The bill amends Sections 40-18-310, 40-18-311, and 40-18-312 of the Code of Alabama 1975 to enhance the provisions regarding catastrophe savings accounts. Key insertions include the definition of "Qualified Catastrophe Expenses," which now encompasses costs related to insurance deductibles, annual costs for FORTIFIED endorsements, and mitigation actions to reduce risks from catastrophic events. Additionally, the bill specifies caps on contributions to these accounts, allowing individuals to contribute amounts that cover their insurance deductibles and other qualified expenses, with a maximum limit of $15,000 for certain cases.

The bill also modifies the tax implications of distributions from catastrophe savings accounts. It clarifies that distributions used for Qualified Catastrophe Expenses are not included in taxable income, while excess distributions will be taxed. Furthermore, it introduces an additional tax on taxable distributions unless specific conditions are met, such as the taxpayer reaching the age of 70 or no longer owning a qualifying legal residence. The provisions of this act will apply to tax years beginning on or after January 1, 2026, and it is set to take effect on October 1, 2025.

Statutes affected:
Introduced: 40-18-310, 40-18-311, 40-18-312, 40-18-310, 40-18-312
Engrossed: 40-18-310, 40-18-311, 40-18-312, 40-18-310, 40-18-311, 40-18-312