SB1 Alabama 2011 Session

Summary

Primary Sponsor

Ben H. Brooks

Republican

Co-Sponsors

Trip PittmanRusty Glover

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 deduction for deposits made to account

Summary

Creates a catastrophe savings account for Alabama homeowners to help pay windstorm deductibles and uninsured losses, with a state income tax deduction for deposits.

What This Bill Does

It would establish a catastrophe savings account for residential property to cover insurance deductibles and uninsured losses from windstorm events. Tax treatment includes a state income tax deduction for deposits and tax-exemption for interest earned. It sets contribution limits and requires excess deposits to be withdrawn and counted as income, with rules for how distributions are taxed and penalties for taxable distributions, plus death transfer rules and department rulemaking. The act becomes effective immediately after passage.

Who It Affects

• Alabama individual taxpayers who own residential property and may open a catastrophe savings account to cover deductibles and uninsured losses from windstorm events.
• Self-insured homeowners and their heirs or surviving spouses who participate in or receive distributions from the account, including limits, taxation rules, and transfer upon death.

Key Provisions

• Establishes a catastrophe savings account for residential property to cover deductibles and uninsured losses from windstorm events (hurricanes, rising floodwaters, and similar perils).
• Allows a state income tax deduction for deposits into the catastrophe savings account; interest earned is exempt from state income tax.
• Sets contribution limits: up to $2,000 if deductible ≤ $1,000; up to the lesser of $15,000 or twice the deductible if deductible > $1,000; up to $250,000 for self-insured homeowners (not exceeding home value); excess contributions must be withdrawn and counted as income.
• Distributions used for qualified catastrophe expenses are not taxed; if distributions exceed expenses, the excess is included in income; an additional 2.5% tax applies to taxable distributions with certain exemptions (e.g., no longer owning a qualifying residence or post-age 70 for some accounts).
• Death and inheritance rules: on death, the account is included in the recipient's income unless the recipient is the surviving spouse; the 2.5% additional tax does not apply to distributions on death.
• Department of Revenue can issue rules to implement and administer the act; the act becomes effective immediately upon passage.

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