HR-1849-119
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.
Sponsored by Doug LaMalfa (R-CA)
What it does
This bill would amend the tax code so that payments homeowners receive from state or state-authorized catastrophe mitigation programs—such as grants to retrofit a home against windstorms, earthquakes, or wildfires—are not counted as taxable income. The exclusion would apply retroactively to tax years beginning after December 31, 2020, and the Treasury would have to let affected individuals file amended returns to claim refunds.
Who benefits
Homeowners who received grants from state programs like California's Earthquake Brace + Bolt program or state-run wildfire or windstorm mitigation funds, particularly in disaster-prone states such as California, Louisiana, and coastal states with insurer-of-last-resort programs. State insurance departments and joint powers authorities that run these programs would see increased participation since recipients no longer face a federal tax bill on the grants. Tax preparers may see added business processing retroactive amended returns.
Who is hurt
Federal revenue is reduced by the amount of tax that would otherwise have been collected on these payments, a cost borne broadly by federal taxpayers. Homeowners who paid taxes on mitigation grants in states without qualifying programs receive no benefit, creating a disparity between states with such programs and those without. The IRS would bear administrative costs processing retroactive amended returns dating back to 2021.
Supporters argue
Supporters argue that taxing disaster mitigation grants discourages homeowners from making protective home improvements that reduce future disaster losses and insurance claims, undermining the very state programs designed to lower catastrophic risk. They contend this treatment already exists for federal disaster mitigation payments under existing law, so extending the same exclusion to comparable state programs simply achieves parity and encourages proactive risk reduction that ultimately saves federal disaster aid dollars.
Opponents argue
Opponents argue that retroactively excluding four years of payments from taxable income reduces federal revenue without a clear offset and primarily benefits homeowners in a handful of disaster-prone states, raising fairness concerns for taxpayers elsewhere. They contend that the retroactive amended-return process would impose new administrative burdens on the IRS and that Congress should evaluate the fiscal cost through the normal committee process before extending tax preferences retroactively.
Constitutional context
Congress has broad authority under the Taxing and Spending Clause (Art. I, §8, cl. 1) to define what counts as taxable income, and the retroactive application would be evaluated under Due Process Clause limits on retroactive taxation, though courts have historically given Congress wide latitude for retroactive tax provisions with a rational legislative purpose.
Checks and balances
Congress defines the income exclusion through statute; the Treasury Department and IRS implement it through regulations and the amended-return process, with taxpayer disputes reviewable in federal courts.
Historical precedent
Section 139 of the tax code already excludes federally declared disaster relief payments and certain federal mitigation payments from gross income, and this bill extends similar treatment to comparable state-run programs.