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Ahead of 2019 Tax Filing Deadline, Courtney Secures Update from IRS Commissioner that Benefits Homeowners Impacted by Crumbling Foundations

April 22, 2020
Press Release

NORWICH, CT – Congressman Joe Courtney (CT-02) released the following statement today after the Internal Revenue Service (IRS) issued new guidance that greatly benefits homeowners in eastern Connecticut impacted by the crumbling foundations crisis. The new guidance clarifies that financial assistance paid to eastern Connecticut homeowners through the Connecticut Foundations Solutions Indemnity Company (CFSIC) – including payments from CFSIC to contractors on behalf of homeowners, and reimbursements paid to homeowners – will not be treated as taxable income in the year the payment or reimbursement was paid. The new IRS guidance comes in response to a letter sent from Rep. Courtney to IRS Commissioner Charles Rettig, and Courtney was alerted to today’s announcement in a letter received today from Commissioner Rettig. To read the full letter, as well as the new IRS document, click here.

“I’ve been working to secure clarification on this issue for months now,” said Congressman Courtney. “The new IRS order that states that payments to homeowners from CFSIC aren’t ‘includable’ as income for tax purposes will provide great clarity and comfort to residents of Connecticut who applied for assistance from the captive insurance company. Traditionally, it’s been black letter law that compensation for injury or loss isn’t considered ‘taxable’ by the federal government, and Commissioner Rettig’s latest correspondence to my office with this new decree reaffirms that longstanding principal. The decision is especially timely since people are still in the process of preparing their 2019 taxes, given the tax filing deadline extension that was instituted in response to COVID-19.”

In November 2019, Rep. Courtney, along with Senators Richard Blumenthal (CT) and Chris Murphy (CT), and Rep. John Larson (CT-01), received initial written correspondence from the IRS regarding the issue of whether CFSIC was required to issue 1099 tax forms to homeowners, as well as the tax implications of CFSIC assistance. After discrepancies on this information was made clear during a webinar that Congressman Courtney hosted with the IRS on February 10, 2020, Courtney wrote to Commissioner Rettig on February 18, 2020 seeking immediate guidance to resolve conflicting information, noting that new information from the agency was even more urgent as the 2019 tax filing season was less than two months away at the time. Today’s new guidance is especially timely, and gives homeowners an opportunity to make any necessary changes to their 2019 taxes documents as the filing deadline has been moved to July 15, 2020.

Congressman Courtney urges all taxpayers to consult with a certified tax preparer should they have individual questions about their own tax liability. In particular, the Commissioner noted that homeowners who claimed an IRS property casualty loss prior to receiving a CFSIC award need to closely scrutinize whether that prior tax benefit needs to be readjusted.