Hurricane Katrina: EIC and refundable child credit.

Taxpayers who claimed the earned income credit (EIC) and refundable child credit on their 2004 Federal income tax returns may be eligible to use their 2004 earned income to calculate these credits for 2005; see Katrina Emergency Tax Relief Act of 2005 Section 406 and JCX-69-05 (9/22/05), p. 37. To qualify:

* The taxpayer's earned income in 2005 must be less than it was in 2004.

* The taxpayer must have been living in one of the following places on Aug. 25, 2005:

1. A Federal Emergency Management Agency (FEMA)-designated individual assistance area; see Exhibit 1 at right.

Exhibit 1: FEMA-Designated "Individual
Assistance Areas"

For purposes herein, a "FEMA-designated individual
assistance area" is a county or parish in
the Hurricane Katrina disaster area that FEMA
designated as eligible for individual assistance;
see Exhibit 3 on p. 9. This includes some counties
and parishes that FEMA also designated for
"public assistance," as well as three counties in
Alabama designated for "individual and public
assistance."

Alabama

The following 11 counties in Alabama are
FEMA-designated individual assistance areas:
Baldwin, Choctaw, Clarke, Greene, Hale,
Marengo, Mobile, Pickens, Sumter, Tuscaloosa
and Washington.

Florida

There are no FEMA-designated individual assistance
areas.

Louisiana

The following 31 parishes in Louisiana are
FEMA-designated individual assistance areas:
Acadia, Ascension, Assumption, Calcasieu,
Cameron, East Baton Rouge, East Feliciana,
Iberia, Iberville, Jefferson, Jefferson Davis,
Lafayette, Lafourche, Livingston, Orleans,
Pointe Coupee, Plaquemines, St. Bernard, St.
Charles, St. Helena, St. James, St. John, St.
Martin, St. Mary, St. Tammany, Tangipahoa,
Terrebonne, Vermilion, Washington, West
Baton Rouge and West Feliciana.

Mississippi

The following 47 counties in Mississippi are
FEMA-designated individual assistance areas:
Adams, Amite, Attala, Choctaw, Claiborne,
Clarke, Copiah, Covington, Forrest, Franklin,
George, Greene, Hancock, Harrison, Hinds,
Jackson, Jasper, Jefferson, Jefferson Davis,
Jones, Kemper, Lamar, Lauderdale, Lawrence,
Leake, Lincoln, Lowndes, Madison, Marion,
Neshoba, Newton, Noxubuee, Oktibbeha, Pearl
River, Perry, Pike, Rankin, Scott, Simpson,
Smith, Stone, Walthall, Warren, Wayne, Wilkinson,
Winston and Yazoo.

2. An area designated by FEMA only for "public assistance" but the taxpayer has been displaced from his or her home; see Exhibit 2 on p. 8.

Exhibit 2: Areas FEMA Has Designated Only for "Public Assistance" in
the Hurricane Katrina Disaster Area

The Hurricane Katrina-related tax relief available to individuals und
businesses located in these areas is much more limited than in
FEMA-designated individual assistance areas; see Exhibit 1 on p. 7.

Alabama

FEMA has designated 11 Alabama counties for public assistance only:
Bibb, Colbert, Cullman, Jefferson, Lamar, Lauderdale, Marion, Monroe,
Perry, Wilcox and Winston.

Florida

FEMA has designated 11 Florida counties for public assistance only:
Bay, Broward, Collier, Escambia, Franklin, Gulf, Miami-Dade, Monroe,
Okaloosa, Santa Rosa and Walton.

Louisiana

FEMA has designated 33 Louisiana parishes for public assistance only:
Allen, Avoyelles, Beauregard, Bienville, Bossier, Caddo, Caldwell,
Catahoula, Claiborne, Concordia, Desato, East Carroll, Evangeline,
Franklin, Grant, Jackson, LaSalle, Uncoln, Madison, Morehouse,
Natchitoches, Ouachita, Rapides, Red River, Richland, Sabine, St.
Landry, Tensas, Union, Vernon, Webster, West Carroll and Winn.

Mississippi

FEMA has designated 35 Mississippi counties for public assistance
only: Alcorn, Benton, Bolivar, Calhoun, Carroll, Chickasaw, Clay,
Coahoma, DeSoto, Grenada, Holmes, Humphreys, Issaquena, Itawamba,
Lafayette, Leflore, Lee, Marshall, Monroe, Montgomery, Panola,
Pontotoc, Prentiss, Quitman, Sharkey, Sunflower, Tallahatchie, Tale,
Tippah, Tishomingo, Tunica, Union, Washington, Webster and Yalobusha.

Deciding to base the calculation of these credits for 2005 on 2004 earned income will not affect how total income for 2005 is calculated.

