S.336 - Disaster Mitigation and Tax Parity Act of 2025 (119th Congress)
Summary
The Disaster Mitigation and Tax Parity Act of 2025, introduced as S.336 in the Senate, aims to amend the Internal Revenue Code of 1986. The amendment would exclude from gross income amounts received from state-based catastrophe loss mitigation programs. This exclusion applies to payments made to individuals for property improvements designed to reduce damage from windstorms, earthquakes, floods, or wildfires.
Expected Effects
The act will likely reduce the tax burden on individuals who receive funds from state programs for disaster mitigation. This could incentivize more homeowners to invest in preventative measures, reducing the overall impact of natural disasters. The retroactive applicability to taxable years beginning after December 31, 2021, allows individuals to claim exclusions via amended returns.
Potential Benefits
- Reduced Tax Burden: Individuals receiving funds for disaster mitigation will not have to pay taxes on those amounts.
- Incentivizes Mitigation: Encourages homeowners to invest in property improvements that reduce damage from natural disasters.
- Retroactive Benefits: Allows individuals to claim exclusions for previous tax years, providing immediate financial relief.
- Supports State Programs: Reinforces the role of state-based catastrophe loss mitigation programs.
- Financial Relief: Provides financial relief to those impacted by natural disasters.
Potential Disadvantages
- Potential for Abuse: The broad definition of 'qualified catastrophe mitigation payment' could lead to misuse or fraudulent claims.
- Administrative Burden: Processing amended returns and verifying eligibility could create an administrative burden for the IRS.
- Limited Scope: The act only addresses specific types of natural disasters, potentially excluding other forms of property damage.
- State Disparities: Benefits may vary significantly depending on the availability and effectiveness of state-based programs.
- Complexity: The changes to the Internal Revenue Code add complexity, potentially requiring taxpayers to seek professional advice.
Constitutional Alignment
The bill appears to align with the general welfare clause of the Constitution, as it aims to mitigate the financial impact of natural disasters on individuals and communities. Congress has the power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States (Article I, Section 8, Clause 1). The bill uses the power of taxation to incentivize disaster mitigation, which can be argued as promoting the general welfare.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).