SHELTER Act

II 116TH CONGRESS 1ST SESSION S. 1958 To amend the Internal Revenue Code of 1986 to provide a credit against tax for disaster mitigation expenditures. IN THE SENATE OF THE UNITED STATES JUNE 25, 2019 Mr. BENNET (for himself and Mr. CASSIDY) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend the Internal Revenue Code of 1986 to provide a credit against tax for disaster mitigation expenditures. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘SHELTER Act’’. 4 SEC. 2. NONREFUNDABLE PERSONAL CREDIT FOR DIS- 5 ASTER MITIGATION EXPENDITURES. 6 (a) IN GENERAL.—Subpart A of part IV of sub- 7 chapter A of chapter 1 of the Internal Revenue Code of 8 1986 is amended by inserting after section 25D the fol- 9 lowing new section: 10 VerDate Sep 11 2014 02:14 Jun 28, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1958.IS S1958 kjohnson on DSK79L0C42 with BILLS 2 •S 1958 IS ‘‘SEC. 25E. DISASTER MITIGATION EXPENDITURES. 1 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in- 2 dividual, there shall be allowed as a credit against the tax 3 imposed by this chapter for the taxable year an amount 4 equal to 25 percent of the qualified disaster mitigation ex- 5 penditures made by the taxpayer during such taxable year. 6 ‘‘(b) MAXIMUM CREDIT.— 7 ‘‘(1) IN GENERAL.—Subject to paragraph (2), 8 the credit allowed under subsection (a) for any tax- 9 able year shall not exceed $5,000. 10 ‘‘(2) PHASEOUT.— 11 ‘‘(A) IN GENERAL.—The amount under 12 paragraph (1) for the taxable year shall be re- 13 duced (but not below zero) by an amount which 14 bears the same ratio to the amount under such 15 paragraph as— 16 ‘‘(i) the amount (not less than zero) 17 equal to the adjusted gross income of the 18 taxpayer for such taxable year minus 19 $84,200, bears to 20 ‘‘(ii) $40,800. 21 ‘‘(B) JOINT RETURN.—For purposes of de- 22 termining the amount of any reduction under 23 subparagraph (A) for any taxable year, if a 24 joint return was filed for such taxable year, 25 VerDate Sep 11 2014 02:14 Jun 28, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1958.IS S1958 kjohnson on DSK79L0C42 with BILLS 3 •S 1958 IS each of the dollar amounts under such subpara- 1 graph shall be doubled. 2 ‘‘(C) INFLATION ADJUSTMENT.—In the 3 case of any taxable year after 2020, each of the 4 dollar amounts under subparagraph (A) shall 5 be increased by an amount equal to— 6 ‘‘(i) such dollar amount, multiplied by 7 ‘‘(ii) the cost-of-living adjustment de- 8 termined under section 1(f)(3) for the cal- 9 endar year in which the taxable year be- 10 gins, determined by substituting ‘calendar 11 year 2019’ for ‘calendar year 2016’ in sub- 12 paragraph (A)(ii) thereof. 13 ‘‘(D) ROUNDING.—If any reduction deter- 14 mined under subparagraph (A) or (B) is not a 15 multiple of $50, or any increase under subpara- 16 graph (C) is not a multiple of $50, such 17 amount shall be rounded to the nearest multiple 18 of $50. 19 ‘‘(c) DEFINITIONS.—For purposes of this section— 20 ‘‘(1) QUALIFIED DISASTER MITIGATION EX- 21 PENDITURE.— 22 ‘‘(A) IN GENERAL.—The term ‘qualified 23 disaster mitigation expenditure’ means an ex- 24 penditure relating to a qualified dwelling unit— 25 VerDate Sep 11 2014 02:14 Jun 28, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1958.IS S1958 kjohnson on DSK79L0C42 with BILLS 4 •S 1958 IS ‘‘(i) for property to— 1 ‘‘(I) improve the strength of a 2 roof deck attachment, 3 ‘‘(II) create a secondary water 4 barrier to prevent water intrusion or 5 mitigate against potential water intru- 6 sion from wind-driven rain, 7 ‘‘(III) improve the durability, im- 8 pact resistance (not less than class 3 