SB400 Alabama 2011 Session

Summary

Primary Sponsor

Ben H. Brooks

Republican

Co-Sponsor

Trip Pittman

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

SB400 would create a catastrophe savings account for Alabama homeowners to help cover insurance deductibles and uninsured losses from windstorm events, with a state income tax deduction for deposits.

What This Bill Does

The bill would allow an Alabama residential property owner to open a catastrophe savings account to cover deductibles and uninsured losses from windstorm damage. Deposits would be deductible from state income tax and the account’s interest would be tax-exempt, with the account protected from garnishment. There are contribution limits and rules about how distributions are taxed, including a 2.5% additional tax on taxable distributions unless certain exceptions apply, and death rules for how the account is treated after the owner’s death.

Who It Affects

• Alabama residential property owners who may open and fund a catastrophe savings account to cover deductibles and uninsured losses from windstorm events.
• Taxpayers who contribute to the catastrophe savings account, who would receive a state income tax deduction for deposits, tax-exempt interest, and protections against attachment.

Key Provisions

• Establishes a Catastrophe Savings Account (CSA) for homeowners to cover deductible amounts and uninsured portions of risk from hurricane, rising floodwaters, or other catastrophic windstorm events; one CSA per taxpayer.
• Allows a state income tax deduction for deposits to the CSA and makes interest income earned by the CSA tax-exempt; the CSA cannot be garnished or attached.
• Sets contribution limits: if deductible ≤ $1,000, max $2,000; if deductible > $1,000, max the lesser of $15,000 or 2×the deductible; self-insured individuals may contribute up to $250,000 but not more than the home’s value; excess contributions must be withdrawn and included in income.
• Distributions from the CSA are generally included in income unless used for qualified catastrophe expenses; if expenses cover all distributions, none is included; if distributions exceed expenses, the excess is included as income.
• Imposes an additional 2.5% tax on taxable distributions unless exceptions apply (e.g., no longer owning a qualifying residence or certain age-related conditions); death benefits are treated specially, with the additional tax not applying to distributions on death.
• If the owner dies, the CSA is included in the recipient’s income unless the recipient is the surviving spouse; the additional tax does not apply to death distributions.
• The 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