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 a FORTIFIED endorsement and mitigation actions to reduce risks from catastrophic events. The bill also specifies that taxpayers can only establish one catastrophe savings account, which must be designated for covering these qualified expenses. Additionally, the contribution caps for these accounts are adjusted, allowing for contributions that cover both insurance deductibles and other qualified expenses, with specific limits based on the taxpayer's deductible amount.

Furthermore, the bill outlines the tax implications of distributions from catastrophe savings accounts, stating that distributions used for qualified catastrophe expenses are not included in taxable income. It introduces a provision for an additional tax on taxable distributions unless certain conditions are met, such as the taxpayer reaching the age of 70 or no longer owning a qualifying legal residence. The act is set to apply to tax years beginning on or after January 1, 2026, and will 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