SECTION 4. DRAFTING

INFORMATION

The principal authors of this notice are Timothy L. Jones and Aviva M. Roth of the Office of Associate Chief Counsel (Tax Exempt & Government Entities). However, other personnel from the IRS and the Treasury Department participated in its development. For further information regarding this notice, contact Timothy L. Jones or Aviva M. Roth at (202) 622–3980 (not a toll-free call).

Postponement of Deadline for Making an Election to Deduct Certain Losses Attributable to Hurricanes Katrina, Rita, and Wilma

Notice 2006–17

PURPOSE

This notice under § 7508A of the Internal Revenue Code postpones until October 16, 2006, the deadline to make an election under § 165(i) to deduct in the preceding taxable year losses attributable to Hurricane Katrina, Rita, or Wilma sustained in Presidentially declared disaster areas in Alabama, Louisiana, Florida, Mississippi, and Texas eligible for Public Assistance or Public Assistance and Individual Assistance.

BACKGROUND

Section 165(i) provides that if a taxpayer sustains a loss attributable to a disaster occurring in an area subsequently determined by the President of the United States to warrant assistance by the Federal Government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. §§ 5121–5206 (the Stafford Act), the taxpayer may elect to deduct that

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This notice is limited to making of an election under § 165(i) and does not affect the application of any other section of the Code or the regulations.

DRAFTING INFORMATION

The principal author of this notice is Norma Rotunno of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this notice, contact Ms. Rotunno at (202) 622–7900 (not a toll-free call).

Additional Postponement of Deadlines for Certain Taxpayers Affected By Hurricane Katrina

Notice 2006–20

PURPOSE

This notice supplements Notice 2005–73, 2005–42 I.R.B. 723 (October 17, 2005); News Release IR–2005–112 (September 28, 2005); Notice 2005–81, 2005–47 I.R.B. 977 (November 21, 2005); and Notice 2005–66, 2005–40 I.R.B. 620 (October 3, 2005) which, under the authority of section 7508A, postponed until February 28, 2006, deadlines for certain taxpayers affected by Hurricane Katrina to perform the acts described in Notice 2005–73 ( e.g., filing returns and other documents, payment of taxes), and for the Internal Revenue Service (IRS) to perform the acts described in Notice 2005–81 ( e.g., assessment and collection of tax). This notice further postpones those deadlines through August 28, 2006, for the IRS and for affected taxpayers in the parishes in Louisiana and the counties in Mississippi and Alabama that the Federal Emergency Management Agency (FEMA) determined were eligible for Individual Assistance or Individual and Public Assistance.

Affected Parishes and Counties

On August 28, 2005 and August 29, 2005, the President issued four federal disaster declarations pertaining to Hurricane Katrina. The disaster declarations included the states of Louisiana, Mississippi, and Alabama. The Presidential declarations authorized FEMA, under the

loss on the taxpayer’s return for the taxable year immediately preceding the taxable year in which the disaster occurred. For purposes of § 165(i), a disaster includes an event declared a major disaster that occurred in an area later determined by the Federal Emergency Management Agency (FEMA) to be eligible for Individual Assistance, Public Assistance, or both, under the Stafford Act.

Generally, § 1.165–11(e) of the Income Tax Regulations provides that a taxpayer must make the § 165(i) election by filing a return, an amended return, or a refund claim on or before the later of (1) the due date of the taxpayer’s income tax return (determined without regard to any extension of time for filing the return) for the taxable year in which the disaster actually occurred, or (2) the due date of the taxpayer’s income tax return (determined with regard to any extension of time for filing the return) for the immediately preceding taxable year. The election is irrevocable 90 days after it is made.

Section 7508A provides the Secretary with authority to postpone the time for performing certain acts under the internal revenue laws for up to one year for a taxpayer affected by a Presidentially declared disaster. Section 301.7508A–1(c)(1) of the Regulations on Procedure and Administration lists several specific acts performed by taxpayers for which § 7508A relief may apply, and § 301.7508A–1(c)(1)(vii) allows the Secretary to specify additional acts. Section 301.7508A–1(d)(1) describes several types of “affected taxpayers” eligible for relief under § 7508A. Section 301.7508A–1(d)(1)(vii) authorizes the Service to determine that any other person is affected by a Presidentially declared disaster and therefore eligible for relief. Under § 301.7508A–1(d)(2), the area of a Presidentially declared disaster for which the Service has determined that the postponement of one or more deadlines applies is referred to as a “covered disaster area.”

