous year.

Any income taxes paid during those years would be refunded. Also refunded would be two years' worth of the payroll taxes that fund Social Security and Medicare.

"The terrorist attacks left thousands of wives, husbands and children suffering," said Sen. Charles Grassley of Iowa, senior Republican on the Senate Finance Committee. "I hope this eases at least some of the hardship and worry for the aggrieved."

At last count, 4,376 people were listed as dead or missing as a result of the attacks. Sen. Don Nickles, R-Okla., attached language that would make many of the tax breaks apply to victims of the April 1995 Oklahoma City bombing; 168 died in that attack. Anthrax victims and their families are also included.

There was also help Friday from the Internal Revenue Service, which issued a notice that said charities are free to provide money to victims of the terrorist attacks without fear of losing their tax-exempt status.

Legal questions were raised about payments made to families of rescuers by the Twin Towers Fund in New York because they are not necessarily in dire financial need.

"Groups who act in a reasonable, good-faith manner to get help to victims will not endanger their tax-exempt status," said IRS Commissioner Charles Rossotti.

For the victims and their families, Senate bill would also:

Make workers' compensation benefits, death benefits and payments from government retirement plans untaxable. Disability benefits for people injured in the attacks also would not be taxed.

Shield the first $8.5 million in assets from federal estate tax in 2001 only.

Exempt from taxation payments to employees from employers for "personal, living, family or funeral expenses" as well as government aid, such as disaster payments, and payments made by airlines to victims.

Give the Treasury Department flexibility to postpone tax filing deadlines for up to one year in cases related to declared disasters, terrorism or military action.