9 or 4 rating), or fire resistance (not 10 less than class A rating) of a roof cov- 11 ering, 12 ‘‘(IV) brace gable-end walls, 13 ‘‘(V) reinforce the connection be- 14 tween a roof and supporting wall, 15 ‘‘(VI) protect openings from pen- 16 etration by wind-borne debris, 17 ‘‘(VII) protect exterior doors and 18 garages from natural hazards, 19 ‘‘(VIII) complete measures con- 20 tained in the publication of the Fed- 21 eral Emergency Management Agency 22 entitled ‘Wind Retrofit Guide for Res- 23 idential Buildings’ (P–804), 24 VerDate Sep 11 2014 02:14 Jun 28, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1958.IS S1958 kjohnson on DSK79L0C42 with BILLS 5 •S 1958 IS ‘‘(IX) elevate the qualified dwell- 1 ing unit, as well as utilities, machin- 2 ery, or equipment, above the base 3 flood elevation or other applicable 4 minimum elevation requirement, 5 ‘‘(X) seal walls in the basement 6 of the qualified dwelling unit using 7 waterproofing compounds, or 8 ‘‘(XI) protect propane tanks or 9 other external fuel sources, 10 ‘‘(ii) to install— 11 ‘‘(I) check valves to prevent flood 12 water from backing up into drains, 13 ‘‘(II) flood vents, breakaway 14 walls or open lattice for homes located 15 in V zones, 16 ‘‘(III) a stormwater drainage sys- 17 tem or improve an existing system, 18 ‘‘(IV) natural or nature-based 19 features for flood control, including 20 living shorelines, 21 ‘‘(V) roof coverings, sheathing, 22 flashing, roof and attic vents, eaves, 23 or gutters that conform to ignition-re- 24 sistant construction standards, 25 VerDate Sep 11 2014 02:14 Jun 28, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1958.IS S1958 kjohnson on DSK79L0C42 with BILLS 6 •S 1958 IS ‘‘(VI) wall components for wall 1 assemblies that conform to ignition-re- 2 sistant construction standards, 3 ‘‘(VII) a wall-to-foundation an- 4 chor or connector, or a shear transfer 5 anchor or connector, 6 ‘‘(VIII) wood structural panel 7 sheathing for strengthening cripple 8 walls, 9 ‘‘(IX) anchorage of the masonry 10 chimney to the framing, 11 ‘‘(X) prefabricated lateral resist- 12 ing systems, 13 ‘‘(XI) a standby generator sys- 14 tem consisting of a standby generator 15 and an automatic transfer switch, 16 ‘‘(XII) a storm shelter that meets 17 the design and construction standards 18 established by the International Code 19 Council and the National Storm Shel- 20 ter Association (ICC–500), or a safe 21 room that satisfies the criteria con- 22 tained in— 23 ‘‘(aa) the publication of the 24 Federal Emergency Management 25 VerDate Sep 11 2014 02:14 Jun 28, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1958.IS S1958 kjohnson on DSK79L0C42 with BILLS 7 •S 1958 IS Agency entitled ‘Safe Rooms for 1 Tornadoes and Hurricanes’ (P– 2 361), or 3 ‘‘(bb) the publication of the 4 Federal Emergency Management 5 Agency entitled ‘Taking Shelter 6 from the Storm’ (P–320), 7 ‘‘(XIII) a lightning protection 8 system, 9 ‘‘(XIV) exterior walls, doors, win- 10 dows, or other exterior dwelling unit 11 elements that conform to ignition-re- 12 sistant construction standards, 13 ‘‘(XV) exterior deck or fence 14 components that conform to ignition- 15 resistant construction standards, 16 ‘‘(XVI) structure-specific water 17 hydration systems, including fire miti- 18 gation systems such as interior and 19 exterior sprinkler systems, 20 ‘‘(XVII) water capture and deliv- 21 ery systems to accommodate drought 22 events or to decrease water use, in- 23 cluding the design of such systems, 24 VerDate Sep 11 2014 02:14 Jun 28, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1958.IS S1958 kjohnson on DSK79L0C42 with