HR1849-119

What This Bill Does

The Disaster Mitigation and Tax Parity Act amends Internal Revenue Code section 139 so individuals do not include qualified catastrophe mitigation payments in gross income. Covered payments must come from a state, political subdivision, public instrumentality, joint powers authority, or state-created insurance market-of-last-resort entity under state insurance regulatory oversight. A qualified payment is money received by or paid for the benefit of a property owner solely to make improvements that reduce damage from windstorms, earthquakes, or wildfires. The bill applies rules similar to section 139(g)(3), so the excluded payment does not also increase basis. It applies to taxable years beginning after December 31, 2020, and requires Treasury to provide an opportunity, including amended returns, for individuals to claim the exclusion retroactively.

Who Benefits and How

Homeowners receiving mitigation grants benefit because qualifying payments for windstorm, earthquake, or wildfire protection are excluded from income. State catastrophe mitigation programs benefit because their payments become more valuable to property owners after tax. Property insurers and insurance pools benefit if mitigation improvements reduce future covered losses. Communities in disaster-prone areas benefit if tax parity increases take-up of mitigation improvements.

Who Bears the Burden and How

The Treasury Department must administer the exclusion and provide amended-return opportunities. Internal Revenue Service staff must process retroactive claims and enforce qualified-payment limits. Federal taxpayers bear revenue loss from excluding qualified mitigation payments. Property owners cannot use excluded payments to increase basis, limiting a second tax benefit.

Key Provisions

• Amends section 139 to exclude qualified catastrophe mitigation payments from gross income.
• Covers state-based payments for improvements reducing windstorm, earthquake, or wildfire damage.
• Applies no-basis-increase rules similar to qualified disaster relief payments.
• Requires Treasury to allow amended-return claims for taxable years after December 31, 2020.