Courtney Touting New IRS Guidance On Crumbling Foundation Aid

TOLLAND/HARTFORD COUNTIES, CT — U.S. Rep. Joe Courtney (CT-02) said Thursday that the Internal Revenue Service has issued new guidance that "greatly benefit" homeowners impacted by the crumbling foundations crisis.

The new guidance, he said, clarifies that financial assistance paid to Connecticut homeowners through the Connecticut Foundations Solutions Indemnity Company, or 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 Thursday's announcement in a letter.

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," Courtney said. "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 U.S. Sens 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.

He said the 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."