Excludes from an individual’s gross income money they receive from State-based catastrophe loss mitigation programs by creating a new exclusion for “qualified catastrophe mitigation payments.” It defines the qualifying payments, directs that rules about adjusting the recipient’s tax basis follow, and makes two minor wording edits to related Internal Revenue Code language.

The change is effective for taxable years beginning after December 31, 2021, and the Treasury is required to allow taxpayers to claim the exclusion, including by filing amended returns for prior affected years.