HB456 Alabama 2012 Session

Summary

Primary Sponsor

Randy Davis

Republican

Co-Sponsors

Harry ShiverJoe FaustAlan BakerSteve McMillan

Session

Regular Session 2012

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

HB456 would create a catastrophe savings account for Alabama homeowners to cover windstorm deductibles and uninsured losses, with a state tax deduction for deposits.

What This Bill Does

It would establish a catastrophe savings account that homeowners can use to pay insurance deductibles and uninsured portions from windstorm events such as hurricanes or rising floodwaters. It would allow a state income tax deduction for deposits to the account and make the account’s interest income exempt from Alabama taxes. Distributions from the account are generally treated as income unless used for qualified catastrophe expenses, and there are rules that could apply an extra 2.5% tax on some distributions, with several exceptions. The bill also sets contribution limits, handles excess deposits, provides rules for death and survivor transfers, and assigns the Department of Revenue to implement the program; the act would take effect immediately after passage.

Who It Affects

• Residential property owners in Alabama who open and fund a catastrophe savings account to cover deductibles and uninsured losses from windstorm events, receiving a state tax deduction for deposits and tax-exempt interest while following distribution rules.
• The Alabama Department of Revenue and state tax administration, which would implement, enforce, and regulate the catastrophe savings accounts, including contribution limits and tax treatment.

Key Provisions

• Establishes a catastrophe savings account for homeowners to cover deductible amounts and uninsured portions of windstorm-related risks; only one account per taxpayer and it must be labeled as a catastrophe savings account.
• Provides a state income tax deduction for deposits to the catastrophe savings account, and exempts interest earned from state taxes; deposits are subject to contribution limits based on deductible amounts and insurance/self-insurance status, with specific caps (e.g., up to $2,000 if deductible ≤ $1,000; up to the lesser of $15,000 or twice the deductible if deductible > $1,000; self-insured limits up to $250,000 but not exceeding the home’s value). Excess contributions must be withdrawn and included in income in the year of withdrawal.
• Distributions are generally included in income unless used for qualified catastrophe expenses; there are exceptions and an additional 2.5% tax on includable distributions, with specific exemptions (such as not owning a qualifying residence or distributions from certain conforming accounts after age 70; death rules affect how distributions are taxed to heirs). The account is not subject to certain attachment or garnishment.
• Allows the Department of Revenue to issue rules to implement the act; the act becomes effective immediately after passage and 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