Sponsors (33)
The bill increases the after-tax benefit of state-funded disaster-mitigation grants and encourages resilience investments for homeowners, at the cost of modest federal revenue loss and uneven treatment for recipients of non-state assistance and potential tax-basis consequences.
Homeowners who receive state-funded wind/earthquake/wildfire mitigation grants can exclude those payments from taxable income and may file amended returns to recover taxes paid on such payments since 2021, increasing the after-tax benefit they keep.
Homeowners and state mitigation programs face lower after-tax costs for property resilience upgrades, which should encourage more investments in wind, earthquake, and wildfire damage-reducing improvements.
All taxpayers: excluding these payments from taxable income reduces federal tax receipts modestly, which could increase deficits or crowd out other federal spending if not offset.
Homeowners who receive similar assistance from private sources or federal programs (rather than State-established programs) may be ineligible for the exclusion and therefore face higher tax burdens compared with recipients of state program payments.
Homeowners receiving excluded payments will not have those amounts increase their tax basis in the property, which can reduce future loss offsets or depreciation benefits when the property is sold.
Based on analysis of 2 sections of legislative text.
Excludes state-sponsored catastrophe mitigation payments for windstorm, earthquake, or wildfire from federal gross income and allows retroactive claims to 2021 tax years.
Official title: To amend the Internal Revenue Code of 1986 to provide for the exclusion from gross income of amounts received from State-based catastrophe loss mitigation programs.
Introduced March 5, 2025 by Doug Lamalfa · Last progress March 5, 2025
Excludes from federal gross income certain state-sponsored payments made to or for individuals to fund property improvements that reduce windstorm, earthquake, or wildfire damage. It amends the tax code to treat these "qualified catastrophe mitigation payments" as tax-free, treats them like other disaster payments for basis rules, applies retroactively to taxable years after December 31, 2020, and requires Treasury to allow taxpayers to claim the exclusion (including by amended return).