HB721 Alabama 2012 Session

Summary

Primary Sponsor

Yvonne Kennedy

Democrat

Co-Sponsors

James E. BuskeyChad FincherJamie IsonJim BartonNapoleon BracyDavid Sessions

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

HB721 would create a Catastrophe Savings Account for Alabama homeowners to help cover insurance deductibles and uninsured losses from catastrophic windstorms, with a state tax deduction for deposits.

What This Bill Does

It would establish a Catastrophe Savings Account (CSA) for residential property owners to cover deductibles and uninsured losses from windstorm events, allow a state income tax deduction for deposits, and exempt CSA interest from tax. It sets contribution limits based on deductible amounts and home value, and requires excess deposits to be withdrawn and included in income. It describes how distributions are taxed, including an extra 2.5% tax on certain taxable distributions and rules around usage for catastrophe expenses, ownership status, and death. It also assigns implementation authority to the Department of Revenue and states the act takes effect immediately after passage.

Who It Affects

• State income taxpayers who own residential property in Alabama and may set up a CSA and claim the tax deduction for deposits.
• Homeowners who are exposed to windstorm risk and/or choose not to obtain insurance (self-insured) and would contribute to the CSA under the specified limits.

Key Provisions

• Establishes a Catastrophe Savings Account to cover insurance deductibles and uninsured losses from hurricanes, rising floodwaters, or other catastrophic windstorm events for residential property.
• Allows a deduction from Alabama income tax for deposits to the CSA and exempts CSA interest from state tax; funds are protected from attachment or garnishment.
• Sets contribution limits: (1) deductible ≤ $1,000 -> max $2,000; (2) deductible > $1,000 -> max lesser of $15,000 or 2x the deductible; (3) self-insured homeowner -> up to $250,000 or home value, whichever is lower; excess must be withdrawn and taxed.
• Distributions are includable in income unless used for qualified catastrophe expenses; if expenses cover distributions, none is included; excess distributions are taxable with an additional 2.5% tax in some cases; special rules apply on death or loss of ownership.
• Death provisions: if the account holder dies, the account is taxed to the recipient unless the surviving spouse is the recipient; the extra 2.5% tax does not apply to death distributions.
• Department of Revenue can issue rules to implement the act; the act becomes effective immediately upon 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