SB227 Alabama 2012 Session

Summary

Primary Sponsor

Ben H. Brooks

Republican

Co-Sponsors

Trip PittmanRusty GloverGeorge M. “Marc” KeaheyVivian Davis Figures

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

SB227 creates 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 establishes a catastrophe savings account that homeowners can use to pay insurance deductibles or uninsured losses from windstorm events. Deposits to the account are deductible from Alabama income tax, and the account interest is tax-exempt. It also sets contribution limits, rules for distributions (including tax treatment and penalties), and protections from certain creditors, with additional rules if the owner dies or if the owner no longer owns the home.

Who It Affects

• Group 1: Alabama individual income taxpayers who own residential property and may establish a catastrophe savings account, eligible to receive a state income tax deduction for deposits and tax-exempt interest if they participate.
• Group 2: Beneficiaries and survivors of catastrophe savings accounts (including heirs and surviving spouses) and individuals who take distributions to cover qualified catastrophe expenses or who no longer own the residence, who face specific income tax treatment and potential penalties on distributions.

Key Provisions

• Establishes a catastrophe savings account to cover deductibles and uninsured portions of windstorm-related losses for a taxpayer's primary residence; one account per taxpayer; must be labeled accordingly.
• Tax benefits: deposits are deductible from Alabama state income tax, and interest earned on the account is tax-exempt.
• Protection: the account is not subject to attachment, levy, garnishment, or other legal process in Alabama.
• Contribution limits: up to $2,000 if deductible is $1,000 or less; otherwise up to the lesser of $15,000 or twice 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• Excess contributions must be withdrawn and included in taxable income in the year of withdrawal.
• Distributions are taxable income unless used to cover qualified catastrophe expenses; if expenses meet or exceed distributions, no tax is due on distributions.
• If distributions exceed expenses, the excess is taxed; an additional 2.5% tax applies to taxable distributions, with exceptions (no extra tax if the home is no longer owned or if distributions after age 70 for certain accounts).
• Death and inheritance: account income is passed to the beneficiary or surviving spouse; the 2.5% additional tax does not apply to death distributions.
• Department of Revenue may issue rules to implement the act, which 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