BILLS 8 •S 1958 IS ‘‘(XVIII) flood openings for fully 1 enclosed areas below the lowest floor 2 of the dwelling unit, 3 ‘‘(XIX) lateral bracing for wall 4 elements, foundation elements, and 5 garage doors or other large openings 6 to resist seismic loads, or 7 ‘‘(XX) automatic shutoff valves 8 for water and gas lines, or 9 ‘‘(iii) for services or equipment to— 10 ‘‘(I) create buffers around the 11 qualified dwelling unit through the re- 12 moval or reduction of flammable vege- 13 tation, including vertical clearance of 14 tree branches, 15 ‘‘(II) create buffers around the 16 dwelling unit through— 17 ‘‘(aa) the removal of exterior 18 deck or fence components or igni- 19 tion-prone landscape features, or 20 ‘‘(bb) replacement of the 21 components or features described 22 in item (aa) with components or 23 features that conform to ignition- 24 resistant construction standards, 25 VerDate Sep 11 2014 02:14 Jun 28, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1958.IS S1958 kjohnson on DSK79L0C42 with BILLS 9 •S 1958 IS ‘‘(III) perform fire maintenance 1 procedures identified by the Federal 2 Emergency Management Agency or 3 the United States Forest Service, in- 4 cluding fuel management techniques 5 such as creating fuel and fire breaks, 6 ‘‘(IV) gather and analyze water 7 and weather data to better under- 8 stand the local climate and drought 9 history, 10 ‘‘(V) replace flammable vegeta- 11 tion with less flammable species, or 12 ‘‘(VI) determine the risk of nat- 13 ural disasters which may occur in the 14 area in which the qualified dwelling 15 unit is located, or 16 ‘‘(iv) for property relating to satis- 17 fying the standards required for receipt of 18 a FORTIFIED designation from the In- 19 surance Institute for Business and Home 20 Safety, provided that the qualified dwelling 21 unit receives such designation following in- 22 stallation of such property. 23 ‘‘(B) EXCEPTION.—The term ‘qualified 24 disaster mitigation expenditure’ shall not in- 25 VerDate Sep 11 2014 02:14 Jun 28, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1958.IS S1958 kjohnson on DSK79L0C42 with BILLS 10 •S 1958 IS clude any expenditure or portion thereof which 1 is paid, funded, or reimbursed by a Federal, 2 State, or local government entity, or any polit- 3 ical subdivision, agency, or instrumentality 4 thereof. 5 ‘‘(2) QUALIFIED DWELLING UNIT.—The term 6 ‘qualified dwelling unit’ means a dwelling unit which 7 is— 8 ‘‘(A) located— 9 ‘‘(i) in the United States or in a terri- 10 tory of the United States, and 11 ‘‘(ii) in an area— 12 ‘‘(I) in which a Federal disaster 13 declaration has been made within the 14 preceding 10-year period, or 15 ‘‘(II) which is adjacent to an 16 area described in subclause (I), and 17 ‘‘(B) used as a residence by the taxpayer. 18 ‘‘(d) LIMITATION.— 19 ‘‘(1) IN GENERAL.—In the case of an expendi- 20 ture described in clause (i) or (ii) of subsection 21 (c)(1)(A), such expenditure shall be taken into ac- 22 count in determining the qualified disaster mitiga- 23 tion expenditures made by the taxpayer during the 24 taxable year only if the onsite preparation, assembly, 25 VerDate Sep 11 2014 02:14 Jun 28, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S1958.IS S1958 kjohnson on DSK79L0C42 with BILLS 11 •S 1958 IS or original installation of the property with respect 1 to which such expenditure is made has been com- 2 pleted in a manner that is deemed to be in compli- 3 ance with the latest published editions of relevant 4 consensus-based codes, specifications, and standards 5 or any more restrictive Federal, State, or local flood- 6 plain management standards and consistent with 7 floodplain management regulations for the local ju- 8 risdiction in which the qualified dwelling unit is lo- 9 cated. 