S. 2538

119th CONGRESS 1st Session

To amend the Internal Revenue Code of 1986 to provide a credit for hazard mitigation projects in connection with certain working waterfront property.

IN THE SENATE OF THE UNITED STATES · July 30, 2025 · Sponsor: Mr. King · Committee: Committee on Finance

Table of contents

• S. 2538
  • Sec. 48F. Working waterfront disaster mitigation project credit.

Sec. 48F. Working waterfront disaster mitigation project credit.

• (a) In general
  • For purposes of section 46, the working waterfront disaster mitigation project for any taxable year is an amount equal to 30 percent of the qualified investment for such taxable year.
• (b) Limitations
  • (1) Dollar limitation
    • Dollar limitation
    • (A) In general
      • The amount of the credit allowed under this section with respect to any taxpayer shall not exceed $300,000.
    • (B) Aggregation rules
      • All taxpayers treated as a single employer under subsection (a) or (b) of section 52 or subsection (m) or (o) of section 414 shall be treated as a single taxpayer for purposes of subparagraph (A).
    • (C) Inflation adjustment
      • In the case of any taxable year beginning after December 31, 2026, the $300,000 dollar amount in subparagraph (A) shall be increased by an amount equal to—
        • (i) such dollar amount, multiplied by
        • (ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting for in subparagraph (A)(ii) thereof. calendar year 2025 calendar year 2016
      • If any amount as increased under the preceding sentence is not a multiple of $10,000, such amount shall be rounded to the nearest multiple of $10,000.
  • (2) Time limitation
    • No credit shall be allowed to a taxpayer for a taxable year if such taxpayer has been allowed a credit under this section (other than qualified progress expenditures allowed under subsection (c)(3)) for any taxable year in the 10-year period ending with the last day of such taxable year.
• (c) Qualified investment
  • (1) In general
    • For purposes of this section, the qualified investment for any taxable year is the basis of eligible property placed in service by the taxpayer during such taxable year which is part of a qualifying working waterfront disaster mitigation project.
  • (2) Eligible property
    • For purposes of this subsection, the term eligible property means property—
      • which is tangible property,
      • with respect to which depreciation (or amortization in lieu of depreciation) is allowable, and
      • which is—
        • (i) constructed, reconstructed, or erected by the taxpayer, or
        • (ii) acquired by the taxpayer if the original use of such property commences with the taxpayer.
  • (3) Certain qualified progress expenditures rules made applicable
    • Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of this section.
  • (4) Coordination with rehabilitation credit
    • The qualified investment with respect to any qualifying working waterfront disaster mitigation project for any taxable year shall not include that portion of the basis of any project which is attributable to qualified rehabilitation expenditures (as defined in section 47(c)(2)).
• (d) Qualifying working waterfront disaster mitigation project
  • For purposes of this section—
  • (1) In general
    • The term qualifying working waterfront disaster mitigation project means any project—
      • which is substantially designed in compliance with—
        • (i) in the case of any project placed in service before January 1, 2032, the 2021 International Code Council International Building Code, and
        • (ii) in the case of any project placed in service on or after such date, the most recent applicable International Code Council model code which has been affirmed by the Secretary for purposes of this section not later than 5 years before the date such project is placed in service, and
      • which designed to prevent or mitigate damage to working waterfront property from natural hazards using one or more of the following:
        • (i) The elevation of continuous foundation walls, the elevation of structures on open foundations (such as piles, piers, posts or columns), the elevation of structures on fill, the conversion of the second story, and other methods involving structural elevation as the Secretary may prescribe.
        • (ii) Stormwater management (including the construction, installation or modification of culverts, drainage pipes, pumping stations, floodgates, bioswales, detention and retention basins, and other stormwater management facilities), flood diversion and storage measures, slope stabilization or grading to direct flood waters away from businesses, flood protection measures for water and sanitary sewer systems or other utility systems, vegetation management for shoreline stabilization (coastal, riverine, riparian and other littoral zones), flood protection and stabilization measures for roads and bridges, and such other flood risk reduction methods as the Secretary may prescribe.
        • (iii) Reducing the risk to structures or infrastructure from erosion and landslides (including through the installation of geosynthetics, surface and subsurface drainage, stabilizing sod, and vegetative buffer strips), preserving mature vegetation, decreasing slope angles, stabilizing with riprap and other means of slope anchoring, and other shoreline stabilization methods as the Secretary may prescribe.
        • (iv) Creating a space that is protected by walls that are substantially impermeable and resistant to flood loads, the use of flood-damage-resistant materials and construction techniques to minimize flood damage to areas below the flood protection level of a structure.
        • (v) Changes made to an existing structure to reduce or eliminate the possibility of damage to that structure from flooding, erosion, extreme temperatures, high winds, or other hazards.
        • (vi) Equipment and systems to warn residents of impending hazards (including enhanced or reversed 911 systems), weather stations, rain gauges, flood alarms, and such other warning systems as the Secretary may prescribe.
  • (2) Working waterfront property
    • The term working waterfront property means real property—
      • which is located within the United States or a possession of the United States, and
      • which is used by the taxpayer to carry on an active trade or business—
        • (i) which meets the gross receipts test of paragraph (3), and
        • (ii) which—
        • provides access to navigable waters to persons engaged in commercial fishing, recreational fishing and boating, boatbuilding, aquaculture, dredging, or other water-dependent activities, and
        • is used for or supports activities described in subclause (I).
  • (3) Gross receipts test
    • (A) In general
      • A trade or business meets the gross receipts test of this paragraph if the average annual gross receipts of such trade or business for the 3-taxable-year period preceding such taxable year does not exceed $47,000,000.
    • (B) Aggregation rules
      • All trades or business of a taxpayer that are treated as a single employer under subsection (a) or (b) of section 52 or subsection (m) or (o) of section 414 shall be treated as one trade or business for purposes of subparagraph (A).
    • (C) Other rules
      • Rules similar to the rules of section 448(c)(3) shall apply for purposes of this paragraph.
    • (D) Inflation adjustment
      • In the case of any taxable year beginning after December 31, 2026, the dollar amount in subparagraph (A) shall be increased by an amount equal to—
        • (i) such dollar amount, multiplied by
        • (ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting for in subparagraph (A)(ii) thereof. calendar year 2025 calendar year 2016
      • If any amount as increased under the preceding sentence is not a multiple of $1,000,000, such amount shall be rounded to the nearest multiple of $1,000,000.
• (e) Regulations
  • The Secretary, in consultation with the Administrator of the Federal Emergency Management Agency, shall issue such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section.