Overview
Title
To amend the Internal Revenue Code of 1986 to provide a refundable credit against tax for wildfire mitigation expenditures.
ELI5 AI
The H. R. 6861 bill wants to help people make their homes safer from wildfires by giving them money back as a tax credit for doing things like putting special coverings on roofs and walls or clearing away bushes. But not everyone can get the same amount, and there are some rules that might make it tricky for some people to get the full help they need.
Summary AI
The H. R. 6861 bill proposes a change to the Internal Revenue Code of 1986 to offer a refundable tax credit for costs linked to protecting homes from wildfires. This credit is 25% of qualifying expenses, with a limit of $25,000 per year, but it reduces for people earning over $200,000. Qualifying expenses include improving fire resistance of roofs, walls, and decks, creating buffers around homes by removing flammable vegetation, and installing systems like sprinklers. The tax credit is available for expenses related to primary homes in areas prone to wildfires or designated disaster zones until the end of 2032.
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Bill Statistics
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AnalysisAI
General Summary of the Bill
H.R. 6861, introduced in the 118th Congress and known as the "Supporting Affordable Fire Emergency Hardening through Optimized Mitigation Efforts Act" or the "SAFE HOME Act," proposes amendments to the Internal Revenue Code of 1986. The bill aims to establish a refundable tax credit for individuals who incur expenses on wildfire mitigation measures for their residential properties. Specifically, the credit would cover 25% of eligible expenditures, with a maximum credit of $25,000 annually. The initiative is designed to encourage homeowners in wildfire-prone areas to invest in fire-resistant upgrades and maintenance, enhancing the safety and resilience of their properties against wildfires.
Summary of Significant Issues
Several issues arise from the bill's language and provisions. One major concern is the $25,000 cap on the tax credit, which some critics argue lacks a clear rationale and may not motivate homeowners sufficiently, especially for costly mitigation efforts in severely affected regions. Additionally, the credit's phaseout is based on adjusted gross income, potentially penalizing those in high-cost living areas where incomes are inclined to be higher but do not necessarily reflect surplus wealth.
There is also uncertainty concerning the funding mechanisms for this tax credit, raising possible implications for the federal budget and associated deficits. The criteria defining a "qualified dwelling unit" could inadvertently exclude certain high-risk zones that have not received federal disaster recognition, leading to inequities in benefit distribution. Furthermore, the complex language around inflation adjustments and documentation requirements may deter potential claimants due to confusion or fear of non-compliance.
Impact on the Public
Broadly, the bill could have a positive impact by incentivizing individual efforts to mitigate wildfire risks, potentially reducing property damage and enhancing public safety in wildfire-prone areas. By offering a financial mechanism to support these efforts, the bill encourages proactive measures that could curb loss and destruction from wildfires, benefiting communities vulnerable to such natural disasters.
However, complexity in the bill's language and requirements might limit its effectiveness, particularly if taxpayers struggle to understand eligibility criteria or necessary documentation. This confusion could diminish participation and, consequently, the overall success of the initiative.
Impact on Specific Stakeholders
Homeowners in Wildfire-Prone Areas: For residents in areas frequently threatened by wildfires, the bill offers a significant financial incentive to invest in fire resilience. However, the effectiveness of this incentive might be hindered for those residing in high-income regions due to the income-based phaseout, possibly impacting motivation or ability to undertake substantial mitigation projects.
Government and Tax Authorities: Implementation could impose administrative challenges surrounding clear guidelines and robust enforcement mechanisms. Tax authorities will need to ensure clarity and accessibility in application processes to maximize participation and compliance.
Construction and Mitigation Industries: Companies specializing in building materials or services for fire-resistant upgrades could see increased demand for their products and services if the credit successfully motivates homeowners to undertake mitigation projects. This potential uptick could spur growth in related sectors, boosting economic activities.
