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HB27 ENROLLED
1 HB27
2 W1F6HE5-2
3 By Representative Brown
4 RFD: Insurance
5 First Read: 13-Jan-26
6 PFD: 11-Aug-25
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1 Enrolled, An Act,
2
3 Relating to catastrophe savings accounts; to amend
4 Sections 40-18-310, 40-18-311, and 40-18-312, Code of Alabama
5 1975; to provide further for the expenditures that may be paid
6 from a catastrophe savings account; and to provide further for
7 caps on how much may be contributed to a catastrophe savings
8 account.
9 BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
10 Section 1. Sections 40-18-310, 40-18-311, and
11 40-18-312, Code of Alabama 1975, are amended to read as
12 follows:
13 "§40-18-310
14 As used in this article, the following terms shall have
15 the following meanings:
16 (1) CATASTROPHE SAVINGS ACCOUNT. A regular savings
17 account or money market account established by an insurance
18 policyholder who is a state income taxpayer for residential
19 property in this state to cover:(i) an insurance deductible
20 under an insurance policy for the taxpayer's legal residence
21 propertyone residential property owned by a taxpayer that
22 covers hurricane, rising floodwaters, or other catastrophic
23 windstorm event damage or by an individual to cover
24 self-insured losses for the taxpayer's legal
25 residenceresidential property from a hurricane, rising
26 floodwaters, or other catastrophic windstorm event; (ii) the
27 annual cost of a FORTIFIED endorsement to supplement an
28 insurance policy; or (iii) the cost of mitigation actions that
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29 would reduce the risk of hurricane, rising floodwaters, or
30 other catastrophic windstorm event damage, including, but not
31 limited to, costs associated with reroofing and obtaining
32 evaluation services to qualify for a FORTIFIED designation,
33 collectively, "Qualified Catastrophe Expenses.". The account
34 must be labeled as a catastrophe savings account in order to
35 qualify as a catastrophe savings account as defined in this
36 article. A taxpayer may establish only one catastrophe savings
37 account and shall specify that the purpose of the account is
38 to cover the amount of insurance deductibles and other
39 uninsured portions of risks of loss from hurricane, rising
40 floodwater, or other catastrophic windstorm eventQualified
41 Catastrophe Expenses.
42 (2) WINDSTORM EVENT. Windstorms, cyclones, hurricanes,
43 tornadoes, high winds, and hail, and similar perils not
44 normally among those covered under most property casualty
45 insurance policies but obtainable through the purchase of
46 wind, wind and hail, storm or windstorm coverage, or all."
47 "§40-18-311
48 (a) An individual taxpayer is allowed a deduction
49 against income earned for state income tax purposes imposed
50 pursuant to Section 40-18-5, for amounts contributed to a
51 catastrophe savings account in accordance with subsection (c)
52 and all interest income earned by a catastrophe savings
53 account is exempt from the tax imposed pursuant to Section
54 40-18-5.
55 (b) A catastrophe savings account is not subject to
56 attachment, levy, garnishment, or legal process in this state.
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57 (c) The total amount that may be contributed to a
58 catastrophe savings account must not exceed any of the
59 following:
60 (1) In the case of an individual whose qualified
61 deductible is less than or equal to one thousand dollars
62 ($1,000), two thousand dollars ($2,000), plus amounts to cover
63 other Qualified Catastrophe Expenses not to exceed fifteen
64 thousand dollars ($15,000).
65 (2) In the case of an individual whose qualified
66 deductible is greater than one thousand dollars ($1,000), the
67 amount equal to the lesser of fifteen thousand dollars
68 ($15,000) or twice the amount of the taxpayer's qualified
69 deductible, plus amounts to cover other Qualified Catastrophe
70 Expenses not to exceed fifteen thousand dollars ($15,000).
71 (3) In the case of a self-insured individual who
72 chooses not to obtain insurance on his or her legal
73 residenceresidential property, two hundred fifty thousand
74 dollars ($250,000), but in no event may the amount contributed
75 exceed the value of the individual taxpayer's legal
76 residenceresidential property.
77 (d) If a taxpayer contributes in excess of the limits
78 provided in subsection (c), the taxpayer shall withdraw the
79 amount of the excess contributions and include that amount in
80 Alabama income for purposes of Section 40-18-5 in the year of
81 withdrawal."
82 "§40-18-312
83 (a) A distribution from a catastrophe savings account
84 must be included in the income of the taxpayer unless the
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85 amount of the distribution is used to cover qualified
86 catastrophe expensesQualified Catastrophe Expenses.
87 (b) No amount is included in income, pursuant to
88 subsection (a), if the qualified catastrophe expenses
89 Qualified Catastrophe Expenses of the taxpayer during the
90 taxable year are equal to or greater than the aggregate
91 distributions during the taxable year.
92 (c) If aggregate distributions exceed the qualified
93 catastrophe expensesQualified Catastrophe Expenses during the
94 taxable year, the amount otherwise included in income must be
95 reduced by the amount of the distributions for qualified
96 catastrophe expensesQualified Catastrophe Expenses.
97 (d)(1) The tax paid pursuant to Section 40-18-5,
98 attributable to a taxable distribution must be increased by
99 two and one-half percent of the amount which is includable in
100 income.
101 (2) This additional tax does not apply if any of the
102 following occur:
103 a. The taxpayer no longer owns a legal
104 residenceresidential property that qualifies pursuant to
105 Chapter 7.
106 b. The distribution is from an account conforming with
107 subdivision (3) of subsection (c) of Section 40-18-311(c)(3)
108 and is made on or after the date on which the taxpayer attains
109 the age of 70.
110 (3) If a taxpayer receives a nontaxable distribution
111 under this subsection, the taxpayer must not make further
112 contributions to any catastrophe savings account.
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113 (e) If a taxpayer who owns a catastrophe savings
114 account dies, his or her account is included in the income of
115 the person who receives the account, unless that person is the
116 surviving spouse of the taxpayer. Upon the death of the
117 surviving spouse, the account is included in the income of the
118 person who receives the account. The additional tax in
119 subsection (d) does not apply to distribution on death of the
120 taxpayer or the surviving spouse."
121 Section 2. The provisions of this act apply to tax
122 years beginning on or after January 1, 2027.
123 Section 3. This act shall become effective on October
124 1, 2026.
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134 ________________________________________________
135 Speaker of the House of Representatives
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139 ________________________________________________
140 President and Presiding Officer of the Senate
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143 House of Representatives
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145 I hereby certify that the within Act originated in and
146 was passed by the House 22-Jan-26.
147
148 John Treadwell
149 Clerk
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155 Senate 10-Feb-26 Passed
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