Disaster Mitigation and Tax Parity Act of 2025

Bill Number

H.R. 1849

Origin Chamber

House

Congress

119th Congress, Session 1

Policy Area

Taxation

Status

Introduced

Latest Action

2026-02-04: ASSUMING FIRST SPONSORSHIP - Mr. Murphy asked unanimous consent that he may hereafter be considered as the first sponsor of H.R. 1849, a bill originally introduced by Representative LaMalfa, for the purpose of adding cosponsors and requesting reprintings pursuant to clause 7 of rule XII. Agreed to without objection.

Last Updated

2026-06-26T08:07:26Z

AI-Generated Summary

Purpose

The Disaster Mitigation and Tax Parity Act of 2025 aims to encourage property owners to reduce risks from natural disasters by making certain state-funded mitigation payments tax-free. It amends the Internal Revenue Code (IRC) of 1986 to exclude these payments from a person's taxable income, promoting proactive disaster preparedness rather than just post-disaster relief.

Key Provisions

• New Tax Exclusion: Adds a new subsection (h) to IRC Section 139, excluding from gross income any "qualified catastrophe mitigation payment" received by or paid on behalf of a property owner.
• These payments come from programs run by states, local governments, joint powers authorities (collaborative government entities), or state-created insurance market entities (like insurers of last resort for essential property coverage, overseen by state insurance regulators).
• Payments must be used solely to improve property and reduce damage from windstorms, earthquakes, or wildfires (e.g., reinforcing roofs or clearing brush).
• No Basis Adjustment: Similar to other IRC exclusions, these payments do not increase the property's tax basis (the value used to calculate capital gains taxes if sold).
• Conforming Changes: Updates references in IRC Section 139 to include these new payments alongside existing disaster-related exclusions (like those for qualified disaster relief).
• Effective Date and Retroactivity: Applies to tax years starting after December 31, 2020. The Treasury Secretary must allow claims via amended tax returns, enabling retroactive refunds for eligible past payments.

Significant Changes to Existing Law

• Expands IRC Section 139, which already excludes certain disaster relief payments (e.g., from governments or nonprofits after federally declared disasters), to include proactive mitigation funding from state programs.
• Introduces the first specific exclusion for state-based prevention efforts against wind, earthquake, and wildfire risks, creating tax parity between mitigation (prevention) and relief (recovery) payments.
• Allows retroactive application back to 2021, which is unusual and could trigger administrative adjustments for prior tax years.

Potential Impacts

• On Citizens: Property owners in disaster-prone areas (e.g., wildfire zones in California or hurricane regions) benefit from tax-free funds to fortify homes, potentially lowering insurance costs and reducing future losses. This incentivizes mitigation, making communities more resilient.
• On Government Agencies: States and local entities can expand mitigation programs without recipients facing tax burdens, possibly increasing program participation. The IRS will handle additional claims and amended returns, potentially increasing short-term administrative workload but reducing long-term disaster aid needs.
• On International Relations: No direct impact, as this is a domestic tax policy focused on U.S. states and properties.
• Broader Effects: Could reduce federal disaster spending over time by preventing damage, though initial retroactive claims might lead to billions in refunds.

Main Stakeholders Affected

• Property Owners and Individuals: Primary beneficiaries, especially homeowners in high-risk states like California, Florida, or Louisiana.
• State and Local Governments: Gain flexibility to fund and promote mitigation programs without tax complications for participants.
• Insurance Entities: State-regulated insurers (including "last resort" markets for hard-to-insure properties) may see reduced claims and more stable markets as properties become safer.
• Federal Government (IRS and Treasury): Responsible for implementing the exclusion and processing retroactive claims.
• Taxpayers Generally: Indirectly affected through potential reductions in future federal disaster relief costs.

Notable Legal, Constitutional, or Political Implications

• Legal: Strengthens tax incentives for environmental resilience under the IRC, aligning with broader federal goals like those in the Federal Emergency Management Agency's (FEMA) mitigation grants. The retroactive provision may face challenges if not all past payments qualify, but it avoids double-taxation issues.
• Constitutional: No apparent conflicts; it falls within Congress's taxing and spending powers under Article I. It promotes equal protection by treating mitigation payments like relief payments.
• Political: Bipartisan support (introduced by members from both parties, including from disaster-vulnerable districts) highlights a non-partisan push for climate adaptation. Could set precedent for expanding tax exclusions to other state-led resilience efforts, influencing future disaster policy debates.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. LaMalfa, Doug [R-CA-1]

Cosponsors (31)

Rep. Thompson, Mike [D-CA-4], Rep. Murphy, Gregory F. [R-NC-3], Rep. Brownley, Julia [D-CA-26], Rep. Rouzer, David [R-NC-7], Rep. Davis, Danny K. [D-IL-7], Rep. Fitzgerald, Scott [R-WI-5], Rep. Pettersen, Brittany [D-CO-7], Rep. Higgins, Clay [R-LA-3], Rep. Peters, Scott H. [D-CA-50], Rep. Mullin, Kevin [D-CA-15], Rep. Chu, Judy [D-CA-28], Rep. Sewell, Terri A. [D-AL-7], Rep. Valadao, David G. [R-CA-22], Rep. Obernolte, Jay [R-CA-23], Rep. Ross, Deborah K. [D-NC-2], Rep. Calvert, Ken [R-CA-41], Rep. Moore, Barry [R-AL-1], Rep. Rogers, Mike D. [R-AL-3], Rep. Huffman, Jared [D-CA-2], Rep. Edwards, Chuck [R-NC-11], Rep. McDowell, Addison P. [R-NC-6], Rep. Davis, Donald G. [D-NC-1], Rep. Panetta, Jimmy [D-CA-19], Rep. Levin, Mike [D-CA-49], Rep. Min, Dave [D-CA-47], Rep. Tran, Derek [D-CA-45], Rep. Vargas, Juan [D-CA-52], Rep. Gooden, Lance [R-TX-5], Rep. LaHood, Darin [R-IL-16], Rep. Gallagher, James [R-CA-1], Rep. Craig, Angie [D-MN-2]

Recent Actions

• 2026-02-04: ASSUMING FIRST SPONSORSHIP - Mr. Murphy asked unanimous consent that he may hereafter be considered as the first sponsor of H.R. 1849, a bill originally introduced by Representative LaMalfa, for the purpose of adding cosponsors and requesting reprintings pursuant to clause 7 of rule XII. Agreed to without objection.
• 2025-03-05: Referred to the House Committee on Ways and Means.
• 2025-03-05: Introduced in House
• 2025-03-05: Introduced in House

Bill Versions

• Disaster Mitigation and Tax Parity Act of 2025 — issued 2025-03-05 — PDF (4 pages)

Related Bills

• S. 336 (119th Congress)