SB343 Alabama 2014 Session

Summary

Primary Sponsor

Bill Hightower

Republican

Co-Sponsors

Trip PittmanVivian Davis FiguresRusty Glover

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

SB343 creates the Homeowner's Insurance Catastrophic Event Planning Act, expands the state tax deduction for catastrophe savings contributions, and fixes ambiguities in the law.

What This Bill Does

It changes the state income tax deduction so that individuals can deduct two times the amount contributed to a catastrophe savings account, and all interest earned is tax-exempt. It sets contribution limits based on the taxpayer’s deductible amount or self-insurance status, including a $250,000 cap for self-insured homeowners and other yearly/total limits. It protects catastrophe savings accounts from attachment and clarifies how distributions are taxed, generally requiring distributions to be used for qualified expenses to avoid income inclusion. It adds a 2.5% additional tax on taxable distributions with certain exemptions, and outlines how the account and taxes are treated if the account holder dies or leaves the surviving spouse.

Who It Affects

• Individual taxpayers who contribute to catastrophe savings accounts: they would receive a doubled state tax deduction for their contributions, and the interest earned would be exempt from state tax, subject to specific annual and total contribution limits and protection from garnishment.
• Taxpayers who use or inherit distributions from catastrophe savings accounts (including survivors and estates) or who self-insure their home: distributions may be included in income unless used for qualified expenses, may incur an additional 2.5% tax, and have specific rules for death and estate transfers.

Key Provisions

• Establishes the Homeowner's Insurance Catastrophic Event Planning Act and designates sections 40-18-311 and 40-18-312 as the applicable law.
• Allows a deduction equal to two times the catastrophe savings contribution, with all interest income from the account exempt from state income tax.
• Sets contribution limits: (a) for deductible ≤ $1,000, a combined limit with annual maxs and total cap (specific amounts described in the bill); (b) for deductible > $1,000, a limit equal to the lesser of $15,000 or twice the deductible; (c) for self-insured homeowners, a limit up to $250,000 but not exceeding the home’s value.
• Requires excess contributions to be withdrawn and included in Alabama income in the year of withdrawal.
• Distributions must be included in income unless used for qualified catastrophe expenses; there are rules to offset income if expenses exceed distributions.
• Adds a 2.5% additional tax on taxable distributions, with exemptions (e.g., when the taxpayer no longer owns a qualifying residence or distributions meet certain conditions).
• Outlines estate and survivorship rules: upon death, the account is included in the recipient’s income, with exceptions for surviving spouses and avoidance of the additional tax.
• Effective for tax years beginning January 1, 2014, and immediate effectiveness after passage.

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