Washington–Legislation that would exclude money the governmentgrants to homeowners for flood repairs from being considered asincome that disqualifies them from federal assistance programs haswon passage in the House of Representatives.

The bill, which has insurance industry support, now moves to theSenate. It was introduced by Rep. Richard Baker, R-La., inFebruary. Known as HR 804, it is a response to an Internal RevenueServices decision issued last year.

Under that IRS finding, all flood mitigation grants must bereported as income for tax purposes. According to the HouseFinancial Services Committee, where Rep. Baker chairs a keysubcommittee, anecdotal evidence has shown that homeowners haverefused grant offers for mitigation out of fear of the taximplications.

The panel found there were concerns as well that eligibility forother programs, such as federal education, nutrition and healthcare benefits, could also be affected.

"This bill reaffirms the purpose of flood mitigation grants,which is to lend a hand to people badly in need of assistance, andto do away with the unfair punishment of counting the grantsagainst them and rendering them ineligible for other programs,"said Rep. Baker.

Mr. Baker's legislation, which was passed by a voice vote on theHouse floor, had the backing of insurance groups.

"It is in the interest of the federal government to encouragemitigation of homes to prevent flood damage, but without thislegislation many homeowners would be forced to forgo suchmitigation in order to continue to qualify for other programsimportant to them and their families," said Melissa Shelk, vicepresident of federal affairs for the American InsuranceAssociation.

Rep. Baker's bill is designed to build on the reforms enacted aspart of the Bunning-Bereuter-Blumenauer Flood Insurance Reform Actof 2004, which required the owners of repeatedly flooded propertiesto make mitigation efforts or potentially face having their floodinsurance premiums raised to actuarially determined levels.