Sponsors (29)
The bill increases the after-tax value of state-funded disaster-mitigation grants (including limited retroactive relief), which should boost resilience investment but reduces federal revenues and creates uneven eligibility and some longer-term tax-basis drawbacks for homeowners.
Homeowners who receive state-funded wind/earthquake/wildfire mitigation grants can exclude those payments from federal taxable income and (for eligible years after 12/31/2020) can file amended returns to recover taxes already paid, increasing the net financial benefit of those grants.
State governments and homeowners face lower effective costs for resilience projects because the federal exclusion reduces the after-tax cost of state grant programs, which is likely to encourage more property-level investments to reduce wind/earthquake/wildfire damage.
All taxpayers are affected because the federal tax exclusion reduces federal revenue modestly, which could increase deficits or crowd out other spending unless offsets are found.
Homeowners who exclude these payments will not increase their property's tax basis, which can reduce future depreciation or loss-offset benefits when the property is sold or otherwise disposed of.
Homeowners who receive similar assistance from private sources or federal programs (rather than State-established programs/entities) may be ineligible for the exclusion, producing unequal tax treatment and leaving some homeowners unable to claim the benefit.
Based on analysis of 2 sections of legislative text.
Excludes from taxable income State-run payments that fund property improvements solely to reduce windstorm, earthquake, or wildfire damage and allows retroactive claims.
Introduced March 5, 2025 by Doug Lamalfa · Last progress March 5, 2025
Creates a tax exclusion for certain State-run payments that pay for home or property improvements that reduce damage from windstorms, earthquakes, or wildfires. The change treats those “qualified catastrophe mitigation payments” as nontaxable to the individual beneficiary, clarifies that the payments do not increase the property's tax basis, and lets people claim the exclusion retroactively for tax years after 2020. The exclusion applies only to payments from States, local subdivisions, joint powers authorities, or State-created entities overseen by a State insurance agency or department. The statute text is adjusted to add this new exclusion to the federal tax code and to make minor conforming edits to existing cross-references.