HB453 Alabama 2014 Session

Summary

Primary Sponsor

Margie WilcoxRepresentative

Republican

Co-Sponsors

Victor GastonAlan BakerHarry ShiverPaul W. LeeRandy DavisSteve McMillanAdline ClarkeJames E. BuskeyJamie IsonNapoleon BracyJoe Faust

Session

Regular Session 2014

Title

Taxation, tax deduction for taxpayers who made contributions to a catastrophe savings account, increase in state tax deduction, technical corrections to remove ambiguities, Homeowner's Insurance Catastrophic Event Planning Act, Secs. 40-18-311, 40-18-312 am'd.

Summary

HB453 creates the Homeowner's Insurance Catastrophic Event Planning Act and expands the state tax deduction for catastrophe savings accounts while clarifying rules for deposits and distributions.

What This Bill Does

The bill establishes a formal act name and changes how the state tax deduction for catastrophe savings accounts works. It increases the deductible amount eligible for the deduction (the deduction equals two times the contributed amount, with exemptions on interest) and sets new annual and total contribution limits. It also outlines how distributions are taxed, when they are excluded from income, and the penalties for excess contributions, along with provisions for death, ownership of a residence, and special cases for self-insured individuals.

Who It Affects

• Individual taxpayers who contribute to catastrophe savings accounts — they could receive a larger state tax deduction (up to the new limits), have interest earnings exempt from state tax, and must withdraw excess contributions or face income inclusion.
• Homeowners and self-insured individuals — accounts are protected from attachment, with specific contribution limits and rules governing how withdrawals and distributions are taxed, including death-related transfers and age-related exceptions.

Key Provisions

• Creates the Homeowner's Insurance Catastrophic Event Planning Act and designates sections 40-18-311 and 40-18-312 as part of it.
• Section 40-18-311(a): allowable state tax deduction equals two times the amount contributed to a catastrophe savings account; all interest income from the account is exempt from state tax.
• Section 40-18-311(b): catastrophe savings accounts are protected from attachment, levy, garnishment, or other legal processes in Alabama.
• Section 40-18-311(c): annual and total contribution limits vary by deductible amount, with specific caps (e.g., up to $4,000 per year and $12,000 total for smaller deductibles; potentially up to $15,000 or twice the deductible for larger deductibles; $250,000 self-insured residence limit).
• Section 40-18-311(d): excess contributions must be withdrawn and included in Alabama income in the withdrawal year.
• Section 40-18-312(a)-(c): distributions are included in income unless used for qualified catastrophe expenses; if expenses cover distributions, no income inclusion; if distributions exceed expenses, income is reduced by the excess distributions.
• Section 40-18-312(d): taxable distributions incur an additional 2.5% tax unless certain exceptions apply (e.g., no longer owning a qualifying residence or distributions after age 70).
• Section 40-18-312(e): if the taxpayer dies, the account is included in the beneficiary's income except for the surviving spouse; the extra 2.5% tax does not apply to distributions on death.
• Effective for tax years starting January 1, 2014; act becomes effective immediately after passage or upon governor's 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

Taxation