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BUSH SIGNS LAW MAKING DISASTER AID TAX EXEMPT

People who receive federal assistance due to a flood, hurricane, tornado or other natural disaster won't owe taxes on that money under legislation that President Bush signed into law Friday, the federal tax deadline.

A bill making Federal Emergency Management Agency grants tax-free for about 43,000 recipients since the program started in 1990 passed the Senate late Wednesday and the House on Thursday, both with broad bipartisan support.

The FEMA grants have helped people in tornado-prone areas build safe rooms and residents in flood plains strengthen the foundations of their homes to protect against future storms.

The Internal Revenue Service determined last year, after a string of hurricanes hit the Southeast, that these hazard mitigation grants were taxable under current law.

However, no taxes previously had been collected on the grants because they were assumed to be exempt.

Bush had encouraged Congress in his budget proposal to change the law and make them exempt.

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