In conclusion, while the SAFE HOME Act holds potential benefits for mitigating wildfire risks and engaging individuals in protective measures, addressing the highlighted issues could enhance its efficacy and inclusivity. Providing clearer guidance and accessible processes will be crucial in realizing the intended public safety outcomes.
Financial Assessment
The bill titled "H. R. 6861," also known as the "SAFE HOME Act," proposes a refundable tax credit to incentivize wildfire mitigation efforts. The credit is set at 25% of qualified expenditures related to protecting homes against wildfires, with a maximum limit of $25,000 per year. These qualified expenditures cover improvements like fire-resistant roofs, walls, creating safety buffers by removing flammable vegetation, and installing hydration systems such as sprinklers.
Financial Summary and Cap Implications
The financial mechanism of this bill revolves around the refundable tax credit, meaning taxpayers can receive a refund even if the credit exceeds their tax liability. The $25,000 cap per year limits the potential outlay for the government but raises the question of whether this cap sufficiently incentivizes more costly wildfire mitigation projects. The bill does not provide a rationale for this specific cap, which could leave residents in high-risk, high-cost wildfire areas without adequate financial support for implementing comprehensive safety measures.
Income-Based Phaseout Concerns
The credit begins to phase out for taxpayers with an adjusted gross income (AGI) over $200,000. For each dollar above this threshold, the credit is reduced in proportion to its relation within a $100,000 band. This phaseout could mean that taxpayers in regions with higher living costs, where income levels are generally higher, might receive diminished benefits. Such a structure might inadvertently undermine the program's effectiveness by reducing the financial incentive for those living in critical fire-prone areas.
Funding Details and Potential Overlap
The bill does not explicitly detail how the credit would be funded. This absence raises concerns about its longer-term fiscal impacts, particularly in light of potential deficits. Furthermore, the provision that excludes government-reimbursed expenditures from being qualified could discourage collaboration with federal or local government programs aimed at wildfire mitigation. This stipulation might lead to inefficiencies or overlap with existing programs aimed at similar objectives.
Inflation Adjustment Complexity
The bill includes an inflation adjustment starting after 2024. This adjustment allows each dollar amount related to the credit to increase based on a cost-of-living index. The text specifies a substitution of calendar years for calculation purposes, potentially causing confusion among taxpayers about how the actual credit amount will change over time. Clearer explanation or guidance may be necessary to ensure taxpayers understand how their entitlements will evolve with inflation.
Documentation and Compliance
Taxpayers claiming the credit must provide adequate documentation of their expenses. However, the bill lacks specifics on what constitutes adequate documentation, potentially leading to inconsistent application and enforcement. This could be problematic for taxpayers trying to navigate the requirements to claim the credit, potentially causing compliance and legal issues if not addressed more thoroughly.
In conclusion, while the bill proposes a valuable financial tool for encouraging wildfire mitigation, its effectiveness might be hindered by the cap limitations, income phaseout structure, and the complexity of its provisions. Without addressing these financial concerns and clarifying key components, the bill's potential benefits could be unevenly distributed or diminished in practice.
Issues
The credit for wildfire mitigation expenditures is capped at $25,000 per year, but the legislation in Section 2(b)(1) does not provide a clear rationale for choosing this specific cap amount. This could be a significant concern as the cap might not adequately incentivize expensive mitigation projects, especially for residents in high-risk areas.
The phaseout structure based on adjusted gross income, detailed in Section 2(b)(2), may disproportionately affect taxpayers in high-cost areas where incomes are generally higher. This could reduce the incentive for wildfire mitigation, potentially impacting the effectiveness of the program in certain vital regions.
In Section 2(a), the text does not specify how the credit for wildfire mitigation expenditures will be funded, which could lead to concerns about budget impact and potential deficits, raising financial and political implications.
The determination of a 'qualified dwelling unit' as defined in Section 36C(c)(2) could limit eligibility for credits to areas with previous or ongoing government assistance, potentially excluding vulnerable areas not previously recognized by federal disaster declarations, leading to ethical concerns about equitable access to benefits.