AFFECTED TAXPAYERS FOR WHICH THE SECTION 165(i) DEADLINE IS POSTPONED

Under the authority of § 7508A and § 301.7508A–1(d)(2), the Service has determined that the counties and parishes that FEMA has determined to be eligible

for Public Assistance or Public Assistance and Individual Assistance pursuant to the major disaster declarations issued in response to Hurricanes Katrina, Rita, and Wilma, are covered disaster areas. See Notice 2005–73, 2005–42 I.R.B. 723 (October 17, 2005) (Katrina); IRS News Release IR–2005–110 (Rita); IRS News Release IR–2005–128 (Wilma); and Publication 4492 for a list of counties and parishes constituting covered disaster areas.

Under the authority of § 301.7508A–1(d)(1)(vii), a taxpayer is an “affected taxpayer” to which the postponement of the deadline for making the § 165(i) election applies if (1) the taxpayer sustained a loss attributable to Hurricane Katrina, Rita, or Wilma; (2) the loss occurred in the covered disaster area for the hurricane (regardless of whether the taxpayer’s principal residence or principal place of business is in one of the covered disaster areas); and (3) the deadline for the taxpayer to make a § 165(i) election for that loss, but for this notice, would be before October 16, 2006.

Affected taxpayers for purposes of this notice and the § 165(i) election are not affected taxpayers for purposes of other relief provided by the Service unless the taxpayer separately qualifies as an affected taxpayer under other guidance issued by the Service. See Notice 2005–73, IR–2005–110, and IR–2005–128 for the definition of an affected taxpayer for purposes of Hurricanes Katrina, Rita, and Wilma.

GRANT OF RELIEF

Under the authority of § 7508A, affected taxpayers, as defined above, are granted a postponement to October 16, 2006, to make an election under § 165(i) for losses attributable to Hurricane Katrina, Rita, or Wilma.

In order to assist the Service in identifying affected taxpayers to ensure that they receive the extension to make the § 165(i) election, affected taxpayers should mark “Hurricane Katrina,” “Hurricane Rita,” or “Hurricane Wilma” in red ink on the top of the return, amended return, or refund claim on which they are making the election. See Publication 4492 for special instructions on completing forms to make the § 165(i) election for a loss attributable to Hurricane Katrina, Rita, or Wilma.

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principal place of business, is not located in the covered disaster area, but whose tax professional/practitioner’s office is located (or was located as of August 29, 2005) in the covered disaster area; and (3) individuals, visiting the covered disaster area, who were killed or injured as a result of Hurricane Katrina and its aftermath. For purposes of (3) above, the estate of an individual visiting the covered disaster area who was killed as a result of the hurricane is also considered to be an affected taxpayer.

Extension of the Postponement Period

Section 7508A authorizes a postponement of deadlines for up to one year for taxpayers affected by a Presidentially-declared disaster. The IRS has determined that affected taxpayers as described in this notice in the parishes and counties identified by the IRS as eligible for additional relief shall receive a further postponement through August 28, 2006, of deadlines for the acts specified in Notice 2005–73 (including the acts listed in section 301.7508A–1(c)(1) and Rev. Proc. 2005–27, 2005–20 I.R.B. 1050). Thus, if the last day to perform one of the specified acts falls on or after August 29, 2005, and before August 28, 2006, then the last day for an affected taxpayer to timely perform the act is August 28, 2006. Furthermore, the IRS has concluded that some affected taxpayers as described in this notice may still have difficulty in making timely federal tax deposits in accordance with section 6302. Accordingly, for deposits required to be made by affected taxpayers on or after August 29, 2005, and before August 28, 2006, the IRS will waive the addition to tax under section 6656 for the failure to timely make any deposit of tax if the deposit is made on or before August 28, 2006. The relief from the failure to timely deposit addition to tax is intended for taxpayers who are unable to meet their deposit obligations because their (or their service provider’s) records, computers, or other essential supporting services were damaged, or essential personnel were injured, by the hurricane or any subsequent flooding. Thus, although the waiver applies to all affected taxpayers, taxpayers that are reasonably able to make their deposits are encouraged to do so.

Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. §§ 5121–5206, to provide assistance to counties and parishes in each state. Under that authority, FEMA determined that certain counties and parishes within those states were eligible for Individual Assistance or Individual and Public Assistance.

Both FEMA and the IRS have closely monitored the effects of Hurricane Katrina in the Gulf region and, due to continued widespread devastation from the hurricane and subsequent flooding, the IRS has determined that certain parishes and counties in Louisiana and Mississippi require additional disaster relief. These counties and parishes were hit the hardest by Hurricane Katrina and its aftermath and either remain uninhabitable or have a large number of displaced individuals and/or trailers in use as temporary housing. These include Cameron, Jefferson, Orleans, Plaquemines, St. Bernard, St. Charles, and St. Tammany parishes in Louisiana, and Hancock, Harrison, and Jackson counties in Mississippi. The Service will automatically provide the additional relief described below to affected taxpayers in these parishes and counties.

In addition, the IRS has determined that some affected taxpayers in other parishes and counties in Louisiana, Mississippi, and Alabama may require additional disaster relief. The parishes and counties identified by the IRS in which some taxpayers may require additional disaster relief are as follows: Alabama (Baldwin, Choctaw, Clarke, Greene, Hale, Marengo, Mobile, Pickens, Sumter, Tuscaloosa, and Washington); Mississippi (Adams, Amite, Attala, Claiborne, Choctaw, Clarke, Copiah, Covington, Franklin, Forrest, George, Greene, Hinds, Holmes, Humphreys, Jasper, Jefferson, Jefferson Davis, Jones, Kemper, Lamar, Lauderdale, Lawrence, Leake, Lincoln, Lowndes, Madison, Marion, Neshoba, Newton, Noxubee, Oktibbeha, Pearl River, Perry, Pike, Rankin, Scott, Simpson, Smith, Stone, Walthall, Warren, Wayne, Wilkinson, Winston, and Yazoo); Louisiana (Acadia, Ascension, Assumption, Calcasieu, East Baton Rouge, East Feliciana, Iberia, Iberville, Jefferson Davis, Lafayette, Lafourche, Livingston, Pointe Coupee, St. Helena, St. James, St. John the Baptist, St. Mary, St. Martin, Tangipahoa, Terrebonne, Vermilion, Washington, West Baton Rouge,

and West Feliciana). In these counties and parishes, affected taxpayers can receive relief by identifying themselves to the IRS as discussed in the Identifying Affected Taxpayers section, infra . The counties and parishes in which taxpayers receive relief automatically or by self-identification constitute a “covered disaster area” within the meaning of section 301.7508A–1(d)(2) for purposes of the relief provided by this notice. This definition of covered disaster area differs from the covered disaster area for purposes of other relief provided by the IRS, including different counties and parishes.

Affected Taxpayers Whose Acts May be Postponed

Under the authority of section 301.7508A–1(d)(1), “affected taxpayers” eligible for the relief provided by this notice include: any individual whose principal residence, and any business entity whose principal place of business, is located (or was located on August 29, 2005) in the covered disaster area; any individual who is a relief worker affiliated with a recognized government or philanthropic organization and who is assisting in the covered disaster area; any individual whose principal residence, and any business entity whose principal place of business, is not located in the covered disaster area, but whose records necessary to meet a filing or payment deadline are maintained (or were maintained on August 29, 2005) in the covered disaster area; any estate or trust that has (or had as of August 29, 2005) tax records necessary to meet a filing or payment deadline in the covered disaster area; and any spouse of an affected taxpayer, solely with regard to a joint return of the husband and wife.

Additionally, under section 301.7508A–1(d)(1)(vii), the IRS may determine that any other person is affected by a Presidentially-declared disaster and therefore eligible for relief. Accordingly, the IRS has determined that the following persons are also affected by Hurricane Katrina and its aftermath: (1) all workers assisting in the relief activities in the covered disaster areas, regardless of whether they are affiliated with recognized government or philanthropic organizations; (2) any individual whose principal residence, and any business entity whose

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Mississippi counties and seven Louisiana parishes where relief is being granted automatically, affected taxpayers are nonetheless strongly encouraged to mark their returns and other documents or otherwise alert the IRS to the need for relief. In the other counties and parishes identified in this notice, and for other affected taxpayers ( e.g., relief workers), taxpayers must notify the Service in order to ensure that they receive the relief. Accordingly, these taxpayers need to mark their returns and documents, or otherwise alert the IRS to the need for relief. Affected taxpayers should also identify themselves as such if the IRS sends them a notice or makes any other direct contact, e.g., telephone calls.

