Working Waterfront Disaster Mitigation Tax Credit Act
- Bill Number
- H.R. 4861
- Origin Chamber
- House
- Congress
- 119th Congress, Session 1
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2025-08-01: Referred to the House Committee on Ways and Means.
- Last Updated
- 2025-12-05T22:48:42Z
AI-Generated Summary
Purpose
The legislation, titled the "Working Waterfront Disaster Mitigation Tax Credit Act," aims to incentivize investments in projects that protect "working waterfront property" from natural hazards like flooding, erosion, and storms. It does this by creating a new tax credit under the Internal Revenue Code (IRC) to encourage building or upgrading resilient infrastructure in areas used for water-dependent commercial activities, such as fishing and boating.
Key Provisions
- Tax Credit Amount and Limits:
- Provides a credit equal to 30% of the "qualified investment" (the cost basis of eligible property placed in service during the tax year).
- Caps the credit at $300,000 per taxpayer, with rules treating related businesses as a single taxpayer to prevent splitting claims.
- The cap adjusts for inflation starting in 2027, based on cost-of-living changes (rounded to the nearest $10,000).
- Taxpayers cannot claim the credit if they received it (excluding progress payments) in the prior 10 years.
- Qualified Investment and Eligible Property:
- Applies to tangible, depreciable property (e.g., buildings or equipment) that the taxpayer builds, reconstructs, or acquires new.
- Excludes costs covered by other tax credits, like historic rehabilitation credits.
- Allows credits for "progress expenditures" (partial payments during construction), similar to rules for other investment credits.
- Qualifying Projects:
- Must be designed to prevent or reduce damage from natural hazards on "working waterfront property."
- Requires compliance with International Building Codes (2021 version for projects before 2033; later versions affirmed by the Treasury Secretary for projects after).
- Approved methods include:
- Structural elevation: Raising buildings on foundations, piles, or fill to avoid flood levels.
- Flood risk reduction: Installing drainage systems, floodgates, or vegetation for shoreline stability.
- Shoreline stabilization: Using riprap, drainage, or buffers to prevent erosion and landslides.
- Floodproofing: Building impermeable walls or using flood-resistant materials.
- Retrofitting: Modifying existing structures to withstand floods, winds, or extreme weather.
- Warning systems: Adding alarms, weather stations, or emergency alert equipment.
- Working Waterfront Property:
- Real property in the U.S. or its possessions used for active water-dependent businesses (e.g., commercial fishing, aquaculture, boatbuilding, dredging).
- Businesses must meet a "gross receipts test": Average annual receipts under $47 million for the prior three years (aggregated for related entities; inflation-adjusted after 2026, rounded to nearest $1 million).
- Supports access to navigable waters for these activities.
- Administration and Scope:
- The Treasury Secretary, consulting with the Federal Emergency Management Agency (FEMA), will issue regulations to implement the credit.
- Applies to tax years ending after December 31, 2025.
- Extends benefits to U.S. possessions: Treasury pays equivalent amounts to mirror-code systems (e.g., Guam) based on lost revenue, and estimates benefits for others with approved distribution plans.
Significant Changes to Existing Law
- Adds a new Section 48F to the IRC, inserting it into the investment tax credit framework (Section 46) alongside credits for clean energy and other projects.
- Amends Sections 49 and 50 to integrate this credit into basis reduction rules and recapture provisions (e.g., if property is sold early).
- Introduces the first targeted tax incentive specifically for disaster mitigation on working waterfronts, building on general investment credit rules but tailoring them to coastal resilience needs.
- No changes to existing disaster relief programs, but coordinates with building code standards and FEMA guidance.
Potential Impacts
- On Government Agencies: Increases administrative workload for the IRS and Treasury to verify eligibility, issue guidance, and handle inflation adjustments; potential revenue loss from credits claimed (estimated indirectly through possession payments). FEMA's involvement ensures alignment with federal disaster standards.
- On Citizens and Businesses: Encourages small to medium-sized waterfront operators to invest in hazard-resistant upgrades, potentially reducing future disaster recovery costs and insurance premiums. Could enhance economic stability in coastal communities by protecting jobs in fishing and related industries.
- On International Relations: Minimal direct impact, though it may indirectly support U.S. maritime trade and fisheries by bolstering domestic waterfront infrastructure; applies only to U.S. territories, not foreign entities.
Main Stakeholders Affected
- Waterfront Business Owners: Primary beneficiaries, especially those in commercial fishing, aquaculture, boating, and dredging with under $47 million in receipts, who can offset up to 30% of project costs.
- Taxpayers and Investors: Individuals or entities funding eligible projects, including partnerships or related businesses under aggregation rules.
- Government Entities: IRS (enforcement), Treasury (regulations and payments to possessions), and FEMA (consultation on hazard standards).
- Coastal Communities: Residents and local economies reliant on working waterfronts, gaining from reduced disaster vulnerability.
- U.S. Possessions: Governments and residents (e.g., Puerto Rico, if non-mirror code) receiving equivalent benefits to ensure equitable treatment.
Notable Legal, Constitutional, or Political Implications
- Legal: Establishes clear eligibility criteria tied to building codes and business size, reducing ambiguity but requiring Treasury regulations to define additional methods (e.g., new elevation techniques). Recapture rules (under amended Section 50) ensure credits are not abused if projects fail or are sold prematurely. No conflicts with existing environmental laws, as it promotes resilience without mandating projects.
- Constitutional: Aligns with Congress's taxing and spending powers (Article I, Section 8); treats states and possessions consistently, avoiding equal protection issues.
- Political: Supports climate adaptation in vulnerable coastal regions, potentially aiding bipartisan appeal in areas prone to hurricanes and sea-level rise. Focuses on economic sectors without broad subsidies, but the $300,000 cap and 10-year limit prevent overuse of federal incentives.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Rep. Pingree, Chellie [D-ME-1]
Cosponsors (1)
Rep. Murphy, Gregory F. [R-NC-3]
Recent Actions
- 2025-08-01: Referred to the House Committee on Ways and Means.
- 2025-08-01: Introduced in House
- 2025-08-01: Introduced in House
Bill Versions
- Working Waterfront Disaster Mitigation Tax Credit Act — issued 2025-08-01 — PDF (12 pages)