SB6 Alabama 2010 Session

Summary

Primary Sponsor

Ben H. Brooks

Republican

Co-Sponsor

Trip Pittman

Session

Regular Session 2010

Title

Catastrophe savings account, established, to cover insurance deductibles and other uninsured portions of risks of loss to owners of residential property owners from windstorm events, income tax credit for deposits made to account

Summary

SB6 would create a catastrophe savings account to help Alabama homeowners cover deductibles and uninsured losses from catastrophic windstorms, with a state income tax deduction for deposits.

What This Bill Does

It establishes a catastrophe savings account tied to residential property to cover insurance deductibles and uninsured losses from windstorm events such as hurricanes and rising floodwaters. It allows a state income tax deduction for deposits into the account and exempts the account’s interest from tax. It sets contribution limits based on deductible amounts (higher caps for self-insured homeowners) and imposes rules for excess contributions, distributions, and tax treatment of withdrawals, including penalties and special cases at death or for turning 70.

Who It Affects

• Residential property owners in Alabama who carry windstorm insurance or opt to self-insure; they would be able to open one catastrophe savings account, contribute up to defined limits, receive a state income tax deduction for deposits, and use distributions tax-free if spent on qualified catastrophe expenses.
• Self-insured homeowners or those choosing not to insure their residence (with higher contribution limits up to $250,000 but not exceed the home’s value); they face the same account rules, tax benefits, and distribution consequences, but with the higher cap and self-insurance considerations.

Key Provisions

• Creates a catastrophe savings account to cover insurance deductibles and uninsured losses from hurricane, rising floodwaters, or other catastrophic windstorms for a taxpayer's primary residence.
• Allows a state income tax deduction for amounts contributed to the catastrophe savings account; interest earned is exempt from Alabama income tax.
• Accounts are protected from attachment, levy, garnishment, or other legal process in Alabama.
• Contribution limits: up to $2,000 if deductible is $1,000 or less; up to the lesser of $15,000 or twice the deductible if deductible is greater than $1,000; or up to $250,000 for self-insured individuals not to exceed the home’s value.
• Excess contributions must be withdrawn and included in income in the year of withdrawal.
• Distributions used for qualified catastrophe expenses are not included in income; distributions exceeding expenses are included, with reductions if applicable.
• An additional 2.5% tax applies to includable distributions unless certain exceptions apply (e.g., loss of qualifying residence or compliant account after age 70).
• Non-taxable distributions prevent further contributions to catastrophe savings accounts.
• If the taxpayer dies, the account is included in the recipient’s income (with surviving spouse exception); the extra tax does not apply to distributions on death.
• The Department of Revenue may issue rules to implement and administer the act.
• The act takes effect immediately after passage and approval.

AI-generated summary using openai/gpt-5-nano on Feb 25, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Insurance