Overview
Title
To amend the Internal Revenue Code of 1986 to provide a refundable credit against tax for disaster mitigation expenditures.
ELI5 AI
S. 1323 is a plan where people can get some money back when they spend on making their homes safer from things like big storms or wildfires, but they can't use it for things paid for by the government, and there are special rules they need to follow to get this help.
Summary AI
S. 1323 proposes a change to the Internal Revenue Code of 1986, introducing a refundable tax credit for individuals who make expenditures aimed at mitigating disaster impacts on their homes. This bill allows for a credit of up to 50% on eligible expenditures, such as reinforcing roof structures, protecting openings from weather damage, or installing safety equipment, with a cap of $25,000. It targets homes in areas recently affected by wildfires, hurricanes, floods, or those designated with disaster resilience concerns. However, it excludes expenditures already covered by government aid and requires taxpayers to provide specific documentation to obtain the credit.
Published
Keywords AI
Sources
Bill Statistics
Size
Language
Complexity
AnalysisAI
General Summary of the Bill
The proposed legislation, known as the "Facilitating Increased Resilience, Environmental Weatherization And Lowered Liability (FIREWALL) Act," aims to amend the Internal Revenue Code of 1986. Its primary goal is to offer a refundable tax credit for individuals who make certain disaster mitigation expenditures on their homes. The bill allows homeowners to claim a credit of up to 50% of these expenditures, capped at $25,000. It focuses on homes located in areas prone to natural disasters like wildfires, hurricanes, windstorms, or floods, providing financial incentives for reinforcing the resilience of properties against such hazards.
Summary of Significant Issues
One notable challenge within the bill is the exclusion of any expenditures paid or reimbursed by government entities from being considered "qualified" for the tax credit. This could disincentivize individuals from using existing government cost-sharing programs, potentially increasing their financial burden.
The bill caps the maximum credit at $25,000, which might not be sufficient for high-cost mitigation efforts, particularly in areas prone to severe natural disasters. The complex structure and technical language of the bill could discourage many taxpayers, who might find it difficult to understand their eligibility or benefits, thereby underutilizing the credit.
The phaseout mechanism for higher-income individuals is notably intricate, specifically the formula tied to adjusted gross income, potentially causing confusion. Furthermore, the criteria for defining a "qualified dwelling unit," which leans on historical disaster declarations, could unintentionally favor certain areas over others based on past rather than current risks.
Impact on the Public
Broadly, the bill is designed to encourage homeowners to invest in disaster mitigation by making such investments more financially feasible through tax incentives. This could lead to increased individual preparedness and potentially reduce the damage and economic loss from natural disasters.
However, the bill’s complexity, combined with potentially inadequate coverage for high-cost projects and the challenge of meeting documentation requirements, might limit its accessibility to the average taxpayer. These factors could diminish the bill's intended impact by reducing participation rates.
Impact on Specific Stakeholders
For homeowners in disaster-prone areas, this bill could offer significant financial relief by decreasing the cost of necessary home improvements. However, its effectiveness may be hampered in communities where costs of mitigation typically exceed the credit cap.
Contractors and businesses involved in disaster mitigation work might see increased demand as homeowners strive to take advantage of the tax benefits, potentially boosting the local economy.
Conversely, individuals with higher incomes face a reduction in credit benefits, which might discourage those who are otherwise capable of undertaking costly preventive measures. Additionally, those reliant on government assistance for mitigation may find themselves excluded from claiming these credits, potentially leading to a gap in engaging low-income households in preventive actions.
Overall, while the bill has the potential to enhance community resilience, its structure suggests a need for revisions to optimize inclusivity and ensure the credit is as impactful as intended.
Financial Assessment
The proposed bill, S. 1323, targets disaster mitigation through financial incentives for individuals engaged in home safety improvements. This legislation amends the Internal Revenue Code of 1986 to introduce a new, refundable tax credit aimed at alleviating the personal financial burden of disaster mitigation activities. Specifically, individuals who invest in upgrading their residences to withstand disasters can benefit from a tax credit.
Financial Provisions
The bill provides a refundable tax credit of up to 50% on qualified disaster mitigation expenditures. The total tax credit a taxpayer can claim is capped at $25,000. However, for married individuals filing separately, the cap is 50% of the full amount, which translates to $12,500. This credit applies to expenditures made for reinforcing structures, protecting openings from weather, or installing other safety measures.
Issues with Financial Allocations
Credit Cap Limitation: The maximum credit capped at $25,000 may limit the bill's effectiveness, especially for homeowners in areas frequently affected by severe natural disasters. These regions may require more expensive and extensive mitigation measures, hence the cap may not adequately cover the costs involved.
Exclusion of Government-Funded Expenditures: The bill excludes any expenditures that are "paid, funded, or reimbursed" by federal, state, or local government entities. This exclusion could disincentivize taxpayers from taking advantage of existing government programs that offer financial assistance for disaster mitigation. As a result, individuals may bear higher personal costs.
Complex Phaseout Formula: A complex phaseout provision is attached to the credit, wherein the amount of credit begins to decrease once a taxpayer's adjusted gross income exceeds $200,000. This provision may create confusion as individuals attempt to calculate their exact entitlements, potentially leading to underutilization of the credit.
Inflation Adjustment: The bill includes an inflation adjustment mechanism, whereby the $25,000 cap and other financial thresholds are increased based on a cost-of-living adjustment beginning in 2026. This setup ensures that the credit's value does not erode over time due to inflationary pressures, although the method for calculating these adjustments could appear intricate to taxpayers.
