A bill introduced in the US House of Representatives seeks to establish a federal home-hardening grant program and exempt certain disaster mitigation grants from federal taxes.
The proposed legislation would direct the president to create a grant program focused on properties in high-risk areas, with provisions for defining eligible disaster areas and establishing mitigation plans.
Under the bill, grant amounts for qualifying projects would be capped at $10,000. Eligible projects include installing standby generator systems and upgrading roofs to improve resistance to impact and fire damage.
Individuals earning $250,000 or more annually would not be eligible for the program, and joint filers with incomes exceeding $500,000 would also be excluded.
The proposal follows the expansion of similar state-level programs, according to AM Best. Insurance commissioners and regulators have promoted mitigation grants to enhance community resilience and help control insurance costs.
Notably, the impact of wildfires on property taxes in high-risk areas, particularly in California, has been significant. Homeowners whose properties have been damaged or destroyed by wildfires can apply for property tax relief by filing a "Misfortune or Calamity" application with their county assessor's office, allowing for deferral of property taxes without penalties or interest until the property is repaired or rebuilt.
Rep. Doug LaMalfa (R-Calif.) said the bill aims to prevent homeowners from facing unexpected federal taxes on disaster mitigation grants. He noted that the legislation would align the tax treatment of these grants with that of rebates for energy conservation improvements, which are exempt from federal income taxes.
LaMalfa also said that there is an imbalance in how federal and state disaster assistance is taxed, leaving some homeowners with an additional tax burden.
“We need to be sure that disaster mitigation efforts actually reduce risks and help people rebuild, rather than having their assistance siphoned away by federal taxes,” LaMalfa said.
The bill also proposes exempting certain emergency agriculture assistance payments, such as those from the Wildfires and Hurricanes Indemnity Program Plus, from federal taxes. Additionally, it includes a tax credit equal to 30% of expenditures for qualifying mitigation projects.
As for other legislation, the 2020 California Proposition 19, approved by voters, allows homeowners over 55, disabled individuals, and victims of natural disasters to transfer their existing property tax assessed value to a replacement home, even if it's more expensive. This measure aims to provide financial relief and flexibility to those affected by natural disasters, including wildfires.
However, the destruction caused by wildfires leads to reduced property tax revenues for local governments, as taxes are typically levied on land value alone when structures are destroyed. This reduction strains public services and can impact funding for essential services like emergency response and infrastructure maintenance.
In response to these challenges, some states have introduced measures to offer property tax relief to homeowners affected by natural disasters. For example, New York enacted laws providing property tax relief to individuals affected by climate-related damages.
Additionally, voters in several states have approved measures to cap tax assessments and adjust tax exemptions to inflation, aiming to alleviate the financial burden on homeowners in high-risk areas.
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