Tax break for disaster-proofing homes—but only if your state has the program

What it does

This bill amends the tax code to exclude payments from state-run disaster mitigation programs from taxable income. Homeowners and property owners who receive money from state catastrophe loss programs to make improvements that reduce damage from windstorms, earthquakes, or wildfires will no longer owe federal income tax on those payments. The change applies retroactively to 2021 and later.

Why we flagged it

The bill's core function is to exclude state catastrophe mitigation payments from federal taxable income—a targeted tax exclusion benefiting property owners in disaster-prone regions who participate in state resilience programs.

What the text implies

• Retroactive application to 2021 may create significant revenue loss and administrative burden for IRS processing amended returns, with unclear cost to the federal government.
• The exclusion applies only to state-administered programs with state insurance oversight, potentially creating unequal treatment between homeowners in states with robust mitigation programs versus those in states without them.
• By excluding mitigation payments from income, the bill may reduce the tax basis of improved properties, limiting future depreciation deductions and shifting tax burden to later years or other taxpayers.
• The bill incentivizes state-level catastrophe mitigation programs but does not require states to establish them, potentially widening regional disparities in disaster resilience investment.

Who it affects

Property owners in disaster-prone areas receive tax-free assistance to harden their homes against natural disasters, reducing out-of-pocket costs for safety improvements. This lowers the financial barrier to resilience and shifts some burden away from individual homeowners toward state programs and federal tax policy.

Who stands to gain

• property owners in disaster-prone states
• state catastrophe loss mitigation programs
• state insurance pools and entities

Named in the bill

Internal Revenue Code Section 139, State insurance departments, State catastrophe loss mitigation programs, Joint powers authorities, Property insurance market of last resort

Where it stands

32 cosponsors: 18 Democrats, 14 Republicans.

• Mar 5, 2025 — Introduced · Congress.gov: “Introduced in House”
• Mar 5, 2025 — Referred to House Committee on Ways and Means · Congress.gov: “Referred to the House Committee on Ways and Means”

Dates and quoted wording are Congress.gov's action record; the timeline shows status changes, not every procedural step.

Money around this bill

6 lobbying clients named this bill on 12 disclosure filings across 3 quarters, Dec 2025 to Jun 2026. Those filings disclosed $6,237,407 in lobbying spend. A filing names 38 bills on average, so that figure is what each filing reported, not a share belonging to this bill.

More lobbying clients named this bill than 82% of bills with at least one filing.

Doug LaMalfa, the sponsor, reported $279,010 in PAC receipts in the 2026 cycle.

• American Property Casualty Insurance Association — $3,540,000 on 2 filings
• Reinsurance Assn of America — $1,100,000 on 3 filings
• Allstate Insurance Company — $1,050,000 on 2 filings
• Independent Insurance Agents & Brokers of America — $410,000 on 2 filings
• American Family Mutual Insurance Company, S.i. — $97,407 on 1 filing

Lobbying Disclosure Act filings through Jul 23, 2026. A filing shows who paid to lobby on a bill it names, not what changed.