Representatives Urge Treasury Not to Tax Grants for Revitalization of Manhattan

[1] We are writing out of deep concern for our constituent victims of the terrorist attacks of September 11, who subsequently received some of the $772 million in federal grants awarded to businesses and individuals formerly and currently located near ground zero. A report in this morning's New York Daily News indicates that these grants may be treated as taxable income by the IRS. We believe this tax treatment totally violates the intent of these grants and will do severe damage to the effort to restore lower Manhattan.

[2] The grants in question, that were intended by Congress to help to rebuild the economy of lower Manhattan, are being distributed to businesses and individuals who were located or lived in lower Manhattan. These are people whose lives were torn apart by September 11, but because of their desire to help rebuild the area, many have bravely chosen to remain in lower Manhattan. At the time these grants were distributed, it was incomprehensible that the grants would later be considered taxable income. If the IRS had thought such tax treatment was a possibility at the time, it should have indicated to policymakers such a concern. Taxing this as income will have the direct opposite of the intended effect of these grants and will drive businesses and residents from the disaster zone or into bankruptcy.

[3] Accordingly, we are writing to strongly urge you not to treat these grants as taxable income. Doing so will have a devastating impact on our constituents and significantly damage the recovery effort. Take for example the situation cited by Meyer Feig, the President of the World Trade Center Tenants Association in today's press report. A former tenant company of the World Trade Center that received a $70,000 grant could be liable for taxes on the money of up to 35%. Given that the grant likely fell well short of the funding needed to recoup losses from the attack, this new tax liability will likely drive such a business to bankruptcy.

[4] We thank you for your immediate attention to this urgent matter. Given the uncertainty created by the possibility that these grants could be treated as taxable income we request that you resolve this situation expeditiously. Please contact Ben Chevat with Rep. Maloney (225-7944) as liaison for this matter.