Interpretation Challenges
The structure and language of this bill, while providing a comprehensive list of qualified disaster mitigation expenditures, could lead to misunderstandings among potential beneficiaries. There is a broad array of expenditures identified as eligible, which might encourage spending on non-essential items, potentially inflating costs. The requirement for detailed documentation could also prove burdensome, especially for those less familiar with formal bureaucratic processes.
By setting a comprehensive framework for disaster mitigation tax credits, the bill aims to mitigate personal financial risks associated with natural disasters. However, its successful application depends heavily on taxpayers' understanding of the complex eligibility criteria and the logistics of claiming these credits.
Issues
The exclusion of expenditures paid, funded, or reimbursed by government entities under Section 36C(c)(1)(B) might disincentivize leveraging existing government programs for cost-sharing in disaster mitigation, potentially resulting in higher personal costs.
The cap on the maximum credit deduction at $25,000 described in Section 2(b)(1) may limit its effectiveness for high-cost disaster mitigation efforts, especially in regions prone to frequent or severe natural disasters where more extensive and expensive measures might be required.
The complex structure of the bill, along with the use of technical jargon and detailed subsections, as seen throughout Section 2, could make it difficult for the average taxpayer to understand their eligibility and benefits, possibly leading to underutilization of the credit.
The language regarding the phaseout under Section 2(b)(2) is complex, potentially causing confusion for individuals trying to calculate their allowable credit, particularly with the formula involving adjusted gross income.
The definition of a 'qualified dwelling unit' in Section 36C(c)(2) relies on historical disaster declarations, which might favor certain areas over others based on historical data rather than current risk or need.
The requirement for documentation under Section 36C(d)(1) may impose a high burden on individuals unfamiliar with bureaucratic procedures, potentially deterring them from applying for the credit.
The lack of clear criteria in Section 36C(a) for what qualifies expenditures as 'necessary' for disaster mitigation could lead to wasteful spending.
The extensive list of qualified disaster mitigation expenditures in Section 36C(a)(1) may include items that are not essential, potentially leading to overuse of funding.
The acronym 'FIREWALL' in the short title of Section 1 is used without explanation, potentially leading to ambiguity about the focus of the legislation.
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 section titled "Short title" indicates that the act in question can be referred to as the "FIREWALL Act," which stands for the "Facilitating Increased Resilience, Environmental Weatherization And Lowered Liability Act."
2. Refundable personal credit for disaster mitigation expenditures Read Opens in new tab
Summary AI
In this section of the bill, a new tax credit for individuals is introduced to cover half of what they spend on making their homes safer against natural disasters. There's a limit of $25,000 on the credit, and it is only available for homes in areas prone to specific disasters, such as wildfires or floods, where a disaster declaration has been issued within the last ten years.
Money References
- “(b) Maximum credit.— “(1) IN GENERAL.—Subject to paragraphs (2) and (3), the credit allowed under subsection (a) to any taxpayer for any taxable year shall not exceed the excess of— “(A) $25,000 (or, in the case of a married individual filing a separate return, 50 percent of such amount), over “(B) the amount of credit allowed to the taxpayer under this section for all preceding taxable years.
- “(2) PHASEOUT.—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— “(A) the excess (if any) of— “(i) the taxpayer’s adjusted gross income for such taxable year, over “(ii) $200,000, bears to “(B) $100,000.
- EXPENDITURES.—The maximum amount of such expenditures which may be taken into account under subsection (a) by all such individuals with respect to such dwelling unit during such calendar year shall be $25,000.
- “(4) INFLATION ADJUSTMENT.— “(A) IN GENERAL.—In the case of any taxable year after 2025, the $25,000 dollar amounts under paragraphs (1)(A) and (3), the $200,000 amount under paragraph (2)(A)(ii), and the $100,000 amount under paragraph (2) (B) shall each 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 2024’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.
- “(B) 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. Disaster mitigation expenditures Read Opens in new tab
Summary AI
Individuals can receive a tax credit of up to 50% for money they spend on certain disaster protection improvements to their homes, such as making a roof stronger or installing a storm shelter, up to a maximum of $25,000. However, this credit decreases if their income exceeds $200,000, and only applies to homes in areas prone to natural disasters that have received specific disaster-related assistance in the past.
Money References
- (b) Maximum credit.— (1) IN GENERAL.—Subject to paragraphs (2) and (3), the credit allowed under subsection (a) to any taxpayer for any taxable year shall not exceed the excess of— (A) $25,000 (or, in the case of a married individual filing a separate return, 50 percent of such amount), over (B) the amount of credit allowed to the taxpayer under this section for all preceding taxable years.
- (2) PHASEOUT.—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— (A) the excess (if any) of— (i) the taxpayer’s adjusted gross income for such taxable year, over (ii) $200,000, bears to (B) $100,000. (3) LIMITATION IN THE CASE OF JOINT OCCUPANCY.—In the case of any dwelling unit with respect to which qualified disaster mitigation expenditures are made and which is jointly occupied and used during any calendar year as a residence by two or more individuals, the following rules shall apply: (A) MAXIMUM
- EXPENDITURES.—The maximum amount of such expenditures which may be taken into account under subsection (a) by all such individuals with respect to such dwelling unit during such calendar year shall be $25,000.
- (4) INFLATION ADJUSTMENT.— (A) IN GENERAL.—In the case of any taxable year after 2025, the $25,000 dollar amounts under paragraphs (1)(A) and (3), the $200,000 amount under paragraph (2)(A)(ii), and the $100,000 amount under paragraph (2) (B) shall each 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 2024” for “calendar year 2016” in subparagraph (A)(ii) thereof.
- (B) 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.