HB295 Alabama 2011 Session

Summary

Primary Sponsor

Randy Davis

Republican

Co-Sponsors

Harry ShiverJoe FaustAlan BakerSteve McMillan

Session

Regular Session 2011

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

HB295 would create catastrophe savings accounts for residential property to cover windstorm deductibles and uninsured losses, with a state tax deduction and a tax credit for deposits.

What This Bill Does

The bill establishes a Catastrophe Savings Account for homeowners to help pay deductibles and uninsured losses from major windstorm events. It gives a state income tax deduction for deposits and tax-exempt interest on the account, and sets contribution limits. Distributions are generally taxable unless used for qualified catastrophe expenses, and an extra 2.5% tax may apply to taxable distributions; there are rules for death, ownership changes, and self-insurance, plus the Department of Revenue would issue implementing rules. The act would become effective immediately upon governor approval.

Who It Affects

• State income taxpayers who own a qualifying residential property and may set up a catastrophe savings account to cover deductibles and uninsured losses; they would receive a deduction for deposits and tax-exempt interest earned.
• Self-insured homeowners who choose not to carry insurance on their primary residence (or who have large deductibles) who may contribute up to $250,000, not exceeding their home's value, with distributions subject to income tax rules and potential additional taxes.

Key Provisions

• Creates a Catastrophe Savings Account (CSA) for residential property to cover insurance deductibles and uninsured losses from hurricane, rising floodwaters, or other catastrophic windstorm events.
• Allows a deduction from Alabama personal income tax for deposits to a CSA and exempts CSA interest from state income tax.
• Sets contribution limits: (a) up to $2,000 if deductible is ≤ $1,000; (b) up to the lesser of $15,000 or twice the deductible if deductible > $1,000; (c) for self-insured individuals, up to $250,000 but not exceeding the home value.
• Treats excess deposits as withdrawals that must be reported as Alabama income in the year of withdrawal.
• Distributions are included in income unless used for qualified catastrophe expenses; if expenses cover distributions, none is included; if distributions exceed expenses, the excess is taxable.
• Adds a 2.5% additional tax on taxable distributions, with specific exceptions (e.g., if the owner no longer has a qualifying residence or when distributions follow certain age or account rules).
• Distributions from CSA accounts on death are treated as income to recipients, with special rules for surviving spouses and no additional 2.5% tax on those death distributions.
• Requires the Department of Revenue to issue rules to implement the act and states it becomes effective immediately after governor approval.

AI-generated summary using openai/gpt-5-nano on Feb 24, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Insurance