10 ‘‘(2) LATEST PUBLISHED EDITIONS.—The term 11 ‘latest published editions means’, with respect to rel- 12 evant consensus-based codes, specifications, and 13 standards, either of the 2 most recently published 14 editions. 15 ‘‘(e) LABOR COSTS.—For purposes of this section, 16 expenditures for labor costs properly allocable to the onsite 17 preparation, assembly, or original installation of the prop- 18 erty described in clause (i) or (ii) of subsection (c)(1)(A) 19 shall be taken into account in determining the qualified 20 disaster mitigation expenditures made by the taxpayer 21 during the taxable year. 22 ‘‘(f) INSPECTION COSTS.—For purposes of this sec- 23 tion, expenditures for the cost of any inspection required 24 under subsection (d) which is properly allocable to the in- 25 VerDate Sep 11 2014 02:14 Jun 28, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S1958.IS S1958 kjohnson on DSK79L0C42 with BILLS 12 •S 1958 IS spection of the preparation, assembly, or installation of 1 the property described in clause (i) or (ii) of subsection 2 (c)(1)(A) shall be taken into account in determining the 3 qualified disaster mitigation expenditures made by the 4 taxpayer during the taxable year. 5 ‘‘(g) DOCUMENTATION.—Any taxpayer claiming the 6 credit under this section shall provide the Secretary with 7 adequate documentation regarding the specific qualified 8 disaster mitigation expenditures made by the taxpayer 9 during the taxable year, as well as such other information 10 or documentation as the Secretary may require.’’. 11 (b) CONFORMING AMENDMENT.—The table of sec- 12 tions for subpart A of part IV of subchapter A of chapter 13 1 of such Code is amended by inserting after the item 14 relating to section 25D the following new item: 15 ‘‘Sec. 25E. Disaster mitigation expenditures.’’. (c) EFFECTIVE DATE.—The amendments made by 16 this section shall apply to taxable years beginning after 17 December 31, 2019. 18 SEC. 3. BUSINESS-RELATED CREDIT FOR DISASTER MITIGA- 19 TION. 20 (a) IN GENERAL.—Subpart D of part IV of sub- 21 chapter A of chapter 1 of the Internal Revenue Code of 22 1986 is amended by inserting after section 45S the fol- 23 lowing new section: 24 VerDate Sep 11 2014 02:14 Jun 28, 2019 Jkt 089200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S1958.IS S1958 kjohnson on DSK79L0C42 with BILLS 13 •S 1958 IS ‘‘SEC. 45T. DISASTER MITIGATION CREDIT. 1 ‘‘(a) GENERAL RULE.—For purposes of section 38, 2 the disaster mitigation credit determined under this sec- 3 tion for any taxable year is an amount equal to 25 percent 4 of the qualified disaster mitigation expenditures made by 5 the taxpayer during the taxable year. 6 ‘‘(b) MAXIMUM CREDIT.— 7 ‘‘(1) IN GENERAL.—Subject to paragraph (2), 8 the amount of the credit determined under sub- 9 section (a) for any taxable year shall not exceed 10 $5,000. 11 ‘‘(2) PHASEOUT.— 12 ‘‘(A) IN GENERAL.—The amount under 13 paragraph (1) for the taxable year shall be re- 14 duced (but not below zero) by an amount which 15 bears the same ratio to the amount under such 16 paragraph as— 17 ‘‘(i) the amount (not less than zero) 18 equal to the average gross receipts of the 19 taxpayer over the 3 preceding taxable 20 years minus $5,000,000, bears to 21 ‘‘(ii) $5,000,000. 22 ‘‘(B) INFLATION ADJUSTMENT.—In the 23 case of any taxable year after 2020, each of the 24 dollar amounts under subparagraph (A) s [Text truncated for display. 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