Disaster Zone Energy Affordability and Investment Act
- Sponsor
- Sen. Graham, Lindsey [R-SC]
- Committees
- Finance Committee (primary)
- Last action
- Jan 8, 2026
Bottom line
The bill aims to provide financial relief and incentivize economic recovery for businesses in disaster-stricken regions by making certain tax credits more liquid and usable.
What it actually does
This bill amends the Internal Revenue Code to allow businesses operating in federally or state-declared disaster areas to transfer a portion of their accumulated general business credit carryforwards. This transferability is limited to the amount of "eligible expenditures" made by the taxpayer to carry out a trade or business in the disaster area, specifically for disasters declared after December 31, 2023. It also includes a special rule waiving registration requirements for these transfers until the online tool is updated.
Proponents argue
Supporters argue that this measure provides crucial liquidity to businesses struggling to rebuild and operate after natural disasters. By allowing the transfer of otherwise locked-up tax credits, it injects capital into affected communities, helping businesses cover recovery costs and maintain operations, thereby accelerating economic revitalization and job retention in disaster zones.
Opponents contend
Critics might contend that while well-intentioned, this tax credit transferability could primarily benefit larger corporations with complex tax structures or those capable of acquiring these credits at a discount, rather than directly aiding smaller, more vulnerable businesses. Concerns could also be raised about the potential for revenue loss to the Treasury and the administrative complexity of tracking eligible expenditures and transfers.
The bill is very short and focused, making it accessible for a quick read and understanding of its core mechanism.
Section 2(a) and 2(b)
Allowing Transfer of General Business Credit Carryforwards for Disaster-Affected Taxpayers
This provision allows businesses that have accumulated general business tax credits from previous years (carryforwards) to sell or transfer a portion of these credits to other entities. This ability to transfer is specifically granted to taxpayers operating in areas designated as major federal disasters or state-declared disasters after December 31, 2023. The amount of credits that can be transferred is capped by the "eligible expenditures" a business makes to operate or rebuild in the disaster area within two years of the disaster declaration.
Supporters argue
Supporters argue that this provision provides a direct and efficient mechanism for disaster recovery by unlocking capital for businesses when they need it most. It leverages existing tax incentives to support rebuilding efforts, helping to stabilize local economies and preserve jobs in affected regions.
Critics contend
Critics might argue that this mechanism could be complex to administer and prone to abuse, requiring robust oversight to ensure that only legitimate disaster-related expenditures are matched with transferred credits. There could also be concerns about the potential for a secondary market for tax credits that benefits intermediaries more than the affected businesses.
Tradeoffs
The bill balances the immediate need for financial assistance in disaster zones with concerns about potential revenue loss and the administrative complexity of creating a new transferrable tax credit mechanism. It aims to provide targeted relief but introduces new layers of tax code interaction.
The bill specifies that only general business credits attributable to "clauses (ii) and (ix) of subparagraph (A)" of Section 38(a)(1) are eligible for transfer. Without looking up these specific clauses in Section 38(b)(1) of the IRC, the exact scope of eligible credits is unclear from the bill text alone.
Section 6418(f)(3)(A)(ii)
Why it matters:This is standard legislative practice for amending existing code sections, avoiding redundancy and maintaining consistency within the broader tax law framework.
Case for: Proponents would argue that referencing existing code sections is efficient and precise, avoiding redundancy and maintaining consistency within the broader tax law framework.
Case against: Critics might argue that this approach reduces the accessibility of the bill for the general public and even many policymakers, requiring specialized knowledge to fully grasp its implications.
Estimated impact: The impact is limited to the specific types of general business credits defined by those clauses, affecting the total pool of transferrable credits.
The bill includes "State declared disasters" as qualified disaster areas, but defines this by reference to a specific section of the IRC (165(h)(5)(C)) as added by a specific Public Law (119-21). This means the definition of a state-declared disaster is not self-contained within this bill.
Section 6418(f)(3)(B)(ii)(II)
Why it matters:This is standard legislative practice to maintain consistency with existing definitions in the tax code, rather than creating new, potentially conflicting definitions.
Case for: Proponents would argue that using established definitions from existing law ensures legal consistency and avoids ambiguity, streamlining the application of the bill.
Case against: Critics might suggest that such cross-references make the bill less transparent and harder for the average person or even state officials to understand without extensive legal research.
Estimated impact: Broadens the scope of eligible disaster areas beyond federally declared ones, potentially increasing the number of eligible businesses.