Shelter Act
- Sponsor
- Rep. Salazar, Maria Elvira [R-FL-27]
- Committees
- Ways and Means Committee (primary)
- Last action
- Dec 16, 2025
Bottom line
The Shelter Act aims to reduce future disaster costs and protect property by offering tax incentives for individuals and businesses to invest in pre-disaster mitigation measures.
What it actually does
This bill establishes two new federal tax credits: a nonrefundable personal credit and a business-related credit, both designed to incentivize disaster mitigation expenditures. It allows taxpayers to claim a 25% credit for qualified expenses, up to specified annual and cumulative limits, for improvements made to dwelling units or places of business in disaster-prone areas to enhance resilience against natural hazards. The bill details a wide range of eligible mitigation activities, from roof strengthening and flood protection to wildfire-resistant construction and storm shelters.
Proponents argue
Supporters argue that this bill will encourage proactive disaster preparedness, ultimately saving lives, protecting property, and significantly reducing the long-term financial burden on federal, state, and local governments for post-disaster relief and recovery efforts. They contend that investing in mitigation is a cost-effective strategy that builds community resilience and stabilizes local economies.
Opponents contend
Critics may contend that the tax credits could lead to substantial federal revenue loss without a guaranteed offset in disaster spending, and that the benefits might disproportionately accrue to higher-income individuals and larger businesses who can afford the upfront costs of mitigation. Concerns could also be raised about the administrative complexity for taxpayers and the IRS in verifying eligible expenditures and location-specific hazard applicability.
The bill is relatively concise and its core provisions are accessible to an informed reader, though understanding the full scope of eligible expenditures and location criteria requires careful reading.
Section 2(a), new Section 25G of the Internal Revenue Code of 1986
Nonrefundable Personal Credit for Disaster Mitigation Expenditures
This provision creates a new tax credit for individuals, allowing them to claim 25% of their qualified disaster mitigation expenditures. The credit is nonrefundable, meaning it can reduce a taxpayer's liability to zero but cannot result in a refund. It is capped at $3,750 annually ($7,500 for joint filers) and has a cumulative limit of $15,000 per qualified dwelling unit. The credit also includes an income phase-out, beginning at $100,000 adjusted gross income (AGI) and fully phasing out by $150,000 AGI (doubled for joint returns), with inflation adjustments after 2026.
Supporters argue
Supporters argue that this credit directly incentivizes homeowners to invest in critical upgrades that protect their properties and families from natural disasters, thereby reducing future losses and the need for federal disaster aid. The limits and phase-out aim to target the credit responsibly.
Critics contend
Critics might argue that the nonrefundable nature and income phase-out mean the credit primarily benefits higher-income individuals who can already afford mitigation, potentially excluding lower-income households most vulnerable to disasters. The administrative burden for the IRS to verify expenditures could also be significant.
Tradeoffs
The provision balances the goal of encouraging widespread mitigation with concerns about federal revenue impact and ensuring the credit is targeted effectively without being overly complex or inequitable.
Section 2(a), new Section 25G(c)(1) of the Internal Revenue Code of 1986
Definition of Qualified Disaster Mitigation Expenditure
This section provides an extensive list of expenditures that qualify for the personal tax credit. These include improvements to roof strength, water barriers, impact-resistant roof coverings, bracing gable-end walls, protecting openings from wind-borne debris, elevating dwelling units, sealing basement walls, and protecting external fuel sources. It also covers installing flood vents, stormwater drainage systems, ignition-resistant construction components (for roofs, walls, exterior elements), standby generators, storm shelters, lightning protection systems, and water capture systems. Furthermore, it includes services like creating defensible space around homes for wildfire mitigation and achieving third-party certifications like FORTIFIED or Wildfire Prepared designations.
Section 2(a), new Section 25G(c)(1)(B) & (C) of the Internal Revenue Code of 1986
Hazard-Specific Applicability and Exclusion of Government-Funded Expenditures
This provision specifies that qualified disaster mitigation expenditures must address a hazard type identified in the applicable State or tribal Standard or Enhanced State Mitigation Plans. It also grants the Secretary of the Treasury, in consultation with FEMA, the authority to publish 'negative lists' of inapplicable expenditures that are not relevant to a specific region. Crucially, the credit explicitly excludes any expenditure or portion thereof that is paid, funded, or reimbursed by a federal, state, or local government entity, preventing 'double-dipping' of government benefits.
