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HB27 ENROLLED
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HB27
W1F6HE5-2
By Representative Brown
RFD: Insurance
First Read: 13-Jan-26
PFD: 11-Aug-25
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PFD: 11-Aug-25
Enrolled, An Act,
Relating to catastrophe savings accounts; to amend
Sections 40-18-310, 40-18-311, and 40-18-312, Code of Alabama
1975; to provide further for the expenditures that may be paid
from a catastrophe savings account; and to provide further for
caps on how much may be contributed to a catastrophe savings
account.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. Sections 40-18-310, 40-18-311, and
40-18-312, Code of Alabama 1975, are amended to read as
follows:
"§40-18-310
As used in this article, the following terms shall have
the following meanings:
(1) CATASTROPHE SAVINGS ACCOUNT. A regular savings
account or money market account established by an insurance
policyholder who is a state income taxpayer for residential
property in this state to cover :(i) an insurance deductible
under an insurance policy for the taxpayer's legal residence
property one residential property owned by a taxpayer that
covers hurricane, rising floodwaters, or other catastrophic
windstorm event damage or by an individual to cover
self-insured losses for the taxpayer's legal
residence residential property from a hurricane, rising
floodwaters, or other catastrophic windstorm event ; (ii) the
annual cost of a FORTIFIED endorsement to supplement an
insurance policy; or (iii) the cost of mitigation actions that
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insurance policy; or (iii) the cost of mitigation actions that
would reduce the risk of hurricane, rising floodwaters, or
other catastrophic windstorm event damage, including, but not
limited to, costs associated with reroofing and obtaining
evaluation services to qualify for a FORTIFIED designation,
collectively, "Qualified Catastrophe Expenses." . The account
must be labeled as a catastrophe savings account in order to
qualify as a catastrophe savings account as defined in this
article. A taxpayer may establish only one catastrophe savings
account and shall specify that the purpose of the account is
to cover the amount of insurance deductibles and other
uninsured portions of risks of loss from hurricane, rising
floodwater, or other catastrophic windstorm event Qualified
Catastrophe Expenses .
(2) WINDSTORM EVENT. Windstorms, cyclones, hurricanes,
tornadoes, high winds, and hail, and similar perils not
normally among those covered under most property casualty
insurance policies but obtainable through the purchase of
wind, wind and hail, storm or windstorm coverage, or all."
"§40-18-311
(a) An individual taxpayer is allowed a deduction
against income earned for state income tax purposes imposed
pursuant to Section 40-18-5, for amounts contributed to a
catastrophe savings account in accordance with subsection (c)
and all interest income earned by a catastrophe savings
account is exempt from the tax imposed pursuant to Section
40-18-5.
(b) A catastrophe savings account is not subject to
attachment, levy, garnishment, or legal process in this state.
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attachment, levy, garnishment, or legal process in this state.
(c) The total amount that may be contributed to a
catastrophe savings account must not exceed any of the
following:
(1) In the case of an individual whose qualified
deductible is less than or equal to one thousand dollars
($1,000), two thousand dollars ($2,000) , plus amounts to cover
other Qualified Catastrophe Expenses not to exceed fifteen
thousand dollars ($15,000) .
(2) In the case of an individual whose qualified
deductible is greater than one thousand dollars ($1,000), the
amount equal to the lesser of fifteen thousand dollars
($15,000) or twice the amount of the taxpayer's qualified
deductible, plus amounts to cover other Qualified Catastrophe
Expenses not to exceed fifteen thousand dollars ($15,000) .
(3) In the case of a self-insured individual who
chooses not to obtain insurance on his or her legal
residence residential property , two hundred fifty thousand
dollars ($250,000), but in no event may the amount contributed
exceed the value of the individual taxpayer's legal
residence residential property .
(d) If a taxpayer contributes in excess of the limits
provided in subsection (c), the taxpayer shall withdraw the
amount of the excess contributions and include that amount in
Alabama income for purposes of Section 40-18-5 in the year of
withdrawal."
"§40-18-312
(a) A distribution from a catastrophe savings account
must be included in the income of the taxpayer unless the
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must be included in the income of the taxpayer unless the
amount of the distribution is used to cover qualified
catastrophe expenses Qualified Catastrophe Expenses .
(b) No amount is included in income, pursuant to
subsection (a), if the qualified catastrophe expenses
Qualified Catastrophe Expenses of the taxpayer during the
taxable year are equal to or greater than the aggregate
distributions during the taxable year.
(c) If aggregate distributions exceed the qualified
catastrophe expenses Qualified Catastrophe Expenses during the
taxable year, the amount otherwise included in income must be
reduced by the amount of the distributions for qualified
catastrophe expenses Qualified Catastrophe Expenses .
(d)(1) The tax paid pursuant to Section 40-18-5,
attributable to a taxable distribution must be increased by
two and one-half percent of the amount which is includable in
income.
(2) This additional tax does not apply if any of the
following occur:
a. The taxpayer no longer owns a legal
residence residential property that qualifies pursuant to
Chapter 7.
b. The distribution is from an account conforming with
subdivision (3) of subsection (c) of Section 40-18-311 (c)(3)
and is made on or after the date on which the taxpayer attains
the age of 70.
(3) If a taxpayer receives a nontaxable distribution
under this subsection, the taxpayer must not make further
contributions to any catastrophe savings account.
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contributions to any catastrophe savings account.
(e) If a taxpayer who owns a catastrophe savings
account dies, his or her account is included in the income of
the person who receives the account, unless that person is the
surviving spouse of the taxpayer. Upon the death of the
surviving spouse, the account is included in the income of the
person who receives the account. The additional tax in
subsection (d) does not apply to distribution on death of the
taxpayer or the surviving spouse."
Section 2. The provisions of this act apply to tax
years beginning on or after January 1, 2027.
Section 3. This act shall become effective on October
1, 2026.
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1, 2026.
________________________________________________
Speaker of the House of Representatives
________________________________________________
President and Presiding Officer of the Senate
House of Representatives
I hereby certify that the within Act originated in and
was passed by the House 22-Jan-26.
John Treadwell
Clerk
Senate 10-Feb-26 Passed
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