S.586 - Flood Insurance Affordability Tax Credit Act (119th Congress)
Summary
S.586, the Flood Insurance Affordability Tax Credit Act, proposes to amend the Internal Revenue Code of 1986 by introducing a refundable tax credit to offset a portion of flood insurance premiums. This credit would be available to eligible taxpayers who pay flood insurance premiums for their principal residence under the National Flood Insurance Act of 1968.
The bill also includes provisions for advance payments of the credit, allowing eligible individuals to receive assistance with their premiums throughout the year. The amount of the credit is subject to limitations based on household income, with a phaseout mechanism for those exceeding certain income thresholds.
Furthermore, the bill disallows a deduction for the portion of flood insurance premiums equal to the amount of the credit received, preventing a double benefit.
Expected Effects
The primary effect of this bill would be to reduce the financial burden of flood insurance premiums for eligible homeowners, particularly those with lower incomes. This could lead to increased participation in the National Flood Insurance Program (NFIP), as affordability is a significant barrier to entry.
Additionally, the advance payment mechanism would provide immediate relief to policyholders, helping them manage their expenses throughout the year. However, the income-based limitations could exclude some higher-income homeowners from receiving the full benefit of the credit.
Finally, the disallowance of a deduction for the credited portion of premiums ensures that taxpayers do not receive a double benefit, maintaining fiscal responsibility.
Potential Benefits
- Reduces the financial burden of flood insurance for eligible homeowners.
- Increases participation in the National Flood Insurance Program (NFIP).
- Provides immediate financial relief through advance payments.
- Targets assistance to lower-income households.
- Encourages responsible flood risk management.
Most Benefited Areas:
Potential Disadvantages
- Income limitations may exclude some homeowners from receiving the full credit.
- Potential complexity in administering the advance payment program.
- Could increase government spending and potentially the deficit.
- May create an incentive for individuals to live in flood-prone areas.
- Potential for fraud or abuse in claiming the credit.
Constitutional Alignment
The bill appears to align with the General Welfare Clause (Article I, Section 8) of the Constitution, as it aims to provide financial assistance to homeowners facing the risk of flooding. By promoting participation in the NFIP, the bill could also be seen as contributing to the common defense and domestic tranquility by mitigating the financial impact of natural disasters.
However, the bill's reliance on the taxing power of Congress raises questions about whether the tax credit is uniformly applied across all states, as required by Article I, Section 8. The bill does not appear to infringe upon any specific individual rights or liberties protected by the Bill of Rights.
Ultimately, the constitutionality of the bill would likely depend on whether it is deemed a reasonable exercise of Congress's power to tax and spend for the general welfare.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).