Note: If a taxpayer and his or her spouse are filing a joint Federal income tax return, only one spouse needs to have been living in the Hurricane Katrina disaster area (see Exhibit 3 on p. 9), to base 2005 earned income and refundable child credits on 2004 earned income. When calculating these credits for 2005, taxpayers can also use both spouses' earned income from 2004, even if only one of them was located in the Hurricane Katrina disaster area.

Exhibit 3: Hurricane Katrina Disaster Area

For purposes herein, the "Hurricane Katrina disaster area" means these
counties in Alabama and Florida that President Bush declared disaster
areas as a result of Hurricane Katrina, as well as the entire states
of Louisiana and Mississippi.

Information on Hurricane Katrina relief from other sources may refer to
the counties and parishes affected by the hurricane differently. The
IRS, for example, calls the counties and parishes declared disaster
areas as a result of Hurricane Katrina the "covered disaster area."
FEMA does not identify a "Hurricane Katrina disaster area" per se.
Instead, it identifies the type of assistance available to each county
or parish declared a disaster area as a result of Hurricane Katrina:
(1) "Individual assistance" refers to assistance FEMA provides to
individuals and households and (2) "Public assistance" refers to
assistance FEMA provides to state and local governments and some
private nonprofit organizations for the repair or replacement of
disaster-damaged facilities.

Some counties and parishes in the Hurricane Katrina disaster area
may qualify only for individual assistance or public assistance, while
others may qualify for both.

The Katrina Emergency Tax Relief Act of 2005 uses the term "Hurricane
Katrina disaster area" to describe the counties and parishes declared
disaster areas as a result of Hurricane Katrina. The legislation
provides the most Federal tax relief to individuals and businesses
located in the "core disaster area," which it defines as counties
or parishes in the Hurricane Katrina disaster area designated by FEMA
for individual assistance or individual and public assistance.

What follows are the counties and parishes that are pact of the
Hurricane Katrina disaster area for purposes herein.

Alabama

There are 22 counties within the Hurricane Katrina disaster area:
Baldwin, Bibb, Choctaw, Clarke, Colbert, Cullman, Greene, Hale,
Jefferson, Lamar, Lauderdale, Marengo, Marion, Mobile, Monroe, Perry,
Pickens, Sumter, Tuscaloosa, Washington, Wilcox and Winston.

Florida

There are 11 counties within the Hurricane Katrina disaster area: Bay,
Broward, Collier, Escambia, Franklin, Gulf, Miami-Dade, Monroe,
Okaloosa, Santa Rosa and Walton.

Louisiana

The entire state (64 parishes) is within the Hurricane Katrina disaster
area: Acadia, Allen, Ascension, Assumption, Avoyelles, Beauregard,
Bienville, Bossier, Caddo, Calcasieu, Caldwell, Cameron, Catahoula,
Claiborne, Concordia, Desato, East Baton Rouge, East Carroll, East
Feliciana, Evangeline, Franklin, Grant, Iberia, Iberville, Jackson,
Jefferson, Jefferson Davis, Lafayette, Lafourche, LaSalle, Uncoln,
Livingston, Madison, Morehouse, Natchitoches, Orleans, Ouachita,
Pointe Coupee, Plaquemines, Rapides, Red River, Richland, Sabine, St.
Bernard, St. Charles, St. Helena, St. James, St. John, St. Landry,
St. Mary, St. Martin, St. Tammany, Tangipahoa, Tensas, Terrebonne,
Union, Vermilion, Vernon, Washington, Webster, West Baton Rouge,
West Carroll, West Feliciana, and Winn.

Mississippi

The entire state (82 counties) is within the Hurricane Katrina disaster
area: Adams, Alcorn, Amite, Attala, Benton, Bolivar, Calhoun, Carroll,
Chickasaw, Choctaw, Claiborne, Clarke, Clay, Coahoma, Copiah,
Covington, DeSoto, Forrest, Franklin, George, Grenada, Greene, Hancock,
Harrison, Hinds, Holmes, Humphreys, Issaquena, Itawamba, Jackson,
Jasper, Jefferson, Jefferson Davis, Jones, Kemper, Lafayette, Lamar,
Lauderdale, Lawrence, Leake, Leflore, Lee, Lincoln, Lowndes, Madison,
Marion, Marshall, Monroe, Montgomery, Neshoba, Newton, Noxubee,
Oktibbeha, Panola, Pearl River, Perry, Pike, Pontotoc, Prentiss,
Quitman, Rankin, Scott, Sharkey, Simpson, Smith, Stone, Sunflower,
Tallahatchie, Tate, Tippah, Tishomingo, Tunica, Union, Walthall,
Warren, Washington, Wayne, Webster, Wilkinson, Winston, Yalobusha and
Yazoo.

FROM LINDA GURENE, SAN ANTONIO, TX