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 changes include the definition of a catastrophe savings account, which is now specified to cover expenses related to residential property owned by a taxpayer, including insurance deductibles, costs for FORTIFIED endorsements, and mitigation actions to reduce risks from catastrophic events. The bill also introduces caps on contributions to these accounts, allowing individuals with lower deductibles to contribute up to $15,000 for qualified catastrophe expenses, while those with higher deductibles can contribute an amount not exceeding their deductible or $15,000, whichever is less.

Additionally, the bill clarifies the tax implications of distributions from catastrophe savings accounts, stating that distributions must be included in the taxpayer's income unless used for qualified catastrophe expenses. It also establishes that if distributions exceed the qualified expenses, the excess must be reported as income. The provisions of this act will apply to tax years beginning on or after January 1, 2027, and it is set to take effect on October 1, 2026.

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