HR 4440
The Gulf Opportunity Zone Act of 2005
Legislation passed both houses of Congress on December 16, 2005 and signed into law
on December 21, 2005.
Definition of Gulf Opportunity Zone: The portion of the Hurricane Katrina affected
disaster area determined by the President to warrant individual and public assistance from
the federal government. Counties affected are in the states of Louisiana, Mississippi and
Alabama.
Major items impacting individual returns for 2005:
 The following provisions of the Katrina Emergency Tax Relief Act are extended
to victims of Hurricanes Rita and Wilma
 All Retirement account withdrawal provisions
 Special Earned Income provision for the calculation of EIC and Additional
Child Tax Credit
 Personal casualty loss rules (the $100 and 10% rule do not apply)
 Employee Retention Credit is expanded to include employers affected by Rita
and Wilma
 Corporate cash donations
The 10% limit will not be applicable for donations for Katrina, Rita and
Wilma relief efforts. These are for donations made between Aug 28, 2005 and
December 31, 2005.

Doubles the Hope Scholarship and Lifetime Learning Credits for students in a
Gulf Opportunity Zone.
Does not apply to Rita or Wilma disaster area.
For tax years 2005 and 2006, the maximum Hope Credit will be $3,000 for
students attending an eligible education institution located in a Gulf Opportunity
Zone. The breakdown for these students is 100% of the first $2,000 and 50% of
the next $2,000.
For the Lifetime Learning Credit the credit rate percentage is increased to 40%.
This increases the maximum credit to $4,000 for eligible students.
The definition of qualified expenses is also expanded to include certain room and
board expenses for at least half-time students.
This change will affect the Form 8863 (Education Credits). Lines will be added to
the Lifetime Learning Credit section and the instructions will be updated for this
change.
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HR 4440
The Gulf Opportunity Zone Act of 2005

Depreciation Provisions (Only applies to Katrina Disaster Area Gulf Opportunity
Zone. Does not apply to Rita or Wilma disaster area.)
o 50% bonus depreciation for property in Gulf Opportunity Zones. Property
must be placed in service between August 28, 2005 and December 31, 2007
(December 31, 2008 for nonresidential real property).
The type of property that qualifies includes the following:
 MACRS property with a recovery period of 20 years or less
 Water utility property
 Computer software depreciable over 3 years under Code Sec
167
 Qualified Leasehold improvement property
This means that the auto limits will follow the same higher maximum amounts
that applied to autos purchased before 2005. These are for the first year:
$10,160 for passenger autos and $10,910 for trucks and vans.
See the 2005 Form 4562 instructions and the revised Publication 946 for more
details.
o Additional $100,000 Sec. 179 deduction for property in Gulf Opportunity
Zone. Property must have been placed in service between August 28, 2005
and December 31, 2007.
This means for 2005 the maximum Section 179 for property in a Gulf
Opportunity Zone is $205,000.
Maximum cost of property before the Sec. 179 expense is reduced is increased
by an additional $600,000 for Gulf Opportunity Zone. This means for 2005
the maximum would be $1,040,000
Certain types of business’ are excluded from the above depreciation
provisions. These are: private or commercial golf courses, country clubs,
massage parlors, hot tub facilities, suntan facilities, liquor stores or gambling
or animal racing property.


Allows businesses to expense 50% of cleanup and demolition costs in the Gulf
Opportunity Zone.
Extends the NOL carryback period from 2 to 5 years for certain casualty losses
and depreciation expenses in a Gulf Opportunity Zone.
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