Taxpayers Not Receiving an Extension of the Postponement Period

The grant of relief provided by this notice applies only to affected taxpayers with respect to the counties and parishes listed in this notice. If an affected taxpayer described in Notice 2005–73 is not described as an affected taxpayer under this notice, and that taxpayer determines that additional time is needed, that taxpayer may request an extension under sections 6081 and 6161 (so long as the taxpayer has not previously received a full six-month extension of time to file or pay under those provisions for the specified act) and/or relief under any other provision providing for a waiver of a penalty for reasonable cause, such as sections 6651 and 6656.

DRAFTING INFORMATION

The principal author of this notice is Dillon Taylor of the Office of Associate Chief Counsel, Procedure and Administration (Administrative Provisions and Judicial Practice Division). For further information regarding this notice, you may call (202) 622–4940 (not a toll-free call).

Likewise, the IRS is granted a further postponement through August 28, 2006, to perform the acts specified in Notice 2005–66 (including the acts listed in section 301.7508A–1(c)(2)), with respect to affected taxpayers as described in this notice in the parishes and counties identified by the IRS as eligible for additional relief. Thus, if the last day for the IRS to perform one of the specified acts falls on or after September 6, 2005, and before August 28, 2006, then the last day for the IRS to timely perform the act is August 28, 2006. The act of issuing a notice of final partnership administrative adjustment (FPAA) to the Tax Matters Partner under section 6223 with respect to the tax attributable to the partnership items of partners of any partnership that is an affected taxpayer was added to the list of items postponed for the IRS by Notice 2005–81. If the last date for issuance of the FPAA is on or after November 7, 2005, and before August 28, 2006, then there is a postponement through August 28, 2006.

Requests for Further Relief

Affected taxpayers described in this notice who receive relief under section 7508A until August 28, 2006, may request, if applicable, additional time to file and/or pay after August 28, 2006, under other provisions of the Internal Revenue Code and regulations thereunder.

Section 6081 provides that the Secretary may grant a reasonable extension of time (generally not to exceed six months) for filing any return, declaration, statement, or other document required by the Code or by regulations thereunder. Section 6161 provides that the Secretary may grant a reasonable extension of time (generally not to exceed six months) for paying the amount (or any installments) of tax shown or required to be shown on any return or declaration required by the Code or by regulations thereunder. To the extent that a taxpayer has not previously received a full

six-month extension of time under section 6081, then the taxpayer will be entitled to request an extension of time to file under section 6081. For example, an affected individual income taxpayer’s 2005 Federal income tax return (including any payment) is due on April 17, 2006. Under the relief provided by this notice, the taxpayer would be required to file the return (and pay) on or before August 28, 2006. As the postponement from April 17, 2006, through August 28, 2006, was under the authority of section 7508A, the taxpayer would be eligible to request a further extension of time, up through February 28, 2007, to file (and pay) under section 6081 and section 6161. The granting of the extension of time to file (and pay) would be based on the standards applicable to all taxpayers, not just affected taxpayers.

Except in the case of taxpayers who are abroad, a taxpayer who has previously received a full six-month extension of time under section 6081 will not be entitled to request an extension of time to file under section 6081. Although the taxpayer could not receive an extension beyond August 28, 2006, if the taxpayer is unable to file by that date, the taxpayer can request that the IRS grant relief from any penalty if the failure to file is due to reasonable cause and not due to willful neglect. The waiver of the penalty would be based on the standards applicable to all taxpayers, not just affected taxpayers.

Identifying Affected Taxpayers

In order to assist the IRS in identifying affected taxpayers as described in this notice, to ensure that they receive the relief to which they are entitled, affected taxpayers should mark “Hurricane Katrina” in red ink on the top of their returns and other documents for which the IRS has postponed the due dates. In addition, affected taxpayers may identify themselves as eligible for relief by calling the IRS Disaster Hotline at (866) 562–5227. In the three

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