SB117 Alabama 2015 Session

Summary

Primary Sponsor

Bill Hightower

Republican

Session

Regular Session 2015

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

SB117 expands and renames the catastrophe savings program, increasing the state tax deduction for contributions and clarifying how these accounts work under the Homeowner's Insurance Catastrophic Event Planning Act.

What This Bill Does

It creates the Homeowner's Insurance Catastrophic Event Planning Act and adjusts tax rules for catastrophe savings accounts. It allows a deduction equal to twice the contributed amount, with new annual and total contribution limits, and makes interest earned tax-free. It protects the accounts from attachment and clarifies how excess contributions are handled, how distributions are taxed, and the special rules for death distributions and survivors.

Who It Affects

• Individual taxpayers who contribute to catastrophe savings accounts; they would receive a state income tax deduction equal to twice their contributions, subject to annual and total limits, and their account interest would be tax-free.
• Beneficiaries and surviving spouses of catastrophe savings accounts; distributions to them may be treated as income with certain exceptions, and death distributions have special tax treatment.

Key Provisions

• Sets the act as the Homeowner's Insurance Catastrophic Event Planning Act, amending Sections 40-18-311 and 40-18-312.
• Deduction: a taxpayer may deduct two times the amount contributed to a catastrophe savings account; interest earned on the account is exempt from state income tax.
• Protection: the catastrophe savings account cannot be attached, levied, garnished, or subject to legal process in Alabama.
• Contribution limits: limits depend on the taxpayer's qualified deductible, with specific annual and total caps for deductible $1,000 (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 value.
• Excess contributions: any amount over the limit must be withdrawn and included in Alabama taxable income in the year of withdrawal.
• Distributions: distributions used for qualified catastrophe expenses are not included in income; if distributions exceed expenses, the excess is included in income to that extent.
• Additional tax: distributions included in income incur an extra 2.5% tax, with exceptions (no extra tax if the homeowner no longer owns a qualifying residence, or if the distribution is from a compliant account after age 70).
• Death and inheritance: the account becomes part of the recipient's income upon the owner's death unless the recipient is the surviving spouse; the extra 2.5% tax does not apply to death distributions.

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