Overview
Title
To amend the Internal Revenue Code of 1986 to provide a credit for hazard mitigation projects in connection with certain working waterfront property.
ELI5 AI
This bill wants to help people who own boats or work by water places by giving them special money back, called a tax credit, to make their places safer from storms. They can get back 30% of the money they spend, but there are some rules and limits on how much they can get back.
Summary AI
The bill, titled the "Working Waterfront Disaster Mitigation Tax Credit Act," aims to amend the Internal Revenue Code of 1986. It proposes a 30% tax credit for investments in hazard mitigation projects related to working waterfront properties, with a maximum limit of $300,000 per taxpayer. The credit applies to projects designed to prevent or mitigate damage from natural disasters, using methods such as structural elevation, flood risk reduction, and shoreline stabilization. Real property eligible for this credit must be used in activities like commercial fishing or boating, and there are income-based restrictions for qualifying businesses.
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AnalysisAI
General Summary
The proposed bill, referred to as the "Working Waterfront Disaster Mitigation Tax Credit Act," seeks to amend the Internal Revenue Code of 1986. Its primary aim is to establish a tax credit for projects designed to protect working waterfront properties from natural disasters. The bill defines these projects as "working waterfront disaster mitigation projects" and offers a tax credit amounting to 30% of qualifying investments. Limitations are set, such as a ceiling of $300,000 per taxpayer, and specific compliance requirements are outlined, including adherence to particular building codes and disaster mitigation strategies.
Summary of Significant Issues
A key issue with the bill is the $300,000 cap on the tax credit, which may be insufficient to cover the substantial costs associated with comprehensive disaster mitigation measures. This cap could particularly affect smaller businesses that might struggle to fund such projects without sufficient government incentives.
Another concern revolves around the inflation adjustment mechanism for the credit limit and gross receipts threshold. This mechanism introduces complexity in calculations, potentially leading to errors and misinterpretations, which could affect the fair distribution of the credits.
The reliance on the 2021 International Code Council Building Code as a reference standard poses another challenge. As building standards evolve, this reliance may result in projects using outdated codes, potentially diminishing the effectiveness of mitigation measures.
Furthermore, the gross receipts test may exclude businesses that slightly exceed the $47,000,000 threshold, potentially limiting access to credits for essential businesses. There is also concern that the criteria for qualifying projects are not sufficiently specific, which may lead to inconsistencies in how the bill is applied.
Impact on the Public
Broadly, the bill could have positive impacts on communities that depend on working waterfronts by encouraging investments in mitigating the effects of natural disasters. By providing a financial incentive, the bill aims to reduce risks and damages to these critical economic areas. However, the complexities associated with determining eligibility and calculating credits might deter some from accessing these benefits, thereby limiting the bill's overall effectiveness in driving widespread improvements.
Impact on Specific Stakeholders
Small Businesses and Waterfront Property Owners: The cap on the tax credit might not fully accommodate the needs of smaller stakeholders, who could struggle to finance expensive mitigation projects without adequate government support. Conversely, the tax credit could offer significant relief to those who can navigate the eligibility requirements, aiding in the protection of their properties and sustaining their operations.
Contractors and Builders: Requiring adherence to specific building codes may create opportunities for contractors familiar with these standards. On the downside, it might limit competition, as smaller firms less experienced with these codes may find it harder to compete, potentially increasing project costs.
Communities in U.S. Possessions: The provisions for payments to U.S. possessions aim to mitigate economic disparities, but the effectiveness of these measures may vary. Inaccurate estimates of benefits could lead to unequal distribution and dissatisfaction among residents of these areas.
While the bill holds promise for reinforcing the resilience of waterfront properties, its impact on stakeholders will largely depend on the accessibility and clarity of its provisions. Careful implementation and oversight will be crucial to maximizing its intended benefits and minimizing potential drawbacks.
Financial Assessment
The "Working Waterfront Disaster Mitigation Tax Credit Act" presents several financial elements designed to encourage investment in projects that mitigate disaster risks for working waterfront properties. These financial components are structured primarily around tax credits, which have particular implications and raise certain issues:
Tax Credit Limitations
The bill introduces a 30% tax credit on qualified investments in hazard mitigation projects associated with working waterfront properties, with a maximum cap of $300,000 per taxpayer. This cap is crucial because it sets a financial boundary for those seeking to benefit from the legislation. However, there is concern that this limit might be too restrictive, especially given the substantial costs that can be associated with comprehensive disaster mitigation projects. Smaller businesses, which may not have sufficient capital to invest heavily in such projects without significant government assistance, could find this cap limiting their ability to fully utilize the credit.
Inflation Adjustments
The bill includes provisions for adjusting the $300,000 cap for inflation. Starting after December 31, 2025, the limit will increase based on the cost-of-living adjustment derived using specific criteria outlined in the Internal Revenue Code. This adjustment ensures that the credit maintains its value over time in real terms. However, the calculation mechanism introduces complexity, which could lead to issues in interpretation and application. The rounding rules—where amounts are rounded to the nearest $10,000—also need careful understanding to avoid potential miscalculations.
