Restoring Competitive Property Insurance Availability Act
- Sponsor
- Rep. Higgins, Clay [R-LA-3]
- Committees
- Ways and Means Committee (primary)
- Last action
- Feb 6, 2025
Bottom line
The bill provides a temporary tax exclusion for insurance companies operating in federally declared disaster areas, aiming to incentivize continued or increased real property insurance availability in high-risk regions.
What it actually does
This bill amends the Internal Revenue Code of 1986 by adding a new Section 836. It excludes from the gross income of certain non-life insurance companies their qualified real property insurance income for the first five taxable years following a federally declared disaster in an area where they provided coverage. Qualified income is defined as premiums received for real property insurance in the disaster area, less properly allocable deductions.
Proponents argue
Supporters argue that this bill will stabilize insurance markets in disaster-prone regions by providing a crucial tax incentive for insurers to continue offering or expand real property insurance coverage. By reducing the tax burden on income from these high-risk areas, it could prevent insurers from withdrawing, potentially leading to more available and affordable coverage for homeowners and businesses, thereby aiding disaster recovery and resilience efforts.
Opponents contend
Critics might contend that this legislation primarily offers a tax break to insurance companies, potentially reducing federal revenue without a guaranteed benefit to policyholders in the form of lower premiums or improved availability. They may argue that more direct or efficient mechanisms exist to support disaster-prone communities or stabilize insurance markets, such as direct subsidies or reinsurance programs, rather than a broad tax exclusion that could disproportionately benefit large insurers.
The bill is concise and clearly written, making it highly accessible for a quick and thorough review by an informed reader.
Section 2(a), adding new Section 836(a) to the IRC
Tax Exclusion for Disaster Area Insurance Income
This provision establishes that 'specified insurance companies' can exclude 'qualified real property insurance income' from their gross income for the first five taxable years (referred to as the 'recovery period') following a federally declared disaster. This directly reduces the taxable income for eligible insurers operating in affected regions, providing a significant financial incentive.
Supporters argue
Supporters argue this exclusion provides a crucial incentive for insurers to remain in or enter high-risk markets, ensuring that property owners in disaster-prone regions have access to necessary coverage. This stability can aid in faster recovery post-disaster and potentially reduce the burden on federal aid programs.
Critics contend
Critics contend that this is a direct tax handout to insurance companies, which may not translate into tangible benefits for policyholders. They argue that insurers already factor risk into premiums and that this exclusion could simply boost corporate profits without necessarily improving market conditions or lowering costs for consumers.
Tradeoffs
This provision balances the goal of stabilizing insurance markets in disaster-prone areas and supporting recovery with the cost of reduced federal tax revenue and the potential for increased corporate profits without guaranteed consumer benefits.
Section 2(a), adding new Section 836(b) to the IRC
Eligibility for Tax Exclusion (Specified Insurance Company Definition)
This provision defines a 'specified insurance company' as any insurance company (excluding life insurance companies) that, immediately prior to the incident date of a federally declared disaster, provided real property insurance for property located within that disaster area. This limits the tax benefit to existing non-life insurers already serving the affected regions.
Section 2(a), adding new Section 836(c) and (d) to the IRC
Scope of Excludable Income (Qualified Real Property Insurance Income Definition)
This provision defines 'qualified real property insurance income' as the premiums received by an insurer for real property insurance in a disaster area, minus any deductions properly allocable to those premiums. It further clarifies that 'real property insurance' includes coverage for personal property if it's covered under the same policy as real property and located on that real property. This ensures the exclusion applies to the net income from relevant insurance activities, covering both real and associated personal property.
Defines 'disaster area' by cross-reference to section 7508A(d)(3) of the Internal Revenue Code.
Section 2(a), adding new Section 836(f) to the IRC
Why it matters:This is standard legislative practice to maintain consistency with existing definitions within the tax code and avoid redundancy, rather than an attempt to obscure information.
Case for: Ensures consistency with established federal definitions of disaster areas, leveraging existing processes for official declarations and avoiding the creation of new, potentially conflicting definitions.
Case against: Requires external knowledge of the tax code, making the bill less self-contained and potentially more difficult for a casual reader to fully comprehend without additional research.
Estimated impact: The geographic and temporal scope of the tax exclusion is entirely dependent on which areas are officially declared federal disasters under the referenced section, which can vary significantly in frequency and scale year to year.