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 the annual 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 to allow for greater flexibility, permitting contributions to cover other qualified expenses up to $15,000, depending on the taxpayer's deductible.

Furthermore, the bill 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 also introducing an additional tax on taxable distributions. 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. The bill aims to provide better financial support for taxpayers facing catastrophic events by expanding the scope of allowable expenses and adjusting the tax treatment of contributions and distributions.

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