Section 3(a), new Section 45BB of the Internal Revenue Code of 1986
Business-Related Credit for Disaster Mitigation
This section introduces a new general business credit for qualified disaster mitigation expenditures, mirroring the personal credit in its 25% rate. The maximum credit for businesses is $5,000 per taxable year. It includes a phase-out mechanism based on the taxpayer's average gross receipts over the three preceding taxable years, starting at $5,000,000 and fully phasing out by $10,000,000, with inflation adjustments after 2026. The definition of 'qualified disaster mitigation expenditure' is the same as for the personal credit, but applied to a 'place of business' instead of a 'qualified dwelling unit'.
The eligibility for both the personal and business tax credits is geographically restricted. A 'qualified dwelling unit' or 'place of business' must be located in the United States or a U.S. territory AND in an area that, within the preceding 5 taxable years, either received FEMA hazard mitigation assistance, had a federal natural disaster declaration, is adjacent to such a declared area, or has been designated as a community disaster resilience zone (as defined in the Robert T. Stafford Disaster Relief and Emergency Assistance Act).
Section 2(a), new Section 25G(c)(2) and Section 3(a), new Section 45BB(c)(2) of the Internal Revenue Code of 1986
Why it matters:This is standard legislative practice for defining the scope and applicability of a tax benefit, ensuring it is targeted to specific geographic areas deemed at risk or previously impacted by disasters.
Case for: This geographic targeting ensures that the tax credits are directed to areas with a demonstrated history of natural disasters or recognized vulnerability, maximizing the impact of federal incentives where mitigation is most urgently needed and cost-effective.
Case against: Critics might argue that this criterion could exclude proactive mitigation efforts in areas that are at high risk but have not yet experienced a federally declared disaster or received specific FEMA assistance, potentially creating a reactive rather than purely preventative incentive structure.
Estimated impact: Significantly limits the number of properties and businesses eligible for the credit, thereby controlling the overall fiscal cost and focusing the benefits on communities with established hazard profiles.
For expenditures related to property installation (e.g., roof improvements, flood vents), the bill requires that the onsite preparation, assembly, or original installation must be completed in compliance with the 'latest published editions' of relevant consensus-based codes, specifications, and standards, or any more restrictive federal, state, or local floodplain management standards. 'Latest published editions' is defined as either of the two most recently published editions.
Section 2(a), new Section 25G(d) and Section 3(a), new Section 45BB(d) (by reference) of the Internal Revenue Code of 1986
Why it matters:This is standard practice in tax legislation to ensure that incentivized activities meet a certain quality or safety threshold, aligning with best practices in construction and hazard mitigation.
Case for: Proponents argue that this requirement ensures that mitigation investments are effective and durable, meeting modern safety and resilience standards. It prevents taxpayers from receiving credits for substandard work that may not adequately protect against future disasters.
Case against: Critics might suggest that requiring adherence to the 'latest published editions' could increase the cost of mitigation projects for taxpayers, as newer codes often imply more expensive materials or construction methods. It also places a burden on taxpayers to ensure their contractors are up-to-date with these standards.
Estimated impact: Enhances the quality and effectiveness of mitigation projects nationwide, potentially leading to greater long-term resilience and reduced damage, but may increase initial project costs.
If the personal disaster mitigation credit allowable for any taxable year exceeds the taxpayer's applicable tax limit for that year, the unused portion can be carried forward to each of the five succeeding taxable years. This allows taxpayers to utilize the full value of the credit even if their tax liability in the year of the expenditure is insufficient to absorb it.
Section 2(a), new Section 25G(g) of the Internal Revenue Code of 1986
Why it matters:This is a common feature for nonrefundable tax credits in the Internal Revenue Code, designed to ensure that taxpayers can fully benefit from the incentive over time, especially for significant, one-time expenditures.
Case for: Proponents argue that the carryforward provision is essential to ensure that taxpayers who undertake substantial mitigation projects, potentially incurring costs that exceed their annual tax liability, can still realize the full intended benefit of the credit, thereby encouraging larger, more impactful investments.
Case against: Critics might point out that carryforward provisions add complexity to tax filings for individuals and increase the administrative burden on the IRS for tracking these unused credits over multiple years.
Estimated impact: Increases the effective value of the credit for taxpayers with large mitigation expenses or lower annual tax liabilities, potentially encouraging more substantial and comprehensive mitigation projects.