Sponsors (32)
The bill increases the net benefit and uptake of state-funded disaster-mitigation grants for homeowners (including retroactive relief) but lowers federal revenue, can reduce recipients' property tax basis, and excludes those who got similar aid outside state-established programs.
Homeowners who receive state-funded wind/earthquake/wildfire mitigation grants can exclude those payments from federal taxable income and (for payments after 12/31/2020) file amended returns to recover taxes they already paid on such grants.
Homeowners and state mitigation programs: lowering the after-tax cost of state-funded repairs and upgrades makes it more financially attractive for property owners to invest in resilience, likely increasing participation in programs that reduce future disaster damage.
State governments' mitigation efforts become more effective because the tax exclusion increases the net benefit of grants, which can help state programs achieve higher uptake and stronger local resilience outcomes.
All taxpayers: excluding these payments reduces federal tax receipts modestly, which could increase deficits or crowd out other federal spending if not offset.
Homeowners who exclude mitigation payments may have a lower tax basis in the improved property, which can increase taxable gains on sale or reduce future loss/depreciation offsets.
Homeowners who receive similar assistance from federal programs or private sources, or who participate in programs not established by a State or State entity, may be ineligible for the exclusion, creating unequal treatment and leaving some homeowners worse off.
Based on analysis of 2 sections of legislative text.
Excludes State-provided payments for windstorm, earthquake, or wildfire mitigation improvements from recipients' gross income and allows retroactive claims.
Deletes a tax barrier to state-run disaster-mitigation programs by excluding from gross income certain payments or amounts paid on behalf of individuals for property improvements that reduce windstorm, earthquake, or wildfire damage. The change amends the Internal Revenue Code to treat those State, local, and State-created entity payments as "qualified catastrophe mitigation payments," makes related technical cross-reference edits, preserves existing rules that the exclusion does not increase the recipient's tax basis, applies retroactively to tax years after December 31, 2020, and requires Treasury to allow taxpayers to claim the exclusion retroactively (including by amended return).
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