Shelter Act
- Bill Number
- S. 3497
- Origin Chamber
- Senate
- Congress
- 119th Congress, Session 1
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2025-12-16: Read twice and referred to the Committee on Finance.
- Last Updated
- 2026-01-21T05:01:27Z
AI-Generated Summary
Purpose
The Shelter Act (S. 3497) aims to encourage individuals and businesses to invest in measures that make homes and workplaces more resistant to natural disasters, such as hurricanes, floods, wildfires, and earthquakes. It does this by offering tax credits to offset the costs of these improvements, helping to reduce future damage from disasters and lower reliance on emergency aid.
Key Provisions
- Personal Tax Credit (Section 25G):
- Provides a nonrefundable credit of 25% on qualified disaster mitigation expenditures for homes (qualified dwelling units).
- Annual limit: $3,750 per taxpayer ($7,500 for joint filers).
- Lifetime limit per home: $15,000 total credits after December 31, 2025.
- Phaseout: Credit reduces for taxpayers with adjusted gross income (AGI) over $100,000 ($200,000 for joint filers), fully phasing out at $150,000 ($300,000 joint); amounts adjust for inflation after 2026.
- Carryforward: Unused credit can be carried over for up to 5 years.
- Business Tax Credit (Section 45BB):
- Provides a general business credit of 25% on qualified disaster mitigation expenditures for places of business.
- Annual limit: $5,000, with phaseout for businesses with average gross receipts over $5 million (adjusts for inflation after 2026).
- No double-dipping: Expenditures cannot qualify for both personal and business credits.
- Qualified Expenditures:
- Cover improvements to strengthen structures against specific hazards, including:
- Roof reinforcements, secondary water barriers, impact-resistant materials, and fire-resistant features.
- Flood protections like elevation, check valves, vents, and drainage systems.
- Wildfire measures like ignition-resistant materials, vegetation buffers, and sprinkler systems.
- Earthquake bracing, storm shelters, lightning protection, and automatic shutoff valves.
- Certifications from organizations like the Insurance Institute for Business and Home Safety (e.g., FORTIFIED or Wildfire Prepared designations).
- Must comply with consensus-based building codes (e.g., latest editions of standards from the International Code Council) and local regulations.
- Includes related labor and inspection costs, but excludes any expenditures funded by government sources.
- Limited to hazards relevant to the location, based on state or tribal mitigation plans; the Treasury Secretary (with FEMA input) can exclude irrelevant regional expenditures.
- Eligibility Requirements:
- Homes or businesses must be in the U.S. or its territories.
- Located in areas with a federal disaster declaration in the past 5 years, adjacent areas, those receiving FEMA hazard mitigation aid, or designated community disaster resilience zones.
- Taxpayers must provide documentation to the IRS.
- Effective Date: Applies to tax years beginning after December 31, 2025.
Significant Changes to Existing Law
- Adds new sections (25G for individuals and 45BB for businesses) to the Internal Revenue Code of 1986, creating these credits from scratch.
- Integrates with existing tax structures, such as the general business credit under Section 38 and inflation adjustments under Section 1(f)(3).
- No changes to prior disaster-related tax provisions, but prevents overlap with other credits and excludes government-reimbursed costs to avoid double benefits.
Potential Impacts
- On Citizens: Homeowners and small business owners in disaster-prone areas could save thousands on tax bills by retrofitting properties, making resilience more affordable and potentially lowering insurance premiums or future repair costs.
- On Government Agencies: The IRS will administer claims and documentation, while FEMA provides input on eligible hazards and plans, possibly reducing long-term federal disaster relief spending (e.g., via the Stafford Act) by promoting proactive mitigation.
- On International Relations: No direct impact, as the bill focuses on domestic U.S. properties and hazards.
- Broader effects include increased adoption of resilient building practices, potentially decreasing economic losses from disasters estimated at billions annually.
Main Stakeholders Affected
- Individuals: Homeowners in high-risk areas (e.g., coastal, wildfire, or seismic zones) who undertake mitigation projects.
- Businesses: Small to medium-sized enterprises, particularly in vulnerable regions, seeking to protect operations.
- Government Entities: IRS (tax credit processing), Treasury Department (rulemaking and consultations), and FEMA (hazard guidance and mitigation planning).
- Other: Insurance providers (may see reduced claims), construction firms (increased demand for specialized work), and certification bodies (e.g., Insurance Institute for Business and Home Safety).
Notable Legal, Constitutional, or Political Implications
- Legal: Relies on Treasury and FEMA's authority to define and limit eligible expenditures, ensuring alignment with existing regulations like state mitigation plans (44 CFR §§ 201.4–201.5) and the Stafford Act. Documentation requirements help prevent fraud but may increase administrative burdens.
- Constitutional: No apparent issues; uses Congress's taxing and spending powers under Article I to incentivize private action for public benefit (disaster resilience).
- Political: Bipartisan sponsorship (Sens. Bennet and Cassidy) signals broad support for climate and disaster policy. Could face debate over tax expenditure costs (revenue loss to the Treasury) versus savings in disaster aid, but promotes equity by targeting middle-income households and small businesses while phasing out for higher earners.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Sen. Bennet, Michael F. [D-CO]
Cosponsors (1)
Recent Actions
- 2025-12-16: Read twice and referred to the Committee on Finance.
- 2025-12-16: Introduced in Senate
Bill Versions
- Shelter Act — issued 2025-12-16 — PDF (20 pages)