Disaster grants to be taxed on state, federal levels

Friday, January 21st 2005, 5:54 am

By: News On 6

OKLAHOMA CITY (AP) -- Oklahomans who received grants to build safe rooms or relocate from flood-prone areas will not only have to pay federal taxes on them, they'll also have a state tax bill, officials said.

The Internal Revenue Service recently ruled that the grants are is considered taxable income by the recipients.

Tax Commission spokeswoman Paula Ross said Thursday that anything considered taxable by the IRS is taxable at the state level.

The only way to prevent the disaster grants from being considered as taxable income is for congressional legislation protecting the funds, Ross said.

"Obviously this is an issue of concern to Oklahomans, but it's out of our hands," she said.

Under state law, the tax commission uses the same adjusted gross income claimed on federal forms.

Federal Emergency Management Agency spokesman Dave Passey said about $60 million in disaster mitigation grants has gone to Oklahomans since the program was initiated in 1990.

Grant money that went to Tulsa area residents affected by flooding before 1990 was under another program. Passey said it's unclear whether the funds used in Tulsa flood plain projects also would be taxable.

Michelann Ooten, state Department of Emergency Management spokeswoman, said emergency managers across the state have been told to send out 1099 tax forms to all safe-room grant recipients.

"We're continuing to talk to lawmakers and certainly would prefer to see a legislative remedy to this issue," she said.

Congressional lawmakers, including U.S. Rep. Ernest Istook, R-Okla., have pledged to craft legislation that would make the IRS ruling moot.