Disaster Mitigation and Tax Parity

Summary#

This bill adds a new subsection to Internal Revenue Code section 139 to exclude from gross income certain payments made through State-based catastrophe loss mitigation programs. The exclusion covers amounts received by, or paid for the benefit of, a property owner to make improvements solely to reduce damage from windstorms, earthquakes, or wildfires. Eligible programs may be established by a State (or its subdivisions or public instrumentalities), a joint powers authority, or an entity created under State law to support a market of last resort for essential or basic property insurance that is overseen by a State insurance agency. The bill also states that rules similar to the current subsection that prevent increases in property tax basis will apply. Conforming edits to other parts of section 139 are included. The changes apply to taxable years beginning after December 31, 2020, and the Treasury may allow individuals to claim the exclusion by amended return.

What it means for you#

• If you own property and receive a payment from an eligible State program to add windstorm, earthquake, or wildfire damage-reducing improvements, that payment would not count as taxable income under this bill.
• The payment can be received directly by you or paid by the program for your benefit.
• The bill specifies that receiving such a payment will not increase your property tax basis, under rules like those already in section 139.
• The law would apply retroactively to taxable years after December 31, 2020, and individuals may be allowed to claim the exclusion on amended returns.

Expenses#

No publicly available information.

Proponents' View#

The bill's title and text indicate supporters want to allow State-run catastrophe mitigation programs to make payments for property hardening that are excluded from gross income, which would treat these mitigation payments as nontaxable.

Opponents' View#

No publicly available information.