Sponsors (13)
The bill makes State-qualified catastrophe mitigation payments tax-free (including retroactively), encouraging homeowners to invest in resilience and providing immediate tax relief, at the cost of reduced federal revenue and potential tax-basis, administrative, and fiscal trade-offs.
Homeowners who receive State-qualified catastrophe mitigation payments can exclude those amounts from federal taxable income, directly lowering their federal tax bills.
Property owners can receive funding for windstorm, earthquake, flood, or wildfire mitigation improvements without facing immediate federal income tax on those payments, which makes resilience investments more affordable and likely increases mitigation activity.
Taxpayers (including homeowners who already received eligible payments) can claim the exclusion retroactively — including by amended return — so prior qualifying State mitigation payments since 2022 can be relieved from taxable income.
Homeowners who exclude mitigation payments from income generally cannot increase their property tax basis by those excluded amounts, which can raise taxable gain (and tax owed) when they later sell the property.
Making more disaster-mitigation payments nontaxable reduces federal tax revenues, potentially increasing deficits or forcing offsetting spending cuts or tax increases that affect all taxpayers and federal programs.
State-created market-of-last-resort entities and related programs may face additional administrative requirements to qualify payments for the exclusion, adding complexity and compliance costs for state governments and program administrators.
Based on analysis of 2 sections of legislative text.
Excludes state-established catastrophe mitigation payments for property improvements (windstorm, earthquake, flood, wildfire) from federal taxable income.
Excludes from taxable income certain state-established payments that help property owners make repairs or improvements to reduce damage from windstorms, earthquakes, floods, or wildfires. The change adds a new exclusion for “qualified catastrophe mitigation payments” to the tax code, applies retroactively to taxable years beginning after December 31, 2021, and requires Treasury to allow taxpayers to claim the exclusion on amended returns when appropriate.
Official title: Amend the Internal Revenue Code of 1986 to exclude from gross income amounts received from State-based catastrophe loss mitigation programs.
Introduced January 30, 2025 by Thomas Roland Tillis · Last progress January 30, 2025