Disaster Zone Energy Affordability and Investment Act
- Sponsor
- Rep. Steube, W. Gregory [R-FL-17]
- Committees
- Ways and Means Committee (primary)
- Last action
- Feb 9, 2026
Bottom line
The bill enables businesses in disaster-stricken areas to sell their unused general business tax credits, providing immediate financial relief for recovery and rebuilding efforts.
What it actually does
This bill amends the Internal Revenue Code of 1986 to allow certain taxpayers affected by federally declared or state-declared disasters to transfer a portion of their general business credit carryforwards. The amount of credit carryforwards that can be transferred is limited to the eligible expenditures made by the taxpayer for carrying out a trade or business in a qualified disaster area. This provision aims to provide liquidity to businesses recovering from disasters by allowing them to monetize unused tax credits.
Proponents argue
Supporters argue that this legislation provides crucial and timely financial assistance to businesses struggling to rebuild and recover after experiencing a major disaster. By allowing the transfer of general business credit carryforwards, businesses can access immediate cash flow, which is vital for covering eligible expenditures, stimulating local economies, and accelerating the recovery process in affected communities.
Opponents contend
Critics might contend that expanding the transferability of tax credits could lead to increased complexity in the tax code and potentially create new avenues for tax planning that may not always align with the direct intent of disaster relief. Some may also argue that this mechanism primarily benefits businesses with significant existing tax credit carryforwards, potentially overlooking other affected businesses that may not have such credits.
The bill is concise and its core provisions are relatively straightforward for readers with a basic understanding of tax credits, making it accessible for quick evaluation.
Section 2(a) and 2(b)
Expansion of Transferable General Business Credit Carryforwards for Disaster-Affected Taxpayers
This provision amends the Internal Revenue Code to allow certain businesses in areas affected by disasters to transfer (sell) a portion of their unused general business tax credits. Previously, these credits could only be used by the business itself to offset future tax liabilities. The amount that can be transferred is capped by the 'eligible expenditures' the business makes for trade or business activities in a 'qualified disaster area' after December 31, 2023. This change provides a way for businesses to get immediate cash from their tax credits, rather than waiting to use them against future tax bills.
Supporters argue
Supporters argue that allowing businesses to transfer these credits provides crucial liquidity, enabling them to fund immediate recovery and rebuilding efforts without waiting for future profits to offset tax liabilities. This direct financial injection can accelerate economic recovery in disaster-stricken regions.
Critics contend
Critics might raise concerns that this expansion of transferability could introduce additional administrative burdens for the IRS and potentially create a secondary market for tax credits that is complex to regulate. Some may also argue that direct grants or loans might be more efficient or equitable forms of disaster relief.
Tradeoffs
The provision balances the urgent need for financial relief for disaster-affected businesses against the potential for increased complexity in tax administration and the creation of a new tax expenditure that reduces federal revenue.
The bill defines 'qualified disaster area' to include not only areas with federally declared major disasters but also areas determined by a State Governor to be affected by a State-declared disaster. Both types of incidents must have occurred after December 31, 2023.
Section 2(b), new paragraph (3)(B)(ii)
Why it matters:This is standard legislative practice for defining specific terms used within the bill's operative language.
Case for: Proponents argue that including state-declared disasters significantly broadens the scope of relief, ensuring that more businesses affected by various types of incidents can access these critical financial tools, regardless of whether a federal declaration was made. The effective date ensures it applies to recent and future events.
Case against: Some might argue that expanding the definition to include state-declared disasters could lead to inconsistencies in application if state criteria for disaster declarations vary widely, potentially creating administrative challenges for federal oversight.
Estimated impact: Significantly expands the potential pool of beneficiaries compared to limiting relief solely to federally declared major disaster areas.
The amendments apply to taxable years ending after the date of enactment. Additionally, a special rule waives the IRS registration requirement for applicable general business credit carryforwards until the Secretary of the Treasury updates the online registration tool to account for these new provisions.
Section 2(d) and 2(e)
Why it matters:These are standard legislative practices for specifying effective dates and transitional rules to facilitate implementation.
Case for: Supporters argue that the special rule for registration is essential to ensure that businesses can immediately benefit from the provision without being delayed by potential IRS system updates. This allows for timely relief during critical recovery periods.
Case against: Critics might suggest that temporarily waiving the registration requirement could create a period with reduced oversight or increased potential for errors or fraud, especially if the registration system is a key component of verification and tracking.
Estimated impact: Facilitates quicker implementation of the credit transferability and access to benefits for taxpayers, potentially at the cost of temporary administrative flexibility for the IRS.