Sponsors (28)
The bill reduces homeowners' immediate tax burdens and encourages disaster-mitigation investments by making state-backed mitigation payments tax-free (including retroactive relief), but it lowers federal revenue, can create uneven state-by-state access, and may raise future capital gains tax liability for sellers.
Homeowners and taxpayers who receive state-backed windstorm, earthquake, or wildfire mitigation payments can exclude those amounts from taxable income (including by amending returns for taxable years after 12/31/2020), providing direct, retroactive financial relief and lowering immediate tax burdens.
Property owners are financially incentivized to invest in mitigation against windstorm, earthquake, and wildfire risks because mitigation payments are tax-free, which should reduce future disaster damage and recovery costs.
Excluding mitigation payments from income prevents those payments from increasing property tax basis, potentially raising future capital gains tax when homeowners sell their property.
The tax exclusion reduces federal tax revenue, which could shrink funds available for other programs or increase fiscal pressure (higher deficits or future tax increases) on other taxpayers.
Because eligibility depends on state-designed programs, homeowners in states without qualifying programs may be excluded from these tax-free benefits, producing uneven access and potential inequities (disproportionately affecting lower-income or resource-limited areas).
Based on analysis of 2 sections of legislative text.
Excludes from gross income state-provided payments for property improvements that reduce windstorm, earthquake, or wildfire damage and allows retroactive claims for tax years after 2020.
Excludes from federal gross income certain state-provided payments made to individuals for property improvements that reduce damage from windstorm, earthquake, or wildfire. The change applies to state programs, joint powers authorities, and state-created market-of-last-resort insurance entities, and the Treasury is directed to allow taxpayers to claim the exclusion retroactively for tax years beginning after December 31, 2020.
Introduced March 5, 2025 by Doug Lamalfa · Last progress March 5, 2025