Gross Receipts Test
The gross receipts test stipulates that to qualify, a business must have average annual gross receipts not exceeding $47,000,000 over the previous three years. This test aims to target smaller to mid-sized businesses, but it may inadvertently exclude businesses that slightly surpass this figure, potentially limiting the reach of the tax credit. The bill provides for inflation adjustments to this amount as well, where the threshold will be rounded to the nearest $1,000,000. Such inflation adjustments are again subject to similar complexity issues as the $300,000 credit cap.
Payments to U.S. Possessions
For U.S. possessions with and without mirror code tax systems, the Secretary of the Treasury is tasked with estimating payments equal to the loss or aggregate benefits due to the amendments proposed in this bill. This calculation has the potential for inaccuracies, which could lead to unequal or unfair distribution of benefits to residents of these regions. Ensuring the estimates are accurate and well-founded is essential to prevent discrepancies in federal support.
Implications
These financial structures underscore the targeted allocation of resources intended by the bill. While the act provides necessary incentives for businesses engaged in water-dependent activities to make safety improvements, its financial constraints and calculations carry the risk of complexity and the potential exclusion of certain businesses from its benefits. These factors necessitate clear guidelines and oversight to ensure the act’s intended equitable financial support is realized effectively.
Issues
The section on 'Working waterfront disaster mitigation project credit' (SECTION 48F(b)) includes a dollar limitation that caps the credit at $300,000 per taxpayer. This limit may be too restrictive given the potentially high costs of disaster mitigation projects and could disproportionately affect smaller businesses that rely more on government support to undertake such significant investments.
The inflation adjustment mechanism for dollar limitations and gross receipts (SECTIONS 48F(b)(1)(C) and 48F(d)(3)(D)) introduces potential complexities and ambiguities in calculation. This could lead to misinterpretations and errors, affecting the fairness and effectiveness of the tax credit distribution.
The use of the 2021 International Code Council International Building Code as a standard for projects until 2032 (SECTION 48F(d)(1)(A)) may not reflect advancements in building standards, potentially leading to projects being out of compliance with newer, more effective codes.
The requirement that projects comply with specific building codes (SECTION 48F(d)(1)(A)) might inadvertently favor contractors already familiar with those standards, thereby potentially limiting competition and increasing project costs.
The gross receipts test (SECTION 48F(d)(3)) may inadvertently exclude key businesses, particularly those slightly exceeding the $47,000,000 threshold. This could limit the intended benefits of the bill and affect businesses crucial to the waterfront economy.
The criteria for a 'qualifying working waterfront disaster mitigation project' (SECTION 48F(d)) lack specificity, leading to potential varied interpretations and inconsistencies in application. This vagueness could allow for subjective decision-making by the Secretary, affecting transparency.
Issues with the payments to U.S. possessions (SECTION 48F(d)) could create discrepancies in benefit distribution if estimated amounts are inaccurately calculated. This raises concerns about equality and fairness in federal support across different regions.
The language concerning 'rounding to the nearest multiple' in the inflation adjustment sections (SECTIONS 48F(b)(1)(C) and 48F(d)(3)(D)) could be clearer to ensure consistent interpretation and prevent arbitrary financial calculations.
There is a potential for complexity and redundancy in the aggregation rules for credits and gross receipts tests (SECTIONS 48F(b)(1)(B) and 48F(d)(3)(B)), which could create confusion for taxpayers attempting to determine their eligibility, impacting the bill's effectiveness.
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 the bill provides its short title, stating that it can be referred to as the "Working Waterfront Disaster Mitigation Tax Credit Act."
2. Working waterfront disaster mitigation project credit Read Opens in new tab
Summary AI
The proposed section introduces a tax credit for projects aimed at protecting waterfront properties from natural disasters. Taxpayers can receive a credit of 30% on investments for qualifying projects, with certain limits and conditions, like a cap of $300,000 and compliance with specific building codes and hazard mitigation strategies.
Money References
- “(b) Limitations.— “(1) 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, 2025, 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 ‘calendar year 2024’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.
- 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.
- — “(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.
- “(D) INFLATION ADJUSTMENT.—In the case of any taxable year beginning after December 31, 2025, 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 ‘calendar year 2024’ for ‘calendar year 2016’ in subparagraph (A)(ii) thereof.
- 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.
48F. Working waterfront disaster mitigation project credit Read Opens in new tab
Summary AI
The section provides a tax credit of up to 30 percent of qualified investments in projects designed to reduce or prevent damage to working waterfront properties from natural disasters, with a maximum credit of $300,000 per taxpayer, subject to certain rules for aggregation, inflation adjustments, and a 10-year limitation on use. Eligible projects must comply with specific building codes and include measures like structural elevation and floodproofing to protect against hazards, while eligible properties must be used in water-related businesses that meet a gross receipts test.
Money References
- (b) Limitations.— (1) 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, 2025, 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 “calendar year 2024” for “calendar year 2016” in subparagraph (A)(ii) thereof. 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.
- — (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.
- (D) INFLATION ADJUSTMENT.—In the case of any taxable year beginning after December 31, 2025, 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 “calendar year 2024” for “calendar year 2016” in subparagraph (A)(ii) thereof.
- 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.