The language around the inflation adjustment, as described in Section 2(b)(2)(B), is complex. This complexity could confuse taxpayers about the actual credit limitations over time, causing potential financial miscalculations.
The documentation requirements for taxpayers claiming this credit, as noted in Section 36C(d), are not detailed. This ambiguity could lead to inconsistent enforcement or taxpayer confusion, posing legal and compliance issues.
The potential overlap or redundancy with other federal programs related to disaster relief and wildfire mitigation is not addressed in Section 2, raising questions about potential inefficiencies and the need for coordination with existing programs.
The term 'qualified wildfire mitigation expenditure' in Section 36C(c)(1)(B) excludes expenditures reimbursed by government entities, which could discourage collaboration between homeowners and government programs, potentially reducing the effectiveness of the legislation.
The use of terms like 'ignition-resistant construction standards' in Section 36C(c)(1)(A) lacks specificity, requiring taxpayers to refer to other documents and creating potential confusion, which could lead to legal and compliance difficulties.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
The first section of this Act provides its official short title, which is the "Supporting Affordable Fire Emergency Hardening through Optimized Mitigation Efforts Act" or, more simply, the "SAFE HOME Act".
2. Refundable personal credit for wildfire mitigation expenditures Read Opens in new tab
Summary AI
In this section of the bill, individuals can receive a tax credit worth 25% of their spending on qualified wildfire mitigation measures, up to $25,000 per year. These measures must involve improvements like fire-resistant roofing or creating defensible spaces around their homes, as long as these expenses aren't reimbursed by the government, and the home is used as a primary residence in wildfire-prone areas.
Money References
- — “(1) IN GENERAL.—Subject to paragraphs (2) and (3), the credit allowed under subsection (a) for any taxable year shall not exceed $25,000.
- — “(A) IN GENERAL.—The amount under paragraph (1) for the taxable year shall be reduced (but not below zero) by an amount which bears the same ratio to the amount under such paragraph as— “(i) the excess (if any) of— “(I) the taxpayer’s adjusted gross income for such taxable year, over “(II) $200,000, bears to “(ii) $100,000.
- “(B) INFLATION ADJUSTMENT.—In the case of any taxable year after 2024, each of the dollar amounts under 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, determined by substituting ‘calendar year 2023’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.
- “(C) ROUNDING.—If any reduction determined under subparagraph (A) is not a multiple of $50, or any increase under subparagraph (B) is not a multiple of $50
- , such amount shall be rounded to the nearest multiple of $50. “
36C. Wildfire mitigation expenditures Read Opens in new tab
Summary AI
Individuals can receive a tax credit for 25% of their expenses related to making their home more resistant to wildfires, with a maximum yearly credit of $25,000. To qualify, the expenses must be for specific improvements to homes in certain disaster-prone areas in the U.S., and the credit cannot be claimed for expenses already covered by government funds; this tax benefit ends after December 31, 2032.
Money References
- — (1) IN GENERAL.—Subject to paragraphs (2) and (3), the credit allowed under subsection (a) for any taxable year shall not exceed $25,000.
- (2) PHASEOUT.— (A) IN GENERAL.—The amount under paragraph (1) for the taxable year shall be reduced (but not below zero) by an amount which bears the same ratio to the amount under such paragraph as— (i) the excess (if any) of— (I) the taxpayer’s adjusted gross income for such taxable year, over (II) $200,000, bears to (ii) $100,000. (B) INFLATION ADJUSTMENT.—In the case of any taxable year after 2024, each of the dollar amounts under 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, determined by substituting “calendar year 2023” for “calendar year 2016” in subparagraph (A)(ii) thereof. (C) ROUNDING.—If any reduction determined under subparagraph (A) is not a multiple of $50, or any increase under subparagraph (B) is not a multiple of $50, such amount shall be rounded to the nearest multiple of $50. (c) Definitions.—For purposes of this section— (1) QUALIFIED WILDFIRE MITIGATION EXPENDITURE.